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Deeptha Rajkumar

RUMOURS that a capacity expansion may be on the anvil, saw the stock of Tata Motors Ltd soar to a new high, intra-day, on the bourses.

Brokers said expectations that the company's commercial vehicle sales for the month of December would be better than expected, also fuelled interest at the counter. "Export demand coupled with a more-than-robust domestic demand has created a scenario where capacity is an issue. And with capacity utilisation already up significantly, one could say that the company is looking at a manufacturing crunch," sources in the know said.

Analyst speculate that the company will have to increase capacity by almost 50 per cent in order to meet the growing demand. "Next two quarters the company is looking at strong commercial vehicle numbers. And if the next monsoon is as good as this one, the good growth pattern will be sustained," an analyst said. There is also a belief that if the management were to revise its volumes estimate for both CVs and Cars/UVs then it would lead to a spurt in profit levels.

While the domestic market is currently the biggest driver, the company's focus on exports is said to be another plus. "The company is looking at launching a Global Truck platform for the European markets. In fact, work has already started on this," market sources said. Tata Motors is to seek shareholders' approval to hike the FII investment to 36 per cent of the paid-up capital of the company. The company is also expected to hike prices across products next month in order to meet rising input costs.

Analysts predict an EPS of Rs 21-22 on a diluted equity of 341 crore (assuming entire warrants are converted) for the full year March 31, 2004.

From a low of Rs 147.75 as on March 17, 2003, the counter has appreciated by more than 200 per cent at its current levels. The stock ended the day at Rs 452.05 up 2.18 per cent with around 43.11 lakh shares traded on the NSE. On the BSE, the stock ended the day at Rs 452.30 up 2.24 with around 17.7 lakh shares traded.

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