Valuation surge

Turnaround in Tata Motors is driving share prices

The market capitalisation of Tata Motors briefly overtook that of Maruti Suzuki India Ltd (MSIL) last week, making the Tata company the most valuable listed automobile company in India. The share price of MSIL has since gained enough to recover top position. The movements in these two shares illustrate an interesting quirk in valuation. While share prices are indeed tied to prospects of profits, investors are usually prepared to bet more on a possible turnaround in a loss-making company than in a business that’s already doing well. In the past 12 months, MSIL’s share has gained 19.6 per cent while