Tata Motors Rules Out Future Value Unlocking After Tata Technologies Listing
The underlying business performance is what counts to go net debt-free, CFO PB Balaji said.
Tata Motors Ltd. is sitting pretty after the blockbuster listing of group firm Tata Technologies Ltd., so much so that its chief financial officer has ruled out future value unlocking at India’s largest automaker as part of its deleveraging exercise.
“We are comfortable,” PB Balaji, chief financial officer at Tata Motors Group, told BQ Prime on the sidelines of Tata Technologies’ listing ceremony at the Bombay Stock Exchange on Thursday. “We have always said that the underlying business performance is what counts for us to go net debt-free.”
Tata Motors wants its India business to be near net-debt zero in the fiscal ending March 31, 2024, and Jaguar Land Rover in the following year, Chairman Natarajan Chandraskeran said at the company’s 78th annual general meeting on Aug. 8.
As of Sept. 30, the automaker’s net automotive debt stood at Rs 38,700 crore—down from Rs 43,687 crore in FY23—on improved free cash flows. Tata Motors has accrued from the Tata Technologies IPO net proceeds of Rs 2,314 crore, which translates to 68 times returns on investment of Rs 34.24 crore for a controlling stake in 1996.
Tata Motors continues to be a majority shareholder in Tata Technologies, with a 53.39% stake.
According to Balaji, there are three ways to go net debt-free: first, the underlying business performance, which is a priority; second, monetising non-core investments, like the Tata Technologies IPO; and third, a capital raise, “which is not needed any more."
“We are comfortable, focused on underlying business performance here at Tata Tech, and at JLR, and the PV, EV and CV businesses,” Balaji said. “Luckily, all the businesses are firing on all cylinders, and the expectation is to continue that way.”
The Outside Investor
On Thursday, Tata Technologies made the best market debut so far this year, as the stock surged as much as 180% over the issue price of Rs 500 apiece before paring some of the gains to end the day 162.85% higher. A week ago, its IPO—a pure offer for sale of 6.08 crore shares—was subscribed 69.43 times. Such was the demand for the first public issue from the Tata stable since 2004. Tata Motors offloaded a 11.41% stake here.
“(We are) very humbled by the confidence that investors have in the Tata brand and, of course, Tata Technologies,” Balaji said. “It is now our responsibility to live up to the huge expectations that people have on us.”
But, only a month before the IPO, Tata Motors sold 9.99% of its shareholding in Tata Tech to TPG Rise Climate SF Pte—also an investor in Tata Motors’ electric mobility arm—and the Ratan Tata Endowment Foundation at Rs 401.87 per share.
Naturally, the pricing and timing of the stake sale were questioned.
“TPG is a strategic investor in Tata Motors, and we have a good relationship with them. And it’s a strategic view they have taken on where this [auto] industry can go, which is something we liked,” Balaji said, explaining the rationale for the stake sale. “And it also gave an anchor on which the IPO pricing could happen.”
“So, it was a well-thought-through plan. And as the listing shows, the plans have worked out exactly how we wanted them to.”
The EV Overdrive
With the Tata Technologies listing out of the way, Tata Motors’ focus is on expanding its electric vehicle portfolio. In fact, Shailesh Chandra, managing director of Tata Passenger Electric Mobility, said on Wednesday that electric cars will make up 50% of Tata Motors’ sales by 2030.
Naturally, competitors will look to eat into Tata Motors’ largest EV pie, but the company is unperturbed by the competition—be it from homegrown rival Mahindra and Mahindra Ltd. or U.S.-based Tesla Inc., which, as per reports, will be on Indian shores in two years’ time.
“It is our intention to maintain the leadership position in the EV business,” PB Balaji said. "Obviously, there will be competition; that is fine, but more than market share, our goal is to increase the penetration of EVs, and that will give us success in the long run.”
“It’s a market development game. Not a market-share game. We’ll compete fair, and we’ll compete hard. Any competition will keep us on our toes. It’s good for any business.”
