May 15 (Reuters) - Shares of India's Tata Motors Passenger Vehicles jumped up to 8.3% on Friday, as investors looked past margin pressures stemming from the Middle East conflict, with Jaguar Land Rover (JLR) focusing on cost cuts and premium launches to protect margins.
The rally reflects investor confidence that Tata Motors can offset Middle East-driven cost pressures through the pricing power of JLR, its largest revenue generator, strong Western demand, and a $2.3 billion efficiency drive.
Shares were up 5.6% at 357.70 rupees as of 10:43 a.m. IST and were the top gainer on the benchmark Nifty 50 Index and Nifty Auto Index, which were up 0.6% and 0.7%, respectively.
Brokerages also attributed the rally to optimism around a richer product mix and a resilient India business.
Jefferies said western demand is holding up, while the cost-cut plan is expected to lower break-even volumes to 300,000 units and earnings before interest, taxes, depreciation, and amortization (EBITDA) margins of 10%-10.5% for fiscal 2027-28. Its fiscal 2026 margin narrowed to 9.2%.
The launch of the Range Rover electric vehicle and Free-Lander in China could initially boost profitability in the near term, Ambit Capital said in a note, adding that success with these models is key to the much-awaited transition of the brand into a luxury brand.
Macquarie also said that better-than-expected margins in both the India passenger vehicle and JLR businesses could support near-term stock performance.
The automaker has already raised prices effective April 1 and may hike them again if cost pressures persist, Managing Director and CEO Shailesh Chandra said on Thursday in a post-earnings call, adding that commodity prices have risen about 5% over the past 9-12 months and remain volatile.
(Reporting by Urvi Dugar in Bengaluru; Editing by Rashmi Aich)
