Tata motor price vs Dvr ratio fluctuates between 1.4 and 2.2 leaving out extremes the ratios are reverting to mean
The extremes offer arbitrage oppurtunity which smart investors utilise to earn less risky returns.
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A Tata Motor DVR has 10% voting right as compared to an ordinary Tata Motor share. 1:1 (1 voting right per share.) 1:10 (1 voting right for every 10 shares held.)
Hence Tata Motor DVR trades at discount vs Tata Motors Share ā¦
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Thanks. May I know how you calculated this ratio.
So, suppose if its reverting to mean which comes to 1.8, Either tata motors stock to rise up to 460 from 425 (CMP DVR 2551.8=460) or Tata motors DVR should correct up to 236 (CMP Tata motors = 425 = 2361.8). But which direction is it going to happen is my question? I sold my DVR shares today and bought TATA motors assuming it will go up to 460 levels. Lets see how it plays out. Would be a good learning.
Yes, that I understood it will trade at a discount always, but question was with respect to the correlation between the two. If price is rising both should rise, if price is falling both should fall up to same extent. Any discrepancy in this should create arbitrage opportunity as mentioned by @hkgupta in above comment.
I am a long term investor, though I exited in between and traded part of itā¦In the last 5 years.
What I noticed , if you believe that the stock should do wellā¦The DVR goes up higher % than main tata motors. Opposite is true for correction. (Please see above post and few others posts above it)
Since DVR had better returns Iām short term , it is difficult to predict. But I think it should improve now, though still UK business still unpredictable and so many moving parts . But I believe under Chandra this juggernaut is turning slowly. So I am betting on the Chandra to turn itā¦For good considering this is one stock Tata Sons increased stake heavily in recent years.
Thank you @hkgupta. Thatās an interesting take.
Do you keep a ratio tracker on long term or is there a way for me to see this on long run, to see if my thesis holds waterā¦if yes, would you shareā¦My thesis was in bear phaseā¦Ratio widens and bull phase it narrows.
If there is a dividend of letās say inr 2, both classes get similar dividendsā¦ So, a higher yield on the DVR shares (dvr shares get 5 percent extra dividend than the normal shares)
If there is a spin off or a demerger, both classes get the same number of proportionate shares.
Example. If the cv business or Tata motors finance business is spun off, theoretically, the value of the dvr shares will be the same as the normal shares.
It is long running arbitrage position
Since Tata motors is future traded when motor/dvr ratio moved beyond 2.15
I sold x no motor and bought 2x dvr. In anticipation of reversion to mean
I added more positions as ratio went up
Today it has comedown to 1.66
So squared up 25 % position
Shall be out of trade by the time ratio reaches 1.5
This is no suggestion to trade
Pls carry out due diligence
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So if the ratio moves towards 1.5, you dont do the reverse trade? i.e., buying tata motors and selling DVR ? Reversal to mean should work in both the ways.
Dvr is not in futures
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Given the news for Tata technologies IPO, can we do mathematical modelling of what will Tamo shareholders get?
Anyone tracking current numbers of JLR and any views on it??
One of the best ways to identify a cyclical uptrend is the reduction in debt levels across the industry and improvement in ratings.
Look at how tata steel de-leveraged during Covid. Capex cycles are closely linked.
disc: we are invested & biased and this is not a reco
Ujjawal
Founder & CIO - WealthCulture
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Tata Motors to conisider dividend as an agenda item on May 12thās board meeting!
AJ
Disclosure: Remain invested.
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My thesis on tata motors for the next 1-1.5 year are the following -
Assumptions :
- The business will be in steady state for a while and margins can only improve.
- JLR has a very high order book of 152000 Vehicle and JLR is producing 2600 per week. So the JLR revenue has constant visibility till 58 weeks ( i.e entire 2024. This is also what the management is saying )
- They had a cumulative loss of 57 K Cr till now. so that loss will be offset with the profit that is generated hence I am considering a PBT instead of PAT of 4784 per Quarter. I am also considering the other income to be consistent. the forward PE for 2024 hence looks like (184715/(4784 *4)) = 9.65 .
So even if sales does not grow, debt reduction does not take place or margins donāt improve, the MCAP has the potential to double in the next 1 year. In FY 24 they will come out with large EVs which will have better margins ( Harrier and safari EV) . The PE of M&M is 20 . Also, I also assume we are not at the edge of a auto downcycle globally and in India for the next 1 year.
Disclaimer : 20% of PF and extremely Biased
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Hello,
Iāve recently started reading the value chain of auto manufacturing. There are many good companies which caters to metal specialty engineering(Iām using this word broadly which can cover body building using different alloys, powertrain module, wiring and harness different things) which are listed in India. Does anybody know if thereās any company which manufactures infotainment ECU and displayās for OEMās in india?
PS: Iām aware of DIS manufacturers such as Minda and Pricol. Iām aware of the the SW providers such as KPIT, Tata elxi and few others
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