Table of Contents
Business Introduction:
TML is India’s largest wholly-owned automaker, producing passenger automobiles, multi-utility vehicles, and commercial vehicles. In June 2008, it bought Jaguar, a manufacturer of premium automobiles, and Land Rover, a manufacturer of premium sport utility vehicles.
Today, Tata Motors has taken a step ahead and ventured into the Electric segment and is ruling it. Tata Motors is the leader in the EV segment in India with multiple product portfolios. And, the company is doing very well. In fact, Tata Motor’s market share in EVs has jumped from 18% in FY19 to 82% at the end of FY 2021.
Fundamental Analysis:
Financially speaking, Tata motor’s current Financial position isn’t attractive.
The company is running with negative working capital. Good top-line earnings but a lousy bottom line. Hence, negative EPS.
Tata Motors has Free cash of over 34k crores. In regards to liquidity position, Tata motors Cash accrual is expected to be between Rs 12,000-13,000 crore for FY 2022 and around Rs 25,000-28,000 crore in fiscal years 2023, which is sufficient to make annual debt repayments.
Companies’ debt capital is at over 1.5 lakh crore. This includes borrowing and other financial liabilities. With such huge borrowing come accrual interest payments. Which is a burden for the company.
Revenue has been steadily increasing but net profit is still negative.
Financially speaking, Not the best balance sheet. Obviously, if the company could keep up to its sales estimates then everything will be sorted out. The electric segment is expected to bring a turnaround in the company.
Technical Analysis:
Technically speaking, the stock is mildly bullish. MACD is showing a slight upwards signal and volume might pick up too. Right now, im not seeing any strong direction in its chart. So, whatever movement you see will be temporary.
But, you have to understand the fact that as long as the company shows some real growth in sales and profit, the stock can’t reach any higher. Or even if it does, it’ll probably fall back to the 400-420 range.
SWOT – Risk Analysis:
Opportunity & Strength
Strong Promoter
Strong Promoter backing by cash cow companies such as TCS. Being a part of the Tata group, the company derives significant financial flexibility and access to low-cost funds from banks and capital markets. Not just financial support but also technological support from Tata Chemicals & Tata Elxsi.
Strong Portfolio
Tata Motors has a strong market presence, Good product portfolio which includes JLR & Land Rover.
Market Presence
Tata Motor has a dominant presence of over 60% in the Heavy Commercial vehicle segment and 50% in the light commercial vehicle segment. The company also improving its domestic passenger vehicle segment.
Weakness & Threat
Competitive Market
Auto Market has never been easy. In fact, with the advancement of technology, free trade, and globalization. The competition in the industry is as high as it could get. And if Tesla reaches the Indian market, they’ll for sure take most of the high-end EV market share.
Dependent Entity
The company is kind of dependent on its Promoter and backed entities. This is never a good sign. At least, not for the long term.
Conclusion:
As said earlier, The automobile industry is a highly competitive one. Thin margin, need for a constant update, huge capital requirement. And, whether you succeed in the business or not is seen only after all the work is done. Tata motors have been barely surviving until now.
But, the future projections seem really good. I mean, the company came into the EV market with a boom. They sold on average over 2000 EV cars per month in 2021. This demand for EVs is not gonna dial down any soon. And Tata Motors is in the right spot to take on the market.
With that said, considering the future prospects and not just the current financial status, ill give a comfortable 7/10 for tata Motors.
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