Best Auto Stocks – Mahindra & Mahindra Ltd Vs Tata Motors Ltd. Stock

Company Overview of Mahindra & Mahindra Ltd

Mahindra and Mahindra Limited is an Indian company that provides a variety of products and services including farm equipment, utility vehicles, information technology and financial services. The company is divided into segments such as Automotive, Farm Equipment, Financial Services and Industrial Businesses and Consumer Services. 

The Automotive segment includes the sale of automobiles, spare parts, mobility solutions, construction equipment and related services, while the Farm Equipment segment focuses on tractors, implements, spare parts and related services.  

Company Overview of Tata Motors Ltd

Tata Motors Limited is a worldwide car manufacturer with a broad product lineup that includes cars, SUVs, trucks, buses and military vehicles. The company is divided into segments focusing on automotive operations and other activities. 

Within the automotive segment, there are four sub-segments: Tata Commercial Vehicles, Tata Passenger Vehicles, Jaguar Land Rover and Vehicle Financing. The company’s other operations involve IT services, machine tools and factory automation solutions.

The stock performance of M&M

The table below shows the stock performance of Mahindra and Mahindra Ltd over the past 1 year.

The stock performance of Tata Motors

The table below shows the stock performance of Tata Motors Ltd over the past 1 year.

Fundamental Analysis of M&M Ltd

Mahindra & Mahindra, founded in 1945, is an Indian multinational automotive manufacturer headquartered in Mumbai. It produces a diverse range of vehicles, including SUVs, commercial vehicles, and tractors. Notably, its subsidiary, Mahindra Tractors, is the world’s largest tractor manufacturer by volume. The company has a significant global presence and is a key player in India’s automotive industry.

The stock is priced at ₹3012.95 with a market cap of ₹3.61L Crores and a dividend yield of 0.65%. It has a 1Y return of 90.24%, a 5Y CAGR of 40.72% and a 5Y average net profit margin of 5.11%, reflecting strong growth and profitability.

• Close Price ( ₹ ): 3012.95
• Market Cap ( Cr ): 361157.82
• Dividend Yield %: 0.65
• Book Value (₹): 79531.07
• 1Y Return %: 90.24
• 6M Return %: 19.51
• 1M Return %: -1.98
• 5Y CAGR %: 40.72
• % Away From 52W High: 6.94
• 5Y Avg Net Profit Margin %: 5.11

Fundamental Analysis of Tata Motors Ltd

Tata Motors, a prominent automotive manufacturer based in India, is part of the Tata Group, one of the country’s largest and most esteemed multinational conglomerates. Founded in 1945, the company provides a diverse range of vehicles, including passenger cars, trucks, buses and electric vehicles.  

The stock is priced at ₹791.00 with a market cap of ₹2.91L Crores and a dividend yield of 0.68%. It has a 1Y return of 16.12%, a 5Y CAGR of 37.26%, but a negative 5Y average net profit margin of -1.24%, indicating profitability challenges.

• Close Price ( ₹ ): 791.00
• Market Cap ( Cr ): 291166.45
• Dividend Yield %: 0.68
• Book Value (₹): 93093.93 
• 1Y Return %: 16.12
• 6M Return %: -16.52
• 1M Return %: -14.37
• 5Y CAGR %: 37.26
• % Away From 52W High: 49.05
• 5Y Avg Net Profit Margin %: -1.24 

Financial Comparison of M&M and Tata Motors

The table below shows a financial comparison of M&M and TATA MOTORS.

Points to be noted:

• EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization): Measures a company’s profitability before accounting for financial and non-cash expenses.
• PBIT (Profit Before Interest and Tax): Reflects operating profit by excluding interest and taxes from total revenue.
• PBT (Profit Before Tax): Indicates profit after deducting operating costs and interest but before taxes.
• Net Income: Represents the company’s total profit after all expenses, including taxes and interest, are deducted.
• EPS (Earnings Per Share): Shows the portion of a company’s profit allocated to each outstanding share of stock.
• DPS (Dividend Per Share): Reflects the total dividend paid out per share over a specific period.
• Payout Ratio: Measures the proportion of earnings distributed as dividends to shareholders.

Dividend of M&M and Tata Motors

The table below shows a dividend paid by the company.

Advantages and Disadvantages of Investing M&M

Mahindra and Mahindra Ltd

The primary advantage of Mahindra and Mahindra Ltd is its diverse business portfolio, spanning across automotive, agriculture, construction and IT services. This diversification reduces risk, while its strong presence in rural India ensures continued growth, even in fluctuating economic conditions.

1. Automotive Leadership: Mahindra is a dominant player in the Indian automotive sector, especially in SUVs, commercial vehicles and electric vehicles (EVs). Its strong brand recognition and innovation in EV technology position it well for future growth in the evolving automobile market.
2. Agriculture and Farm Equipment: Mahindra is a leader in the tractor and farm equipment market. With its robust agricultural machinery portfolio, including Mahindra tractors, the company plays a vital role in India’s rural economy, benefiting from increased mechanization in agriculture.
3. International Presence: Mahindra has expanded its global footprint, especially in markets like the U.S. and South Africa. Its strategic acquisitions and partnerships in key international markets, particularly in automotive and agribusiness, enhance its growth prospects and global reach.
4. Focus on Innovation: Mahindra invests heavily in R&D to drive innovation across all its business verticals. Its focus on electric vehicles, automation and smart farming solutions strengthens its competitive advantage in emerging markets and aligns with global sustainability trends.
5. Sustainability Initiatives: The company is committed to sustainability, with a focus on reducing its carbon footprint, promoting clean energy and building eco-friendly products. Mahindra’s Green initiatives, such as EV production, further enhance its long-term growth potential in a sustainable world.

The main risk for Mahindra and Mahindra Ltd is its significant exposure to the cyclical nature of the automotive and agriculture sectors. Economic downturns, shifting consumer preferences and policy changes can negatively impact demand for its products, especially in rural markets.

1. Cyclical Demand in Automobiles: Mahindra’s automotive sales are closely tied to economic cycles. A slowdown in consumer spending, especially during economic recessions, can lead to reduced demand for SUVs and commercial vehicles, affecting its revenue and growth prospects.
2. Agricultural Dependency: Mahindra’s strong foothold in the tractor and farm equipment market also makes it vulnerable to fluctuations in agricultural growth. Poor monsoons or changes in agricultural policies could impact tractor sales and overall profitability.
3. Regulatory Risks: As a major player in several sectors, Mahindra faces regulatory risks related to environmental laws, emissions standards and government policies. Changes in regulations, especially in the auto sector, could increase costs or require costly product modifications.
4. Intense Competition: In both the automotive and agricultural machinery sectors, Mahindra faces stiff competition from domestic and global players. Companies like Tata Motors, Maruti Suzuki and John Deere challenge Mahindra’s market share, pushing it to innovate continuously.
5. Raw Material Price Volatility: Mahindra’s manufacturing process relies heavily on raw materials like steel and aluminium, which are subject to price fluctuations. Rising costs of raw materials can adversely affect profit margins and lead to higher production costs for vehicles and farm equipment.

Advantages and Disadvantages of Investing in Tata Motors

Tata Motors Ltd

The primary advantage of Tata Motors Ltd is its strong global presence, with a diverse portfolio that includes passenger vehicles, commercial vehicles and electric vehicles (EVs). Tata Motors’ strategic focus on innovation and sustainability enhances its competitive edge in the automotive market.

1. Global Reach and Market Diversification: Tata Motors operates in more than 175 countries, giving it significant global exposure. Its acquisition of Jaguar Land Rover has strengthened its presence in premium vehicle markets, providing stable revenue streams beyond the Indian market.
2. Electric Vehicle (EV) Focus: Tata Motors is rapidly expanding its electric vehicle (EV) portfolio, with models like the Nexon EV and Tigor EV gaining traction in the Indian market. This focus on sustainability positions Tata Motors well in the growing global EV market.
3. Strong Commercial Vehicle Segment: Tata Motors is a leader in India’s commercial vehicle market, offering a wide range of trucks, buses and utility vehicles. Its strong foothold in this segment ensures steady demand from industries like logistics, transportation and infrastructure.
4. Innovation and R&D Investments: Tata Motors invests heavily in research and development to drive innovation. Its efforts in designing cutting-edge vehicles, including electric and hybrid models, align with global trends toward clean energy and smart technologies, enhancing its competitive position.

The main risk for Tata Motors Ltd is its exposure to the highly cyclical nature of the automotive industry, which can be influenced by economic downturns, regulatory changes and fluctuations in demand for both commercial and passenger vehicles.

1. Cyclical Nature of the Automotive Industry: Tata Motors’ performance is closely tied to the economy. During economic slowdowns, demand for both passenger and commercial vehicles can decline, negatively impacting sales, profitability and growth prospects, especially in challenging market conditions.
2. Currency Exchange Rate Fluctuations: As Tata Motors has a global presence, its revenues and costs are impacted by currency fluctuations. A strong rupee could reduce the company’s profit from international markets, particularly its premium segment, Jaguar Land Rover.
3. Intense Competition: Tata Motors faces stiff competition from both domestic and international automotive companies. In the passenger car segment, it competes with brands like Maruti Suzuki and Hyundai, while in commercial vehicles, it faces competition from Ashok Leyland and Eicher Motors.
4. Supply Chain and Raw Material Risks: Tata Motors is vulnerable to supply chain disruptions and fluctuations in raw material prices, especially steel and aluminium. Any shortage or price hike in these materials could increase production costs and affect profit margins.
5. Regulatory and Emission Standards: The automotive industry is facing stricter emission norms globally, especially in Europe and India. Compliance with new regulations requires significant investment in research and development, which could increase costs and impact Tata Motors’ profitability if not managed efficiently.

How to Invest in M&M Ltd and  Tata Motors Stocks?

To invest in Mahindra & Mahindra (M&M) and Tata Motors stocks, you need to open a demat and trading account with a reputable stockbroker, such as Alice Blue, to facilitate electronic transactions and secure storage of your shares.

1. Conduct Comprehensive Research on M&M and Tata Motors: Analyze the financial health, market position and prospects of both companies. Review their annual reports, recent news and industry trends to make informed investment decisions.
2. Select a Reliable Stockbroker: Choose a reputable stockbroker like Alice Blue to open your demat and trading accounts. Consider factors such as brokerage fees, customer service quality and the robustness of their trading platform.
3. Fund Your Trading Account: Deposit sufficient funds into your trading account to cover the purchase of M&M and Tata Motors shares, including any associated fees. Ensure you have a clear budget and adhere to your investment plan.
4. Place Your Buy Orders: Utilize your broker’s trading platform to locate M&M and Tata Motors stocks by their ticker symbols. Determine the number of shares you wish to purchase and set your order type—market or limit—based on your investment strategy.
5. Monitor and Manage Your Investments: Regularly track the performance of your investments by staying updated on market trends, company developments and industry news. This vigilance enables you to make timely decisions regarding holding, buying more, or selling your shares.

M&M Ltd vs. Tata Motors Ltd – Conclusion

Mahindra & Mahindra Ltd excels in the SUV and commercial vehicle markets, with a strong rural presence and leadership in the tractor segment. Its focus on innovation, electric vehicles and sustainable growth positions it for long-term success, despite risks in cyclical industries.

Tata Motors Ltd benefits from a global footprint, diverse product portfolio and strong presence in both passenger and commercial vehicles. With a growing focus on electric mobility and strategic partnerships, Tata Motors is poised for growth, though it faces risks from intense competition and market fluctuations.

Best Auto Stocks – M&M vs. Tata Motors – FAQ

Disclaimer: The above article is written for educational purposes and the companies’ data mentioned in the article may change with respect to time. The securities quoted are exemplary and are not recommendatory.