Tata Motors logos are pictured outside their flagship showroom in Mumbai
Tata Motors has overtaken Korea’s Hyundai Motor Co to become the second most valuable automaker in Asia outside Japan. Tata Motors is currently valued at about $27.3 billion, compared with Hyundai’s market capitalisation of about $27 billion. China SAIC is currently the most valuable automaker in Asia outside Japan with a market cap of around $36 billion, according to Bloomberg data.
Tata Motors’ market capitalisation is up over 50 per cent in the past 12 months, making it the best performer among top 20 carmakers globally during the period. In comparison, Hyundai Motor’s market value is down 13.5 per cent, while SAIC is up 16 per cent during the period. Globally auto stocks have been laggards with three per cent decline in the combined market cap of the top 50 automakers by market value.
Tata Motors is now the world’s 13th most valuable automaker, up from the 21st slot a year ago, and is ahead of Renault, Suzuki Motor Corp and Volvo among others. Some of the automakers ahead of Tata Motors are Tesla Motors, Audi AG, Nissan and Ford Motor Co. Tata Motors’ market cap includes the current market value of its class-B or differential voting rights shares (DVRs) that carry limited voting rights.
Tata’s local competitor Maruti Suzuki is now the 15th most valuable automaker, up from 18th biggest a year ago. Maruti Suzuki is currently valued at $25.8 billion, compared with $20 billion last year.
Analysts attribute this to higher valuation multiple of Indian automakers compared to their global peers. “Indian automakers are among the most richly valued in the world right now and this reflects in their market capitalisation ranking. Part of this is due to Indian stock market being one of the most expensive globally, and the other being the growth premium that Indian companies currently enjoy over their global peers across sectors,” said G Chokkalingam, founder & CEO, Equinomics Research & Advisory.
This gives Tata Motors and Maruti Suzuki much higher market capitalisation than their revenues and profits. For example, Tata Motors is currently trading at 18 times its trailing twelve months’ earnings. In comparison, Hyundai Motor’s price-earnings multiple is 6x while its 8.6x, 8.5x and 8x for Toyota Motor, Daimler and SAIC Motor, respectively.
Maruti Suzuki tops the valuation league table of trailing twelve months’ price to earnings multiple of 36x, according to Bloomberg data.
Others put Tata Motors in a different league than other Indian automakers. “Tata Motors is as much a global company as many of its global peers. Its value is largely a function of its UK subsidiary Jaguar Land Rover’s performance, which is doing well in line with other global luxury carmakers. This gets reflected in Tata Motors’ stock price,” said Dhananjay Sinha, head-institutional equity, Emkay Global Financial Services.
Tata Motors is currently the 16th largest automaker globally in revenue terms with consolidated sales of $42 billion during the trailing twelve months ending June this year. In comparison, Hyundai Motors is world’s 11th biggest automaker with revenues of $81 billion, while China SAIC Motor is 8th biggest with revenues of $107 billion during the 12 months ended June this year. Their profits were also much higher than Tata Motors during the period.
Maruti Suzuki was the world’s 30th biggest automaker in terms of revenues and 25th largest in terms of profit during the trailing twelve months ending June this year. Toyota Motor Co tops the global league table with revenues and net profit of $240 billion and $19 billion respectively during the 12 months ending June this year.
Experts say the higher valuation provides opportunity to Indian companies to raise capital and invest in growth projects like what Tata Motors did last year. The company raised nearly Rs 9,000 crore through a rights issue in 2015 for investment in capacity expansion, new product development and repayment of high cost debt.