Fresh EV funding, rising PV demand augur well for Tata Motors

by

in

ET Intelligence Group: The electric vehicle (EV) venture of Tata Motors whose valuation remained underappreciated until the fresh funding by private equity company TPG, is expected to bump up the parent company’s valuation by Rs 70-120 per share. Tata Motors’ stock gained 20 per cent on Wednesday to close the day at Rs 506.8 on the BSE.After the TPG deal, analysts have raised the stock’s price target by 30-40 per cent. The deal values the EV division at $ 6.7-9.1 billion or 30-40 per cent of the Tata Motors valuation before the deal.The total valuation and equity stake of TPG is based on the EV company’s FY27 revenue target. TPG will get the compulsory convertible preference share of the EV company and its stake will be 11-15 per cent depending upon the revenue threshold.Tata Motors had a 70 per cent market share in the EV passenger car business with sales of 4,218 cars in FY21 compared with 1,355 a year before. With equity funding from TPG, the company will be able to invest in the development of the EV and surrounding infrastructure. It plans to launch about 10 EV models with an investment of Rs 15,000 crore in the next five years. 87009537The company expects the EV penetration at the industry level in the passenger vehicles (PV) segment to reach 10 per cent in the next five years and to comprise 20 per cent of its total revenue. Analysts estimate that Tata Motors’ EV sales may reach Rs 14,000-15,000 crore in FY26. Given this, the EV company’s enterprise value relative to sales as implied by the TPG deal is similar to the listed Chinese players and at a 35 per cent discount to Tesla’s valuation. The valuation of EV companies is connected to the EV penetration.The equity funding by TPG reduces Tata Motors’ balance sheet risk. The company’s existing PV division will get royalty and commission from the EV company for using its brand and production facility. With no overhang of heavy investments and incremental revenue from the EV business, revenue and valuation of the PV division may also improve. Apart from the valuation boost, the company has reported demand revival and market share gain in the local truck and PV business, which is likely to maintain investors’ interest in the stock in the medium term.

Article Source and Credit economictimes.indiatimes.com https://economictimes.indiatimes.com/industry/renewables/fresh-ev-funding-rising-pv-demand-augur-well-for-tata-motors/articleshow/87011713.cms Buy Tickets for every event – Sports, Concerts, Festivals and more buytickets.com

Discover more from Teslas Only

Subscribe now to keep reading and get access to the full archive.

Continue reading