HSBC Upgrades Tata Motors, Sees Growth Potential Despite Recent Decline

Tata Motors’ stock has declined 45% from its peak of ₹1,179 in July 2024 and is down 12% so far in 2025. On March 17, HSBC upgraded its rating from “hold” to “buy,” citing improved valuations, though it lowered the price target from ₹930 to ₹840, suggesting a 29% upside. The company’s valuation now appears attractive after two to three quarters of decline, with Jaguar Land Rover (JLR) trading at 1.8 times its expected EV/EBITDA for FY26, near historical lows. HSBC expects Tata Motors’ profit margins to improve due to lower discounts and warranty costs at JLR, along with a recovery in the domestic small commercial vehicle segment.

A key re-rating trigger could be JLR meeting its March quarter financial targets, while new product launches in the passenger vehicle market may boost market share. Additionally, Tata Motors’ board will meet on March 19 to discuss raising ₹2,000 crore through Non-Convertible Debentures (NCDs). Among 34 analysts covering the stock, 21 recommend buying, and analysts project a 25% upside. Despite the upgrade, Tata Motors’ stock closed 2% lower on Thursday at ₹654.7.

HSBC Upgrades Tata Motors, Sees Growth Potential Despite Recent Decline

Tata Motors’ stock has had a rough ride lately. After reaching a peak of ₹1,179 in July 2024, it has dropped by 45%. So far in 2025, the stock has declined by 12% and is now attempting to recover from its 52-week low. However, there is some positive news for investors. On Monday, March 17, HSBC, a global financial services firm, upgraded Tata Motors’ rating from “hold” to “buy,” signaling confidence in the stock’s future potential. HSBC noted that the company’s valuation has become more appealing after facing challenges over the past few quarters.

Despite this upgrade, HSBC lowered its price target for Tata Motors from ₹930 to ₹840. However, the new target still implies a potential 29% increase from the stock’s current levels, offering a promising outlook for investors. HSBC also pointed out that Jaguar Land Rover (JLR), Tata Motors’ luxury car division, is currently trading at 1.8 times its projected Enterprise Value-to-EBITDA (EV/EBITDA) for the 2026 financial year. This figure is at the lower end of its historical range, suggesting that the stock may be undervalued and has room to grow.

HSBC’s optimism stems from expectations of improved profit margins at Tata Motors. The company is reducing discounts and warranty costs at JLR, which should enhance profitability. Additionally, the domestic small commercial vehicle segment, which had been struggling, is now showing signs of recovery. These factors could contribute to stronger financial performance in the months ahead.

A key factor that could further boost Tata Motors’ stock is JLR’s ability to meet its financial targets for the March quarter. If JLR achieves these goals, analysts may revise their expectations and price targets upward, potentially leading to a stock re-rating. Additionally, Tata Motors is preparing to launch new products in the passenger vehicle market, which could help expand its market share and strengthen its competitive position.

In a related development, Tata Motors’ board is scheduled to meet on March 19 to discuss raising ₹2,000 crore through Non-Convertible Debentures (NCDs). NCDs are a type of debt instrument where investors lend money to the company in exchange for periodic interest payments and the return of principal at maturity. This funding move could provide Tata Motors with additional capital to support its growth initiatives and enhance financial stability.

Overall, analysts remain optimistic about Tata Motors’ prospects. Of the 34 analysts covering the stock, 21 recommend buying, eight suggest holding, and only five advise selling. On average, analysts project a 25% upside from current levels, reflecting confidence in the company’s potential for recovery and growth.

However, despite the upgrade from HSBC, Tata Motors’ stock did not see an immediate boost. On Thursday, it closed 2% lower at ₹654.7, possibly due to market volatility or investors awaiting clearer signs of improvement before making investment decisions.

In summary, Tata Motors has faced significant challenges, with its stock dropping sharply from its peak. However, HSBC’s upgrade, the potential for improved profit margins, a recovering commercial vehicle segment, and upcoming product launches indicate promising growth prospects. While the stock has struggled in recent months, many analysts believe it has the potential to rise in the near future. Investors will be closely watching JLR’s performance and Tata Motors’ execution of its growth strategy. If the company delivers on these fronts, its outlook could improve significantly.