Tata's Auto Stock Hits Back-To-Back New 52-Week Highs On Stake Sale In IPO-Bound Tata Tech; To Ride Ahead?

Tata Group-backed automobile flagship company, Tata Motors has touched back-to-back new 52-week highs. Although, the stock witnessed profit bookings in the last minutes of Monday's session, halting its four-day winning streak, but it also witnessed a new 1-year high of Rs 677.90 apiece on BSE during the day. The reason behind the sentiment in Tata Motors is that the company decided to sell its 9.9% stake in IPO-bound Tata Technologies.

On BSE, Tata Motors shares ended at Rs 666.10 apiece, marginally down on Monday from the previous closing of Rs 667.15 apiece. In the trading session, Tata Motors shares touched a new 52-week high of Rs 677.90 apiece.

Last week, on Friday, the same stock hit a 52-week high of Rs 669.10 apiece. Tata Motors' share price has been on a gaining spree since October 10th before investors cashed in gains on October 16th.

At the time when Tata Motors decided to sell a 9.9% stake in the IPO-bound company to TPG and Ratan Tata Endowment Foundation, the stock had rallied nearly 5% on October 13th.

In its regulatory filing, Tata Motors entered into a share purchase agreement with the two buyers. Under the deal, Tata Motors will sell a 9% stake to TPG for Rs 1,467.0 crore, and the rest of 0.9% will be sold to Ratan Tata Foundation for Rs 146.7 crore. The transaction is expected to be completed by October 27, 2023, or such other date as may be mutually extended by the parties.

Since TPG is the lead investor for this transaction, it ascribes an equity valuation of Rs 16,300 crore for Tata Tech. Also, TPG is among the major investors in Tata Motors' electric vehicles business. At the start of 2023, the American investment firm infused Rs 3,750 crore into Tata Group's automobile flagship company's EV business. This would be the second tranche of investment by TPG in Tata Motors, as the first tranche was Rs 3,750 crore in March last year.

Tata Tech IPO includes an offering of up to 95,708,984 equity shares. Under the IPO, Tata Motors is offloading 81,133,706 shares in Tata Tech through the IPO, while other selling shareholders are Alpha TC Holdings and Tata Capital Growth Fund I will offload o 9,716,853 equity shares and 4,858,425 equity shares respectively.

More Steam To Ride Ahead?

As per Trendlyne data, analysts' average price target for Tata Motors is Rs 720, which is a potential upside of over 8% ahead of the current market price. Further, it highlighted that Tata Motors shares have low TTM PE Ratio of 20.8 compared to the industry, while its TTM PEG ratio is less than 1 at 0.1. Also, the volatility in the stock is average with a 1-year beta of 1.

Further, as of the latest update, Motilal Oswal has recommended buying Tata Motors shares price for a target price of Rs 740 per share, signalling an 11% upside ahead from current levels.

Year-to-date, the stock has rallied nearly 69% on the BSE.

Disclaimer:

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