From the last 3 quarters, Tata Motors is recording losses, but the stock price of Tata Motors has rallied by more than 160% in the last 1 year. There has been already a huge discount made on Tata Motors Stock, so now it will be important to see how Tata Motors fulfill its promises. So Let’s discuss some of the key promises which Tata Motors made in the past and how it is going on with it in this article.
Will Tata Motors be able to stand over its Promises?
i) Semiconductor Issues:
- Tata Motors witnessed a severe problem recently due to the Semiconductor chip shortage issues which is recovering significantly.
- Tata Motors are having a presence across the world due to its subsidiary JLR.
ii) To become Free Cash Flow (FCF) Positive:
- Tata Motors has a target to become Free-Cash Flow Positive by FY23.
- On this path, the company has already started taking several measures like Cost-Reduction measures, which were a bit affected due to Semiconductor shortage issues.
- The debt of the total consolidated business of Tata Motors is around Rs. 1 Lakh Cr. and also the company has had negative FCF for the last 2 quarters.
iii) Focus on Electric Vehicles:
- The company is highly aggressive on the Electric Vehicles front and it will be interesting to watch that how the company aggravates its focus on the EV business.
- Here, TPG Rise, a private equity firm has already invested an aggregate of Rs. 7,500 Cr. in ‘TML EVCo’. The Investment will be done in tranches. The period for this investment is a period of 18 months from the investment of the 1st tranche.
- ‘TML EVCo’ will be issuing compulsory convertible preference shares to TPG in lieu of the above-mentioned investments.
- TPG Rise will get an equity stake of up to 11%-15% in ‘TML EVCo’.
- The amount raised by issuing this much equity stake takes the valuation of ‘TML EVCo’ to $9.1 billion i.e., ~Rs. 69,000 Cr.
- The first round of capital infusion will be completed by March 2022 and the complete infusion of funds will be completed by end of 2022.
- Also, Tata Motors is strengthening its presence quite strongly in the SUVs segments as well.
- Further, the company’s market share in Passenger Vehicles has improved significantly to 11.3% in Q2FY22, and also the company is taking an early mover advantage in EV Business.
What Should Shareholders Do?
All the above factors or the promises which are made by the company for the near term as well as the long-term, if gets fulfilled then surely the future of Tata Motors looks quite bright and hence it will be an interesting development to witness and therefore one should keep a close eye on this stock and assess it diligently.