Tata group stocks’ day out at Dalal Street

A belief in the stock markets that Tatas may witness multiple investment deals from marquee global funds, similar to the Mukesh Ambani-led Reliance Industries in 2020, is pushing up the share prices of Ratan Tata-led group companies.

On Tuesday, it was reported that US-based private equity fund TGP that manages $70 billion globally and ADQ, the State-run investment arm of Abu Dhabi, will invest a billion dollars in Tata Motors’ electric vehicles business.

The deal triggered wild speculation in the markets that Tata group will be announcing similar such investments in the coming weeks for its salt to software and airlines businesses, experts told Business Line .

The share price of RIL had gained sharply last year after the company announced a slew of investment deals from the sheikhs of Middle East to Google and Facebook.

Air India - Buoyancy

Also, the recent acquisition of Air India by Tatas, which will help the government cut its losses related to the airline, has created buoyancy for the group, experts say.

On Wednesday, Tata Motors, Tata Motors DVR, Tata Chemicals, Tata Tele Business Services, Tata Power, Tata Investment Corporation and Indian Hotels rallied between 5 per cent and 20 per cent. Tata Motors and Tata Motors DVR hit 20 per cent upper circuit. Other Tata group companies including Nelco, Tata Coffee, Tata Consumer Products, Tata Steel and Tata Metaliks, among others, gained up to 5 per cent. Nearly all the Tata group stocks were trading at their 52-week high.

Re-rating hopes

“Tata group is ripe for investments from top global players. Markets got the much needed signal on Tuesday in the TPG and ADQ deal announcements. For a long time, the Tata group has been highly undervalued and markets are only re-rating it on expectation that it is going to be a repeat of what we saw in 2020, where deals with investors were piling up for RIL,” said Kishor Ostwal, MD, CNI Global Research.

Market-cap zooms ₹4 lakh cr

The market-cap of Tata group rose by ₹1.31 lakh crore in the past few days. On Wednesday, the same rose by another ₹70,000 crore and the market cap for Tata Motors alone rose by ₹26,000 crore. Since August, Tata group companies have added more than ₹4 lakh crore ($55 billion) to the market cap.

Ostwal feels that Tata Motors can rise nearly 100 per cent in the next 12 months. “The electric vehicles business of Tata Motors is currently valued at around ₹68,000 crore and it has huge potential considering that leading global motor companies enjoy a m-cap of $50 billion and upwards. In terms of price to earnings, Tata Motors has a lot to catch up, with global peers. The case is similar for other Tata group companies,” Ostwal said.

“There is huge synergy among Tata group companies. Contrary to the general perception that airlines is a difficult business, Tatas have the potential to cut costs by 20-30 per cent by using technology from group companies and make Air India a success. Tatas has always been a sustained long-term story and it’s getting re-rated again,” said Sunil Singhania, Founder - Abakkus Asset Manager LLP.

Motor segment-related growth is leading to rally in most Tata stocks. Tata Power has been rallying due to short supply of electricity on the back of coal shortage, tie-up with Tata Motors and Morris Garage for EV infrastructure. Tata Chemical is anticipated to be the major battery producer for the EV segment.

Analysts also expect Tata Group to spin off some more companies and list them on the bourses in the coming years. For instance, Tata Technologies has been witnessing many deals in the unlisted space where the share price has gained sharply since last year.

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