Here’s Why Management Changes In The Tata Group Would Not Have A Significant Impact On Tata Motors?

-62.32%
Downside
25.14
Market
9.47
Trefis
TTM: Tata Motors logo
TTM
Tata Motors

Recently, The Tata Group which owns nearly 33% stake in Tata Motors, terminated the services of its chairman Cyrus Mistry, who was also the non-executive chairman of Tata Motors and is known to have taken personal interest in managing the affairs of the company. The termination statement issued by the company stated that the erstwhile chairman was unable to turnaround the domestic business of Tata Motors and there has been a significant decline in the company’s market share in both commercial and passenger vehicles during his tenure in the last three years. Reports, however, suggest that Cyrus Mistry took personal interest in the business of Tata Motors and the sudden exit of the chairman might bring lead to uncertainty at the company.  While the domestic business might get impacted by this exit, the company’s U.K. based subsidiary Jaguar Land Rover (JLR) should not be impacted by this move.  According to our estimates, the domestic business (Tata and other vehicles) will account for less than 20% of the company’s revenues in 2016. The two main segments of Tata Motors’ business, Land Rover and Jagaur, account for more than 96% of the company’s valuation according to our estimates, with the domestic business accounting for less than 4% of the company’s valuation.

See our complete analysis for Tata Motors

Ralf Speth the CEO of Jaguar Land Rover was recently nominated to the Board of the group holding company, Tata Sons.  According to Speth, JLR does not expect any impact from the recent developments at Tata Sons, given its professional management.  JLR’s performance in 2016 has been stellar. The company sold 372,978 vehicles between January and August 2016, up 24% year on year. (Read Jaguar Land Rover Continues To Accelerate Sales BY More Than Its Competitors In 2016).

Relevant Articles
  1. Tata Motors Stock Up After Announcement Of Investment In EV Business, Will It Sustain?
  2. Will Tata Motors Achieve Pre-Corona Stock Price?
  3. Can Tata Motors Stock Grow After A Slowdown Warning?
  4. Is Jaguar Land Rover 50%, 70%, Or 80% Of Tata Motors?
  5. Why Tata Motors Stock Has Rallied 30% Over The Last Week
  6. How Does Tata Motors Compare Against A Giant Like Toyota Motors?

While the company’s domestic business might go through a rough patch after Cyrus Mistry’s exit, given the insignificant contribution of this business to the company’ valuation, we do not expect this development to impact Tata Motors significantly. JLR is the key value driver for Tata Motors and with induction of its CEO into the Board of the group company Tata Sons, JLR should continue to focus on growth driving value for the company in the long term.

View Interactive Institutional Research (Powered by Trefis):

Global Large CapU.S. Mid & Small CapEuropean Large & Mid Cap
More Trefis Research