“There are a lot of positive vibes in the market but every thing depends on how successful the product will be. Indian buyers have always given positive response to low priced cars,” said Sudip Bandopadhyay, director and CEO, Reliance Money.The stock price of Tata Motors rose from Rs 145 on March 12 to cross Rs 165 ahead of the Nano launch today. Market has nothing to encash from Nano’s launch as of now barring a sentimental boost, brokers feel.
According to media reports, initial bookings of Nano could reach 5 lakh units, which will far exceed Tata Motors’ current production capacity. The company is currently making Nano from its facilities at Pantnagar and Pune. Tata Motors will be constrained by capacity till its Sanand unit in Gujarat comes up, which has a capacity of 2.5 lakh units per annum.
In the last three consecutive quarters, Tata Motors registered turnover of Rs 20,000 crore. If the company expects sales of 1 lakh Nano cars in a year, it will generate a turnover of Rs 1,000 crore.
Said Manish Innani, a NSE listed member, “Nano is too ‘nano’ in Tata Motor’s balance sheet. It is a low priced car wherein profit margin is very low unlike commercial vehicles which basically drive the company’s fortune.”
However, there are lot of reasons to go for the car. While a large section of two wheeler riders will prefer to switch to a 4-wheeler for the low cost, people with higher income group may find the car convenient to go to short distance places.
“Nano will prove fruitful for the company in long term. More the volume company increases, greater the success for Nano,” said P K Agarwal, head - equity, Bonanza Portfolio, who feels disbursement of arrears on account of 6th Pay Commission will support Nano’s sales.
Brokers seem to be divided on investing into the stock. Bonanza’s Agarwal advocates long term investment at the current level, while Innani is unwilling to take any call until the company shows better turnover in its commercial vehicles segment and a ratings upgrade by rating agencies consequently.
The stock recently saw a new bottom at Rs 135 over its Jaguar and Land Rover acquisition. On Monday, the stock closed at Rs 166.15, up 3.28 per cent from the previous close.
Source: EconomicTimes
