Tata Motors regains Rs 1 trillion market cap as stock zooms 102% in 6 weeks

While a scrappage policy together with push on infrastructure by the Indian government should boost near term demand.

Shares of Tata Motors continued their northward movement in Wednesday's session with the stock regaining a market capitalisation of Rs 1 trillion following a sharp rally in the prices.

Tata Motors stock rallied 6 per cent to Rs 341, up 102 per cent in past six weeks, on healthy operational performance and expectation of improvement in the company's outlook. The stock touched its highest level since May 2018 on the BSE in intra-day trade today. 

At 10:53 am, the scrip was trading 2.7 per cent higher at Rs 331 with the market capitalisation of Rs 1.02 trillion, BSE data showed. The combined market cap of Tata Motors and Tata Motors DVRs stood at Rs 1.09 trillion.

In the Union Budget 2021-22, Finance Minister Nirmala Sitharaman announced a slew of measures, including support to commercial vehicle space through the allocation of Rs 18,000 crore for procurement of over 20,000 buses for urban transport. It is aimed to be implemented deploying PPP model. Announcement of a voluntary scrappage policy for commercial vehicles of more than 15 years of age and private vehicles of more than 20 years of age will be a positive for Tata Motors and Ashok Leyland, the brokerage firm ICICI Securities said.

Meanwhile, for the October-December quarter, Tata Motors posted a sharp 67 per cent year-on-year (YoY) growth in net profit at Rs 2,906 crore. The company, which owns Jaguar Land Rover (JLR), returned to net profit after three consecutive quarters of loss. The better-than-expected net profit was led by strong operational performance both at the standalone and JLR businesses. The operating profit margins expanded by 540 basis points to nearly 15 per cent on higher operating leverage, improving product mix, geographic markets and lower other expenses.

Analysts at Phillip Capital believe Tata Motors' performance momentum will continue. Our confidence stems from improving end markets across the globe, especially China; improved operating structure, cash flow generation and prudent use of capital; domestic commercial vehicle (CV) market showing signs of bottoming out with utilization and freight rates improving for operators and domestic passenger vehicles (PVs) no longer a drag (gaining share with improving profitability), the brokerage said, adding that there’s also a strong case for JLR consolidating nameplates and focussing on investments under new CEO. 

Meanwhile, a scrappage policy together with push on infrastructure by the government should boost near term demand, the brokerage firm said.