Tata Motors shares advance 4%; stock up 16% in 30 days: Four things you need to know

On August 1, 2024, Tata Motors (TML), in its press release, said that its board had approved a composite scheme of arrangement amongst TML, TML Commercial Vehicles Limited (TMLCV), Tata Motors Passenger Vehicles Limited (TMPV) and their respective shareholders under Sections 230-232 and other applicable provisions of the Companies Act, 2013 (“Scheme”).

Further, pursuant to the scheme, the existing passenger vehicle business in TMPV will be merged into TML, the existing listed entity.

Upon the scheme becoming effective, both TMLCV and TML will be renamed, resulting in two separate listed entities: 1) The Commercial Vehicle business and its related investments, under the name TML, and 2) The Passenger Vehicle business, the Electric Vehicle (TPEM) business, JLR and their related investments, under the name TMPV.

Pursuant to the scheme, shareholders of TML will receive one share of TMLCV of face value ₹2 fully paid up for every one fully paid-up share of ₹2 held in TML of the same class (“Entitlement Ratio”).

India-FTA deal a positive

Another reason why Tata Motors shares gained today is the signing of a trade deal between India and the UK.

The deal opens up massive export opportunities for labour-intensive industries and key sectors such as engineering goods, auto parts and engines, and organic chemicals, the Indian government said in a press release.

“India will gain from tariff elimination on about 99% of the tariff lines, covering almost 100% of the trade value, offering huge opportunities for an increase in bilateral trade between India and the UK,” the release stated.

Under the deal, Indian automotive tariffs will drop from over 100% to 10% under the FTA. Quotas will be established for automobile imports on both sides, it added.

The duty-free access to the import of internal combustion vehicles from the UK is limited to a predefined quota. The duty-free quota on EVs is limited to only a few thousand with no scope of out-of-quota reduction in tariffs.

According to an available report, the revised tariff regime works to the advantage of luxury carmakers Rolls-Royce, BMW Group’s Mini Cooper and Aston Martin, though their volumes are yet small in India. A key winner is Jaguar Land Rover, the British unit of India’s Tata Motors Ltd.

“(The UK-India FTA) is good for India’s automotive sector, especially Tata Motors and Mahindra, due to reduced tariffs on auto components, including EV parts. JLR will benefit,” NDTV Profit reported, quoting Ravi Bhatia, president and director at JATO Dynamics India.

Tata Motors fundraising plan

On May 2, Tata Motors said its board has approved the issuance of non-convertible debentures (NCDs) aggregating up to ₹500 crore on a private placement basis to eligible investors.

The NCDs are proposed to be listed on the Wholesale Debt Market Segment of the NSE.

Optimism ahead of Q4 earnings

The auto major is slated to announce its March quarter earnings on May 13. The earnings and commentary will be keenly eyed after its peer Mahindra & Mahindra reported a good set of numbers for the quarter gone by.

Management commentary on JLR sales and outlook will be significant.

Tata Motors files record patent applications in FY25

Last month, Tata Motors said it has filed 250 patents and 148 design applications, its highest ever in a single year, in FY25.

The filings encompass a broad spectrum of product and process innovations, aligning with key automotive megatrends such as Connectivity, Electrification, Sustainability, and Safety (CESS), as well as emerging technologies like hydrogen-based vehicles and fuel cells, the Mumbai-based auto major said in a statement.

Additionally, they cover various vehicle systems, including battery, powertrain, body and trim, suspension, brakes, HVAC, and emission control, it added.

Tata Motors stock performance

Shares of Tata Motors have jumped over 16% in the past month. In comparison, the BSE SENSEX has jumped 10.30%. The BSE AUTO has also rallied over 16% during the window.