TataMotors

Chart Of The Day: How far is Tata Motors DVR away from the stock?

8 comments Written on October 19th, 2011 by
Categories: ChartOfTheDay, TataMotors

In 2008, Tatamotors issued shares with Differential Voting Rights (Symbol: TATAMTRDVR) to shareholders in a rights issues (one DVR for every 6 shares, and also one regular share for every six held). (Read an EQM article on this) The idea was that the DVR would hold only 10% voting rights as the regular share, and would get a 5% higher dividend (that is, if dividend was Rs. 2 per share, DVRs would get Rs. 2.10)

The DVR started off okay, but eventually traded at a discount. Now, the discount is 45% – trading around Rs. 100 as the stock trades at 190 or so, and the “spread” keeps widening:

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Note that there is no need for “convergence” – for the two prices to come together. The only difference is liquidity and the lower voting rights.

If you’re looking for hte obvious arbitrage – short futures and long the DVR – you may be in for a really long wait if the two prices don’t converge. On the other hand, the dividend yield is nearly double the Tata motors yield just because of the price difference.

But hey, would love your thoughts.

Posted in ChartOfTheDay, TataMotors

Tata Motors Hits an All Time High at 967

5 comments Written on August 10th, 2010 by
Categories: TataMotors

In a flat market, it’s always useful to look at stocks making new highs. I’ve seen a lot of action in the small and mid caps recently, but in the last few days one large cap has shown an exceptionally strong move.

Tata Motors made a fantastic move today, up 6% (on the future – the cash was up lower due to a dividend ex-date issue).

 

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Supposedly the market reacted to great results, which on a consolidated basis were pretty impressive. On a consolidated basis, TTM made a profit of about 1989 crores, versus a loss of 329 crores last year. EPS was at Rs. 34 for the quarter versus a (–6.4) figure last year.

On a standalone basis, though, Tata Motors made just 395 crores versus 514 last year, but that was largely through an “Other Income” figure of 318 cr. last year from investment profits.

At Rs. 960, if the company makes a Rs. 100 EPS this year, Tata Motors is going to be one of the cheapest auto stocks in India – and the only problem now is the high interest rates in India, and the potential that interest rates increase abroad. Also, their financing has been quite complicated; it’s likely to show some dilution in the coming months if their stock price remains this high.

On a technical note: The stock did a tiny flag and a weirdish-cup and handle pattern on strong volumes. A tiny signal came in around 875. I’d expect a retracement of part of this move, seeing that the stock’s had five continuous up-days, but this stock has a 5 lakh futures contract which is too large for small portfolios – trade with extreme caution. Might consider options instead.

Disclosure: Have positions. Hedged, but I do benefit from stock going up.

Posted in TataMotors

Tata Motors offers 11% on fixed deposits

5 comments Written on January 13th, 2009 by
Categories: TataMotors
Update: This is not 13.3%. This is more like 11% (or 11.5% if you are a shareholder). The rate mentioned is not annualised; the only rates that matter are compounded rates. Thanks to the anonymous commenter who corrected me.

Tata Motors is offering upto 13.33% 11.5% interest, per year, on fixed deposits with the company. (Read the brochure)

All you need to do to be a shareholder is to buy one share - currently less than Rs. 200 - and get 0.5% more.

The major issue of course: Is Tata Motors going to be solvent? Going by how this stupid government is thinking of bailout a Satyam, I think it's a given that even Tata Motors is going to be bailed out. In Satyam they aren't even letting the shareholders go bust - usually bailouts protect debt holders, but here they're protecting those that took the risk!

Given this mentality it's likely Tata Motors won't be allowed to go bust, but if things get ugly money could be stuck for a while. The financials don't look very good, but that's true of everything. Comes down to trust. So if you like Ratan Tata - and most importantly, if he likes you - this might just be the "alpha" you're looking for.

Posted in TataMotors