Tata Motors revamps JLR

Wed, 16 Jun 11:30 am

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After shedding some gains in early trades, the Indian indices are currently trading firm. Key Asian markets are also in the green. Stocks from auto and metals space are witnessing buying interest while stocks from the oil & gas and consumer goods space are trading in the negative territory.

The BSE-Sensex is trading higher by around 63 points, while the NSE-Nifty is up by about 18 points. Buying interest is also being witnessed among mid and small cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading higher by 0.5% and 0.6% respectively. The rupee is trading at 46.35 to the US dollar.

As per leading business daily, Tata Motors has chalked out various plans for reviving its beleaguered brands Jaguar and Land Rover (JLR). Some of the initiatives include introducing new models, engines and a strategy to move into the electric vehicle and hybrid segments. Apart from this the company also plans to reduce emission with the help of advanced technology to meet the new emission norms. Tata Motors also has the cost management strategy in place for its two brands and has plans for expansion of product development operations in India. The company has ear marked Rs 100-120 bn over the next 2-3 years for capex and research & development for these two brands.

Tata Motors plans to transform the JLR business into a simple, low cost operation - with the ability to generate cash. This should put less pressure on Tata Motors to raise external capital. It should be noted that the two brands posted a net profit of Rs 205 m in FY10 as compared to a net loss in the preceding year. The strategy to streamline the business operations of JLR should improve the bottom line of the company as about half of the Tata Motors consolidated revenue is generated from JLR.

Pharma stocks are trading mixed with Glenmark Pharma, IPCA Labs trading firmly in the green. Sun Pharma and Piramal Healthcare were in the red. Cipla is acquiring minority stakes in two biotech firms in an effort to strengthen its presence in the biotechnology space. The company will invest around US$ 65 m in a phased manner over three years to acquire 40% in Mab Pharm, a biotech company in India, and 25% in BioMabs, a firm in Hong Kong. Both companies are into biosimilars, which are the off-patent versions of biotech medicines. Mab Pharm is setting up a facility for these products in Goa while BioMabs is setting up a biotech plant at China. Cipla will have rights to market these products in India and international markets.

The deal will be completely funded through internal accruals. Cipla currently has a strong presence in the generic space and now wants to foray in to the upcoming biosimilar market. This new market is expected to represent a huge chunk of the overall pharma market by 2015. The combined market for biosimilars is expected to touch US$ 21 bn in the US and Europe by 2015. Other Indian companies such as Ranbaxy, Dr Reddy's, Wockhardt, and Biocon are also developing a large portfolio of biotech drugs. We are positive on Cipla's entry into this new growth segment.