Tata Motors Limited witnessed a surge in its stock price, climbing over a percent to Rs 1,028 in morning trading on March 7, following Moody’s affirmation of the automobile major’s BA3 ratings with a positive outlook.
The positive development comes in the wake of Tata Motors’ recent announcement to split its commercial vehicle (CV) and passenger vehicle (PV) business into two distinct listed entities.
Moody’s Senior Vice President, Kaustubh Chaubal, highlighted the potential benefits of the demerger, stating, “While the demerger would result in TML’s remaining operations comprising only CVs, the company’s strong foothold with about 40 percent share in India’s growing CV industry and the business’ demonstrated ability in generating large free cash flow through industry cycles will support its credit profile.”
The global rating agency further emphasized that all of Tata Motors’ businesses should continue to deliver growth regardless of the demerger, with a focus on achieving net-zero debt by March 2025.
The demerger, anticipated to materialize over the next 12-15 months, has garnered bullish sentiments from various analysts. JP Morgan assigned an “overweight” rating to the stock with a price target of Rs 1,000, expressing confidence in the potential value creation from the restructuring.
Similarly, Morgan Stanley lauded Tata Motors’ decision to split its business into two listed entities, highlighting its confidence in the PV segment’s self-sustainability. The brokerage assigned a target price of Rs 1,013, anticipating improved value creation for Tata Motors shareholders.
Nomura echoed the positive sentiment with a “buy” rating and a target price of Rs 1,057, emphasizing the medium-term benefits of allowing the businesses to pursue their respective strategies with greater autonomy.
The announcement of the demerger reflects Tata Motors’ strategic vision for optimizing its operations and unlocking value for stakeholders. With Moody’s positive outlook and favorable analyst recommendations, Tata Motors continues to chart a promising path forward in the competitive automotive industry.