Analysts and brokerages remained largely bearish on auto player Tata Motors after its analyst call, where the company outlined plans for the PV and CV business demerger, the IVECO acquisition, and shared updates on Jaguar Land Rover following the recent cyber-attack.
Demerger of PV and CV businesses
Passenger vehicles: Ahead of the GST cuts, the management stated that the PV segment went a through low demand phase, to the extent that even SUVs were pushed with discounts. The low demand resulted in significant pressure, making profitability difficult.
Following the announcement of the GST rework, the industry saw a double-digit dip in demand. However, from 5th September, demand recovery was visible. The management noted that while the industry is seeing nearly 20 percent growth in bookings YoY, Tata Motors is seeing 25 percent growth.
Commercial vehicles: For the CV segment, Tata Motors' management shared that the impact of GST rate cuts will vary across sub-segments. Many customers currently avail input tax credit (ITC), which limits the benefits of rate cut.
In Heavy Commercial Vehicles (HCVs), about 60-70 percent of customers are B2B operators who claim ITC, while the figure is around 40 percent in Intermediate Light Commercial Vehicles (ILCVs) and only 18 percent in Small Commercial Vehicle (SCVs). This makes the benefit of GST cuts the highest for low-tonnage vehicles.
Demerger: Analysts expect that the separate listing of the PV and CV businesses will be in October or November 2025, subject to regulatory approvals, although the exact dates are yet to be announced.
IVECO acquisition
Tata Motors highlighted over various synergy levers from the IVECO acquisition across cost, R&D, supply chain, and product portfolios. IVECO brings global scale and technology leadership, while Tata Motors adds cost-competitive manufacturing and a strong India base. The management guided that IVECO will be EPS accretive from Day 1, generate strong FCF, and target 20 percent RoCE, aligned with the firm's profitable growth strategy.
The combined entity will rank No. 4 globally in the MHCV (6T+) market, with volumes close to the No. 2 and 3 players. In Latin America, where IVECO is No. 3, the firm plans to introduce its products below IVECO’s range to expand presence without cannibalization.
Jaguar Land Rover
JLR halted production at its three UK plants from August 31 after a cyber-attack disrupted internal systems, keeping operations down for most of September. On September 29, the Tata Motors subsidiary announced a phased restart, and full recovery expected to take several weeks.
As a result of inventory, September retail sales remained unaffected and even some wholesale was managed, but at a lower rate. Going ahead, the firm will see a liquidity hit due to production halt. The firm added that despite geo-political issues, the US market is resilient, China is holding up, and EU/UK are stable.
Should you buy, sell, or hold?
Motilal Oswal said JLR is facing several headwinds, which include: tariff-led slowdown for exports to the US, demand weakness in key regions like Europe and China; and rising VME, warranty and emission costs. "For the lack of any triggers, we reiterate our 'neutral' rating on Tata Motors, with a price target of Rs 686," noted the brokerage.
Nuvama Institutional Equities concurred, maintaining its 'reduce' call, with a price target of Rs 680 per share, led by muted growth prospects in JLR. JM Financial downgraded its rating from 'hold', cutting it to 'reduce' and issued a target price of Rs 689.
International brokerage Jefferies said that it is positive on India business, along the demand for PVs and CVs. However, the brokerage is less convinced on the JLR outlook and IVECO acquisition. Jefferies reiterated its 'reduce' call, with a price target of Rs 575 per share.
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