Tata Motors' shares surged 10 percent in early morning trade on Wednesday and soon after, jumped another five percent triggering a temporary trading halt twice.

At 9:47 am, shares of the carmaker were up 17.3 percent at Rs 493.60 on the BSE. The stock even hit a fresh 52-week high at Rs 499.95 on Wednesday.

The stock has gained 46 percent in the last five days. Out of this, today's intraday movement in the stock was about 19 percent.

So far in 2021, shares of the automobile manufacturer have risen 164 percent whereas Nifty Auto was up merely 28 percent.

The auto major earlier announced that the US-based private equity major TPG Capital will invest Rs 7,500 crore in the company's new electric vehicle subsidiary.

The board of directors of TML at its meeting on October 12 have given the approval to incorporate a wholly-owned subsidiary to undertake the automaker's passenger electric mobility business.

TPG Capital's new climate-focused financial fund, TPG Rise Climate, along with co-investors shall invest Rs 7,500 crore in compulsory convertible instruments to secure between 11 to 15 percent stake in this company translating to an equity valuation of up to $9.1 billion.

The first round of capital infusion will be completed by March 22 and the entire funds will be infused by end of 2022, TML said.

The new subsidiary shall leverage all existing investments and capabilities of TML. It will channelise the future investments into electric vehicles, dedicated BEV platforms, advanced automotive technologies and catalyse investments in charging infrastructure and battery technologies, TML said in a press release.

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Over the next five years, this company will create a portfolio of 10 EVs. In association with Tata Power Ltd it will catalyse the creation of widespread charging infrastructure, the automaker added.

The fundamental shift into the entire approach of the business has been carried out by creating two separate subsidiaries, one for electric vehicles (EVs), second for passenger vehicles (PVs), said Deven Choksey of KRChoksey.

“Another important aspect to note in this entire restructuring that the company has done, EVs company would be an asset-light company but would continue to develop new patterns and new technology whereas PV company could provide the manufacturing facility to the EV company. I guess this is a very big shift – on one side the entire commercial vehicle (CV) segment and other businesses would remain with the parent Tata Motors and the PV business is coming into the restructured subsidiaries,” he added.

They have successfully attracted large investors into the company, and Choksey expects the valuations to further scale-up. He thinks the company remains convincing from the investment point of view.

Meanwhile, Nomura has upgraded the company's stock rating to 'buy' from 'neutral' while raising its target price to Rs 547.

Nomura believes that the company needs to invest heavily in new technology to achieve its EV ambitions but the capital raise makes the brokerage confident of the investment-driven growth trajectory.

Jefferies has also raised its target price on the automaker's stock to Rs 565 from Rs 435, adding that the stock offers many catalysts like revival and market share gains in the Indian trucks and passenger vehicles segment, while HSBC believes lack of competition may benefit TML's EV volumes.

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First Published:Oct 13, 2021 10:48 AM IST