Tata Motors shares surge to record high after posting Rs 3,203 crore Q1 profit

Shares of Tata Motors rose as much as 4 per cent to record high of Rs 665.40 on Wednesday after the parent company of luxury car maker Jaguar Land Rover registered its third consecutive quarterly profit on the back of price hikes and robust demand for luxury cars.

Financial performance 

Tata Motors reported a consolidated net profit of Rs 3,203 crore for the first quarter of FY24, against a loss of Rs 5,007 crore in the quarter ending June 2022. The company beat analyst estimates, which had pegged the company to report a profit of Rs 2,900 crore.

The UK-based Jaguar Land Rover unit accounted for 70 per cent of the revenue of Tata Motors on the back of strong demand for higher margins in SUVs such as the Range Rover and an improving supply of semiconductors after shortages for several quarters.

Jaguar Land Rover posted its highest production levels in nine quarters in April-June. The strong retail sales of Tata Motors resulted in a 66 per cent rise in revenue.

JM Financial Institutional Securities said "Strong free cash flow (FCF) generation is expected to support higher investments towards electrification at JLR."

Kotak Institutional Equities improved its estimates for the company's consolidated earnings before interest, taxes, depreciation, and amortisation (EBITDA) by 12 per cent to account for the first-quarter performances of Jaguar Land Rover and Tata Motors' domestic commercial vehicle businesses.

Tata Motors to cancel DVR shares

In another development, Tata Motors said it will cancel its DVR shares to simplify its securities structure, leading to Tata Motors' DVR shares rising nearly 17 per cent.

It is the only major listed company with 'A' ordinary shares having voting rights at 10 per cent of ordinary shares. The automaker will issue seven ordinary shares for every 10 'A' ordinary shares, meaning a 23 per cent premium on the previous day's closing level of 'A' ordinary shares. 

The automobile manufacturer had delisted its American depositary shares in January, around 18 years after it first started trading. The move was to focus on its securities on the exchanges.

The 'A' ordinary shares were first issued by Tata Motors in 2008. It improved the count through a qualified institutional placement in 2010 and a rights issue in 2015.

The capital reduction will dilute the voting rights of the company's largest shareholders, called promoters, by around 3.2 per cent but boost its earnings per share without impacting either its cash balance or net debt, Tata Motors said.

It will also increase Tata Motors' free float of ordinary shares by 18 per cent and the elimination of the discounted securities will boost the company's market capitalisation.

The current market value of Tata Motor's is around $28 billion, whereas its rival Maruti Suzuki India's market valuation is $36 billion, making it the country's largest automaker by market value.

(With Reuters inputs)