29-Apr-2009 This document is exclusive property of Cerindus Ventures. © 2008 – 2009
by Mir Mazhar Hussain
The Incredible Stocks of
First one in my 'Incredible Stocks of India' Portfolio is Tata Motors. This is the best stock to buy in the market right now
for long term returns and wealth creation.
Reasons:
1. Price. Tata Motors is around Rs.250 and is a must buy and hold. The face value of Tata Motors is 10 compared to Maruti (face value 5) which is currently trading at Rs.822. Tata Motors has a year high of Rs.743 and year low of Rs.122.
2. Assuming that in the coming months/years 1 crore or more customers worldwide will happily pay a token booking ** amount of Rs.3300 crores or more for Nano though there's no guarantee of immediate delivery… the result would be that... Tata Motors will have a tremendous cash surplus. Every one loves a cash rich company. (I had a chat with a Tata Motors manager he says they printed 10 lakh booking forms initially for Nano but if need be overnight another 10 lakh forms can be printed.) There is talk of exporting Nano to Europe and other global markets. Tata Motors on their part need to ramp up production in a hurry and going by the way they handled bookings so far – by bringing online all their retail stores (Titan, Westside, Croma etc.) in addition to roping in leading banks SBI, ICICI etc. to accept booking forms for Nano and also going by the fact that this project is close to Ratan Tata’s heart – there should not be any major hurdles in meeting the huge demand that is likely to arise for Nano.
** Upon delivery this is revenue of Rs. One Lakh Crores!.
3. With NANO finally ready for delivery the heavy R & D expenses incurred till now will not be there hence expenses to go down and income to go up in their books.
4. Buffett would love to buy this stock because Nano has a virtual monopoly in a particular price segment (Rs.1 lakh) for the Indian middle class with no competition for years to come. Bajaj Auto is planning to launch a small car in 2011 but they emphasized it will not be in 1lakh price range.
Tata Motors makes trucks and LCVs also. They have good export orders for Commercial and Passenger vehicles. Up market version of Nano for
Tatas acquired Land Rover and Jaguar and are likely to get loan restructuring assistance from the British government to cope with turbulent times. All in all this stock is a buy and forget.
