The Tata Motors share gained nearly 19 percent intraday on October 13 following reports of private equity firm TPG Group investing Rs 7,500 crore in its wholly owned electric vehicle subsidiary.
The Tata Motors share touched a 52-week high of Rs 499.95 – up Rs 63.85, or 15.17 percent – on the BSE around 10.08am.
The TPG investment would be made in tranches, over a period of 18 months from the date of completion of the first tranche, said Tata Motors in a statement.
TML EVCo, the entity set up by Tata Motors for the electric vehicles segment, will undertake passenger electric mobility business, the company said. The first round of capital infusion is expected to be completed by March 22 and the entire funds will be infused by the end of 2022, it said.
TPG Group will secure 11-15 percent stake in the EV subsidiary at an equity valuation of $9.1 billion.
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“I am delighted to have TPG Rise Climate join us in our journey to create a market-shaping electric passenger mobility business in India. We will continue to proactively invest in exciting products that delight customers while meticulously creating a synergistic ecosystem. We are excited and committed to play a leading role in the government’s vision to have 30 percent electric vehicles penetration rate by 2030,” Tata Motors Chairman N Chandrasekaran said.
The new company shall leverage all existing investments and capabilities of Tata Motors Ltd and will channel the future investments into electric vehicles, dedicated BEV platforms, advanced automotive technologies and catalyse investments in charging infrastructure and battery technologies.
Over the next five years, this company will create a portfolio of 10 EVs and in association with Tata Power Ltd, catalyse the creation of a widespread charging infrastructure to facilitate rapid EV adoption in India.
Here is what brokerages have to say about the stock and the company after TPG’s investment announcement .
Jefferies has maintained the ‘buy’ rating and raised the target price to Rs 565 from Rs 435 per share.
TPG’s $1 billion investment values the EV business at $6.7-9.1 billion. It is a big value boost for an otherwise underappreciated opportunity. The balance sheet strength is going to drive portfolio electrification.
Research house Nomura has upgraded the rating to ‘buy’ from ‘neutral’ on India PV electrification plans. It also raised the target to Rs 547 per share.
The capital raising provides credibility to EV investments and makes us confident of investment-led growth path, said the research firm.
Brokerage house HSBC has kept the ‘buy’ rating and raised the target to Rs 550 from Rs 340 per share.
The lack of competition may continue to benefit its EV volumes. Incorporating EV value in target, while taper valuations for rest of PV business and JLR.
Recovery is underway in all of the three businesses of Tata Motors. While the India CV business would see a cyclical recovery, the India PV business would witness a structural recovery.
JLR sees a cyclical recovery, supported by a favorable product mix. However, supply-side issues would defer the recovery process.
“The stock trades at 12x FY23E P/E, 3.8x EV/EBITDA, and 2.3x P/BV. We maintain the ‘buy’ rating with a target price of Rs 560/share (September 2023-based SoTP),” it said.
Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.