Brokerages are treading cautiously in indicating their views on the valuation of Tata Motors once the deal to acquire Jaguar and Land Rover from Ford Motors is sealed. But, the undertone is bullish as they are willing to bet on the track record of the Tatas in the area of mergers and acquisitions. After the initial sell calls on the Tata Steel stock went wrong after the Corus acquisition, brokerages are watching the Tata Motors deal with an open and positive mind.
Will there be a re-rating of the stock when the deal is announced? "There would be no time to re-rate the stock as the price would immediately reflect the prevailing sentiment. If it falls, brokerages will turn buyers," said an automobile analyst not willing to be named.
At present, 18 out of the 24 stock recommendations available with Bloomberg are for "buy", with an average target price of Rs 851.48. On Thursday, the stock closed at Rs 794.25, unchanged from the previous close. Citigroup put a buy on the stock with the highest target price of Rs 1,029 on Wednesday. JP Morgan Research put a buy on the stock on November 28, with a target price of Rs 863. Both Citigroup and JP Morgan are advising the Tatas on the Jaguar, Land Rover deal.
In the absence of any clear numbers available on the proposed price for the deal and the profit and loss numbers specific to the Rover and Jaguar brands, it is difficult to make an assessment of the deal, according to analysts. "Going by the numbers that are being discussed in the media, which are all source based, we believe the deal may not be expensive if you strip off the expenses Ford incurred for restructuring the company," said Chirag Shah, automobile analyst at Emkay Share & Stock Brokers.