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Tata Motors shares scale 52-week high; TPG may invest in auto major's EV division

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Shares of Tata Motors gained nearly 6 percent on the BSE on Friday after a report did the rounds that private equity firm TPG is in advanced discussions with Tata Group to invest $1 billion or more in the electric vehicles (EV) division of Tata Motors.

Tata Motors shares scale 52-week high; TPG may invest in auto major's EV division
Shares of Tata Motors gained nearly six percent on the BSE on Friday after reports that private equity firm TPG is in advanced discussions with Tata Group to invest $1 billion or more in the electric vehicles (EV) division of Tata Motors.
At 9:30 am, shares of Tata Motors were trading 3.2 percent higher at Rs 388.60.  The stock hit a new 52-week high at Rs 398 on Friday.
The country’s largest vehicle maker is in the process of transferring its passenger vehicles division, including its EV portfolio, to a step-down subsidiary. For this, the automaker had got the shareholder’s approval in March.
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TPG’s $1 billion investment which could even go up to $1.5 billion, values the EV division at $8-9 billion. The final quantum of investment and the valuation is yet to be finalised, and a formal announcement is expected this month, the media report said.
The group is also talking to some of the sovereign wealth funds in the Middle East to come on board either separately or as a consortium but they are expected to get smaller allocations than TPG, whereas similar approaches have also been made to California Public Retirement System, the report added.
This development comes a day after foreign brokerage firm Morgan Stanley upgraded its rating on shares of Tata Motors to 'overweight' from 'equal-weight' and raised the stock's target price by a whopping 50 percent to Rs 448.
"As India's auto-cycle emerges from multi-year lows, we believe Tata Motors will see the highest operating and financial leverage gains," Morgan Stanley had said in a note on Thursday while adding that the stock's risk-reward ratio also appears favourable.
In the past year, the stock has zoomed 173 percent, sharply outperforming the benchmark Nifty50 that has gained only 51 percent during the same period.
Talking about Tata Motors, Harendra Kumar, Managing Director at Elara Securities said, "Among the auto index, that is the only stock that has few amount of optimism left for the future. If you look at the rest of the stocks like Maruti Suzuki or Mahindra and Mahindra (M&M) or Bajaj etc, they have challenges on the supply side, product pipeline etc. The trade per se for the auto index is only with Tata Motors".
"That is why you are also seeing a little bit of crowding in into the stock. So whenever you sense a little bit of optimism in the series or the JLR volumes, the stock gets repriced but per se it is built on hopes, not on that the recovery will actually take place, so yes, there is a tailwind of the market and a little bit of optimism but unfortunately that is the only choice available for us in autos," added Kumar.
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