Tata Motors surges 54% in December quarter; sees sharpest gain in 10 years

Shares of Tata Motors were up nearly 3 per cent to Rs 181 on the BSE on Monday, gaining more than 50 per cent in October-December quarter. The stock of Tata Group automobiles company is set to post its sharpest quarterly gain in the past one decade.

Thus far in the fourth quarter of current calendar year 2019 (Q4CY19), shares of Tata Motors have rallied 54 per cent, as compared to 7.5 per cent rise in the S&P BSE Sensex. The stock hit a 52-week low of Rs 106 on September 4, 2019.

Tata Motors is the top gainer among BSE Auto and Nifty Auto indices - both of them have gained nearly 10 per cent each during the quarter. Earlier, in September 2009 quarter, the share price of Tata Motors had more-than-doubled.

The rally was also attributed to better-than-expected September quarter (Q2FY20) earnings, with improvement in the operational performance at Jaguar Land Rover (JLR), its Britain-based luxury vehicle arm. The infusions of fund worth Rs 6,500 crore by the promoter Tata Sons via preferential issue will help deleverage the standalone balance sheet.

"Against the backdrop of a downturn in the global automotive market, the management sees sales grow in the US and China. Despite the ongoing headwinds in China, the management continues to see green shoots of recovery in our sales there. The intensive work with retailers in the region, combined with significant process and product improvements are starting to gain traction," it had added.

With clarity over Brexit, US-China trade and the end of regulatory issues in the European Union (EU), analysts at JM Financial believe that pent-up demand and new model launches in the Battery Electric Vehicles (BEV) / Plug-in Hybrid Electric Vehicle (PHEV) space points to a relatively better market scenario than that in CY19.

“We are enthused by incremental capital commitment by Tata Sons. We believe it will help limit the company’s leverage, going forward. The Q2FY20 performance showed substantial promise but we await sustained margin improvement and further cash flow visibility at JLR before revisiting our directional call on Tata Motors,” analysts at ICICI Securities said in result update. The brokerage firm has ‘hold’ rating on the stock.