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English EditionEnglish Editionहिन्दीગુજરાતીमराठीবাংলাಕನ್ನಡമലയാളംதமிழ்తెలుగు
| 21 April, 2023, 03:34 AM IST | Today's Paper
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Business News›Markets›Stocks›News›Tata Motors gathers momentum on bourses with
improving JLR business



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TATA MOTORS GATHERS MOMENTUM ON BOURSES WITH IMPROVING JLR BUSINESS




SYNOPSIS

JLR EXPECTS FREE CASH FLOW (FCF) TO REACH OVER 800 MILLION POUNDS FOR THE MARCH
2023 QUARTER. FOR FY23, FCF IS ESTIMATED TO BE OVER 500 MILLION POUNDS IMPLYING
CASH OUTFLOW IN THE EARLIER QUARTERS OF THE FISCAL YEAR. THE FY23 FCF WILL BE
THE HIGHEST IN SEVEN YEARS. IT IS ALSO SIGNIFICANTLY HIGHER THAN JLR’S EARLIER
GUIDANCE OF BREAKING EVEN ON THE FCF FRONT.

ET Intelligence group: The stock of Tata Motors has gained 15% over the past
month after staying range bound in the prior six months. The renewed interest in
the stock owes to improving cash flow of the UK subsidiary Jaguar Land Rover and
abating chip shortage that had hampered production in the previous fiscal year.

JLR expects free cash flow (FCF) to reach over 800 million pounds for the March
2023 quarter. For FY23, FCF is estimated to be over 500 million pounds implying
cash outflow in the earlier quarters of the fiscal year. The FY23 FCF will be
the highest in seven years. It is also significantly higher than JLR’s earlier
guidance of breaking even on the FCF front.

A better cash flow will help in reducing JLR’s debt of three billion pounds.
This and a higher production ramp up along with superior profitability is
expected to result in an FCF of around 1.5 billion pounds in the current fiscal
year. Analysts anticipate a net debt of 1.5 billion pounds for FY24 and nil for
FY25.



The volume scenario also looks optimistic. JLR’s wholesale volume increased by
19% sequentially to an eight-quarter high of 95,000 units in the March 2023
quarter. It was higher than the company’s guidance of 80,000 units which means
the chip situation is improving thereby reducing the constraint on production.
The volume for FY23 rose by 9.2% to 3.2 lakh units after declining in the
previous three years. Analysts expect volume to grow by 10-12% for FY24.

The demand for JLR vehicles continues to be robust with an order backlog of two
lakh units, of which three fourth are of high volume models such as Range Rover,
Range Rover Sport and Defender. The product mix is richer with a higher share of
Land Rover, which fetches a superior margin than Jaguar. The production volume
of Range Rover and Range Rover Sport rose to 32,950 units in the March quarter
from 28,000 units in the previous quarter while that of Defender increased to
27,513 units from 23,816 units by similar comparison.

JLR contributes about 30% to the fair value of Tata Motors. Currently, JLR’s
ascribed valuation is at a 20-25% discount to the German peers, which may narrow
given the improving cash flow and increasing volume offtake.

(Originally published on Apr 18, 2023, 06:54 PM IST)

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BY
Ashutosh R Shyam
ET Bureau

3 mins read, Last Updated:
Apr 19, 2023, 06:17 AM IST

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