Everything goes up, save ITC. What is wrong with ITC?
ITC is probably one of those companies which suffer from wrong capital allocation. On one hand, it has a huge cash generating cigarette business; on the other hand, the hotels business as well as the FMCG business use up an intense amount of cash. I think a good amount of the cash flows, probably Rs 8,000 crore generated over the last few years has gone into funding these two businesses. Yes, these two businesses — FMCG and hotels — will probably be far more valuable as standalone companies but given this conundrum, it is one of those value stocks with no near term catalysts.
Just when it appeared that had a long runway in front of themselves, they came out and said that for next two quarters due to semiconductor problem, JLR will have negative EBITDA. Where is that company headed?
The company is still fine. Semiconductor problem is clearly a global issue across sectors and not just for cars. It is affecting mobiles and various items. In the case of Tata Motors, two of its strongest markets — Europe and China — are a slightly different cup of tea. We have seen that used car sales in the US are up 45% because there were not enough new cars available in the market. This is across brands. Tata Motors falls in the same bracket. They have fairly good deleveraging plans, very crucial for them. Valuations are not expensive.
One would not really look at valuations given that they are coming out of pandemic. So Tata Motors is a work in progress. I do not think there are short-term gains to be made in the stock but over a longer term it has potential.
