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market | IST

Tata Motors’ rally: Domestic biz promising, EV strategy ahead of competitors, says Kotak Institutional Equities

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In an interview with CNBC-TV18, Sanjeev Prasad, MD & co-head of Kotak Institutional Equities, said he believes Tata Motors' domestic business is showing promise while for Maruti, one will have to wait and see if the company can come up with anything in its compact segment, where it has lost significant market share. He also spoke about the recent TCS results, and how RIL's much-needed push in renewable energy is creating a paradigm shift in the space.

In an interview with CNBC-TV18, Sanjeev Prasad, MD and co-head of Kotak Institutional Equities, shared his views on Tata Motors. He believes the company is showing promise in its domestic business and even with respect to the electric vehicle (EV) space, it's way ahead of its competitors.
Prasad said, “We are hearing some whispers around, for example- Tata Motors talk about some strategic partner or PE entity coming in the domestic passenger vehicle (PV) business. Clearly, Tata Motors also has done a remarkable job in the domestic PV business. At least in the last two-three years, they have transformed their business dramatically, their EV strategy seems to be well ahead of competitors, newer product launches have been well-received by the markets. So it seems to be doing the right things. On commercial vehicles, the cycle will turn over the next few months, so it seems to be in the right position as far as the domestic recovery theme is concerned.”
“JLR has its own challenges, it is not the optimum size when it comes to being a global player, but I am sure Tata will have something in mind with respect to JLR itself. The brand is very powerful and if combined with some other entity, then we will see how that evolves but at least the domestic story has been doing very well for Tata Motors,” he added.
The auto major's last six months on Dalal Street have seen share prices accelerate. In the past six months, Tata Motors has shot up 46 percent and in the past month itself, the stock has risen 39 percent. At the time of publishing the copy, the scrip is up almost 10 per cent in intraday trade.
On Maruti, he said, “Maruti, I guess it is more of expectation that the short-term issues will get resolved as soon as the domestic demand comes back. Maruti will be in a position to capture some that. Now we will have to wait and see whether Maruti does have anything to offer in the compact segment, where it has lost significant market share and that segment itself is somewhere around 27-28 percent of the overall market.”
IT major Tata Consultancy Services (TCS) recently came out with its Q2 earnings, the company failed to meet Street expectations. The pace of deal wins has slowed down for the company and attrition has also seen a pick-up.
On TCS, Prasad said, “Disappointing numbers for sure, market was looking at much higher numbers for TCS. It seems like the company is struggling for volumes currently, whereas the rest of the industry seems to be in a somewhat better position. Now, whether it is issue-specific to TCS – we will find out within the next few days, but at least in our assessment it is more like a TCS-specific issue for now. Clearly, it doesn't set the tone well for the rest of the IT sector. On top of that, the sector is pricing a lot of strong, stable margins so on and so forth and TCS has disappointed on both, and it is becoming really hard to justify the valuation the sector is trading at right now.”
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On RIL, Prasad said, “There is a lot of opportunity that this company can create over the next few years. If you look at the entire energy space, the paradigm shift in energy to renewable energy is making a big splash over there. Market size and opportunity is pretty large over there, if you look at renewable energy itself. We are looking at somewhere around 20-gigawatt incremental capacity over the next five years and by the time we reach 2020-2025, we will be looking at somewhere about 40-gigawatt incremental capacity. So clearly, market opportunity is very large which Reliance wants to exploit. Reliance is not a stock I want you to sell currently, there is still a lot of good news out there which will come out over the next 7 years.”
On markets, Prasad said, “The risk to the market, if anything, will emerge from bond yield, interest rate, inflation side, less from the earnings side. If you look at the last 5-6 years, disappointment to the market has come out more from the earnings side. This time around, I am fairly confident that earnings numbers will come through.”
For full interview, watch accompanying video.
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