TATA Motors Analysis: Mega Demerger & EV Future Plan

Introduction

You may already know that Tata Motors, one of the EV leaders in the country with 70% of the EV market share, has announced its Q3 results, which impressed the market and increased its share price. The company is also part of the Tata Group, which is planning to spin off its battery and EV businesses into separate companies. How did these moves affect the company's performance and prospects? In this blog, we will analyse the Q3 results, the spinoff plans, and the reasons behind the market's positive reaction. Stay with us till the end to understand the full picture.

 

Q3 Results Breakdown

First off, let's talk about the recent quarterly results. Tata Motors saw an impressive 18% year-on-year (YOY) increase in revenue from operations, with a modest 0.68% quarter-on-quarter (Q-O-Q) growth. Although it is a decent uprise, looking at the current market trends, any growth in today's market is a win worth celebrating.

 

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Profit Making

But where things get really interesting is in the profit department. In December 2022, the company declared a profit of 506 crores. Fast forward to December 2023, and that number skyrocketed to an amazing 4570 crores. How did they pull off such an extraordinary leap. Well, remember Tata Technologies' recent IPO? Tata Motors cashed in on that, selling off a 21.3% stake and adding a cool ₹3,747.91 crores to their bottom line.

 

Consolidated Results

But the real excitement lies in the consolidated results. With revenue from operations soaring to 110.6 thousand crores, a 25% increase compared to December 2022, Tata Motors is proving its mettle as a top player in the market. And let's not forget the EBITDA - a mouthful that basically means how much cash the company made from its operations before paying interest, taxes, and depreciation. In December 2023, that figure stood at a hefty 15.6 thousand crores, a whopping

 

 

Tata Demerger

Along with the Q3 results, another factor that boosted the share price of Tata Motors was the news of the Tata Group's demerger plans. According to some media reports, Tata Group is considering spinning off its battery business, Agratas Energy Storage Solutions Pvt, as an independent entity. Agratas specialises in the design and production of batteries for the automotive and energy sectors, with manufacturing facilities in India and the UK. Agratas's main customers are Tata Motors and its subsidiary, Jaguar Land Rover. 

The spinoff could enable Agratas to raise funds and potentially go public in the future. Agratas could be valued at between $5 billion and $10 billion if it hits the stock market, depending on factors such as growth and market sentiments. 

Tata Group is also exploring similar spinoff plans for its EV business, which produces electric cars and trucks. The EV business may also go public as a separate company at a later stage, as some of the existing investors may want to exit. 

The spinoff plans are not finalised yet, and Tata may decide against proceeding with them, depending on the market conditions and growth prospects. However, the market welcomed the news, as it shows Tata's commitment to expanding its presence in the renewable energy and EV sectors, which are expected to grow rapidly in the coming years. 

The spinoff plans could also support Tata Motors' expansion into electric vehicles, as it would establish an independent supply chain for EVs and capture a larger market share. Tata Motors recently regained its position as India's most valuable carmaker, propelled by its strong presence in sports utility vehicles and electric vehicles (EVs). The company's shares have delivered a return of 52% in six months and 113% in a year!

 

 

Conclusion

Tata Motors has shown remarkable performance in Q3, with a huge jump in profit and revenue. The company has also benefited from the news of the Tata Group's demerger plans, which could enhance its growth potential and market value. The market has responded positively to the Q3 results and the spinoff plans, and has rewarded the company with a higher share price. Tata Motors is clearly on the right track to become a leader in the EV sector, and we can expect more exciting developments from them in the future.

Disclaimer: This Stock Analysis is only for informational purposes and should not be considered as investment advice. Always do your research and consult with a financial advisor.