Ace investor Rakesh Jhunjhunwala has bought shares of Tata Motors during the quarter ended September. This is Jhunjhunwala's first direct investment into an auto firm after Autoline Industries where he and his wife Rekha held 6.20% or 17.51 lakh shares of the firm for the quarter ended September 2020.
Jhunjhunwala bought 1.29% or 4 crore shares in Tata Motors, shareholding data at the end of September quarter show. Tata Motors share has surged 36% in September quarter.
Big Bull bought shares in the Tata Group firm during the quarter in which Tata Motors chairman N Chandrasekaran announced the firm would cut its debt to zero in the next three years.
Addressing the 75th shareholders' meet on August 25, Chandrasekaran said, "...currently we are deleveraging this business substantially. Target is to bring it to near zero debt levels in the next three years."
The company has a net automotive debt of Rs 48,000 crore.
The Big bull's latest bet on Tata Motors comes at a time when the Indian auto major has started showing signs of recovery. In Q2 of current fiscal, the firm narrowed its loss on a quarter on quarter basis.
Tata Motors posted net loss of Rs 314.5 crore in Q2 against Rs 216.56 crore loss in the year-ago period. However, it reduced its loss from Rs 8,437.99 crore on a quarter on quarter basis.
The company sees a gradual recovery of demand and supply in the coming months despite concerns around risk of second wave of infection in many countries and other geopolitical risks.
"In this context, we are committed to achieving near zero net automotive debt in the coming years by focusing on better front-end activations of our exciting product range and executing our cost and cash savings with rigour," Tata Motors said. Though the holding period of Jhunjhunwala in Tata Motors stock cannot be predicted, Business Today looks at the one-year horizon and checks how the stock is likely to perform during the same period.
Motilal Oswal has maintained a buy call on the auto firm post its Q2 earnings.
The brokerage said, "Tata Motors would see the triple benefit of a macro recovery, company-specific volume/margin drivers and sharp improvement in free cash flows and leverage in both JLR as well as the India business.
We upgrade our FY22E by 13% to factor in lower tax in JLR (reversal of deferred tax). Maintain Buy, with target price of Rs 230 (Sep'22 SOTP)."
Similarly, ICCI Securities has revised its target price from Rs 131 to Rs 197 per share. The brokerage said for India business, non-core asset sale, potential investment from new partner in domestic PV business will also be strong levers to deleverage. The core CV business in India is at trough demand while green shoots are visible coupled with market share gains in PVs.
"JLR's performance in FY22 is likely to driven by new products (Defender) coupled with continued cost reduction success. Disorderly Brexit remains a key risk. Maintain BUY, "the brokerage said.