Following a demerger, Tata Motors shares jump on Moody's optimistic outlook

Following a demerger, Tata Motors shares jump on Moody's optimistic outlook

The global rating agency said that even though Tata Motors has placed a strong focus on reaching net-zero debt by March 2025, all of its businesses should continue to thrive.

In early trading on March 7, shares of Tata Motors Ltd. increased by more than 1% to Rs 1,028 after Moody's affirmation of the automaker's BA3 rating with a positive outlook.

The biggest producer of electric vehicles in the nation recently declared its intention to divide its passenger and commercial vehicle (CV) businesses into two publicly traded companies. This development occurred just a few days ago.

"TML has a strong position in India's expanding CV industry, holding a 40% share, and has a track record of producing significant free cash flows during industry cycles. These factors contribute to the company's creditworthiness, even though its post-demerger operations will only involve CVs. will provide weight to the profile." Kaustubh Chaubal, senior vice president of Moody's, said.

The global rating agency said that even though Tata Motors has placed a strong focus on reaching net-zero debt by March 2025, all of its businesses should continue to thrive.

Many experts have issued optimistic predictions as a result of the likelihood that the demerger would occur over the next 12 to 15 months. JP Morgan, the brokerage, rates the stock as "overweight" and set a price objective of Rs 1,000.

According to Morgan Stanley, the move to divide the firm into two publicly traded companies shows the management's faith in the PV segment's ability to support itself and may improve Tata Motors' value generation. The brokerage has designated Rs 1,013 as its target price.

The target price, as stated in Nomura's "buy" prediction, is Rs 1,057. "In the medium term, businesses should be able to look into each of their strategies with greater freedom," the letter said.