Tata Technologies IPO, JLR sales to Q4 results: Why you should buy Tata Motors shares — explained

Tata Motors share: It is around two months since Tata Technologies Ltd, a subsidiary of the Tata group company, filed Draft Red Herring Prospectus (DRHP) for the launch of its initial public offering (IPO), shares of Tata Motors have been in uptrend. The Tata group stock has been hitting 52-week high on a regular basis. On Friday, the India auto major announced its Q4 results, which is better-than-expected quarterly numbers for the company. The company has also given promising numbers on JLR sales.

According to stock market experts, Tata Motors has left Covid behind and the auto giant is all set for big leap on the fundamental front and Tata Technologies IPO is going to play a big role in it. They said that one should start accumulating Tata Motors shares ahead of the launch of Tata Technologies IPO as the public issue is 100 per cent OFS, which means net proceeds of the public issue will go into the balance sheet of shareholders selling their stake in Tata Technologies and Tata Motors is one of the shareholders who would be offloading its stake in the IT company through this upcoming IPO.

In Q4 results announced yesterday, Tata Motors surpassed estimates in consolidated net profit to ₹5,407.79 crore in the fourth quarter of FY23, against a net loss of ₹1,032.84 crore in the same quarter in last fiscal. Sequentially, the Q4FY23 PAT saw a growth of nearly 83 per cent. The company’s top-line front came in strong with an upside of over 35 per cent YoY in revenue.

Speaking on Tata Motors Q4 results 2023, Himanshu Singh, Research Analyst at Prabhudas Lilladher said, “Revenue was slightly lower than our estimate while above street estimate. EBITDA margins were largely in line with our and street estimate. Depreciation was higher than expected while PAT gained from deferred tax benefit. Overall, good set of numbers as per expectation.”

JLR sales

“JLR expects gradual improvements in chip supply to continue over FY24 and is targeting to grow wholesales through FY24 and achieve EBIT margins of over 6 per cent in FY24. Investment spending is expected to increase to about GBP3bn in FY24, with free cash flow to be greater than GBP2bn and net debt to reduce to less than GBP1bn by FY24,” Prabhudas Lilladher expert said.

Himanshu of Prabhudas Lilladher went on to add that order book at 200K units remains strong despite increased retail sales. Range Rover, Range Rover Sport and Defender represent 76 per cent of the book.

Tata Motors Ltd holds 74.69 per cent stake in Tata Technologies Ltd and it has offered to offload 9.571 crore Tata Technologies shares in this upcoming IPO. On 9th March 2023, the IT company filed DRHP at SEBI for the launch of IPO.

On how Tata Technologies IPO would be a game changer for Tata Motors, Avinash Gorakshkar, Head of Research at Profitmart Securities said, “As per the DRHP filed by Tata Technologies Ltd at SEBI, Tata Motors input cost per share in Tata Technologies is ₹7.40 per share and if we look at the unlisted market hints, then we can assume that there will be huge rise in the absolute value of Tata Motor’s investment in Tata

Technologies. Most importantly, this IPO would be completely OFS, which means net proceeds of Tata Technologies IPO will go to the balance sheet of Tata Motors and other shareholders instead of Tata Technologies Ltd. So, the IPO is expected to streamline cash flow in the Indian auto giant and this is the reason for uptrend in Tata Motors share, which is expected to continue further.”

Weakness in US dollar

“Even though US dollar bounced back from one-month low last week, outlook for US dollar remains weak in the wake of US debt ceiling and hence FIIs are expected to continue buying in Indian stock market. As auto and banking are favourite sectors of the foreign investors, Tata Motors is expected to continue attracting FIIs in short to medium term,” said Avinash Gorakshkar.

Tata Motors share price target now

On outlook for Tata Motors shares after strong Q4 results and other developments, Himanshu Singh of Prabhudas Lilladher said that the auto stock may go up to ₹590 per share levels in short to medium term.

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