Tata Motors soars on back of improving JLR sales — shareholders bet on Chandrasekaran’s zero-debt target by 2023

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  • Jaguar Land Rover sold 15% fewer vehicles compared to last year, but the numbers are better, keeping a weak august and coronavirus battered economy in mind.
  • The shareholders are motivated by the company’s chairman N Chandrasekaran’s aim to make it net debt-free in the next coming three years and generate free cash flows from FY22 onwards.
  • The share price of Tata Motors has surged nearly 110% since the beginning of the first quarter to date.
The automobile arm of Tata Group, the Tata Motors, is now seeing green shoots of recovery with its premium vehicle segment Jaguar Land Rover (JLR) gaining momentum.

Although JLR reported a 15% YoY decline in the seasonally weak August, with sales of 28,887 vehicles. This is an improvement from the lockdown period of March and April, when COVID-19 had battered the Indian auto industry. However, the JLR market grew in the UK, where it recorded 14% YoY growth in August.

Also, the shareholders have been motivated by the company’s chairman N Chandrasekaran’s aim to make it net debt-free in the next coming three years and generate free cash flows from FY22 onwards. The share price of Tata Motors has surged nearly 110% since the beginning of the first quarter to date.

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As of July 31, the consolidated debt of Tata Motors stood at ₹68,000 crore.

Tata Motors- Debt/Equity ratio
Tata Motors201620172018201920202021 (Expected)
Debt/Equity Ratio0.8x1.3x0.8x1.5x1.6x2x
Source: Motilal Oswal

JLR leading the road to recovery

Tata Motors is betting heavily on JLR’s newly launched Defender SUV and said the future outlook is stronger.
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The newly launched Defender SUV has an order bank of more than 30,000 units. And to ramp up its production, the JLR’s manufacturing unit in Slovakia, which produces the Defender, has doubled the production capacity by doing two shifts to meet the demand as Europe and other key markets recover.


Plans for India passenger vehicles business to turn cash-neutral in next three years

According to Motilal Oswal, Tata Motors has fared even better than other peers, and the company’s conversion rate has increased as it has one of the most refreshed portfolios. Tata Motors CFO PB Balaji said in a chat with Motilal Oswal analysts that “with a strong product portfolio, the focus of the PV business is to improve the frontend.”
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The company also said that it is looking for a partner for the PV business to secure the future of this business. It is open to all types of partnerships and does not necessarily seek just an equity partner.

Tata Motors selling stakes Tata Technologies and Tata Hitachi Construction Machinery

The company has also begun the process of hiving off a stake in other Tata subsidiaries— Tata Technologies and Tata Hitachi Construction Machinery as a part of its move to become debt-free.
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