Tata Motors has re-oriented itself back to its core commercial-vehicles (CV) business after decades of diversification, yet the stock market is not giving full credit for scale. Despite generating roughly 80 percent more revenue than Ashok Leyland, Tata’s valuation premium remains a modest ~37 percent.
The muted market response appears driven by caution around demand cyclicality and uncertainty surrounding Tata’s planned acquisition of European truck-maker Iveco. Lessons from past global-acquisition challenges, such as those from its purchase of luxury assets, weigh on investor sentiment.
In contrast, Ashok Leyland enjoys a cleaner earnings profile, more disciplined capital expenditure, stable margins and a diversified revenue mix beyond just heavy trucks. Exports, lighter capital intensity and a more conservative business model give it a more favourable valuation compared to Tata.
Given this backdrop, while Tata offers scale and global ambitions, the market seems to value predictability and lower risk — qualities Ashok Leyland currently exhibits more clearly. The valuation gap persists until Tata delivers consistent execution and demonstrates clarity on the Iveco integration.
