Tata Motors — after decades of diversification — has refocused on its core commercial-vehicles (CV) business by demerging and returning to trucks and buses. Yet, despite generating roughly 80% more revenue than Ashok Leyland, the market values Tata only around 37% higher than Ashok Leyland — a modest premium considering the scale differential.
Investors remain cautious because of concerns over a potentially weak CV cycle ahead and uncertainty surrounding Tata’s planned acquisition of Iveco. While the demerger provides clarity and focus, it also raises questions about rising leverage and how the global assets will fit into the valuation framework.
In contrast, Ashok Leyland’s cleaner earnings profile, stable business mix, disciplined capital expenditure, and consistent dividends make it a preferred option for many investors. Its diversified offerings — beyond just heavy trucks — and stronger export presence give it clearer near-term visibility.
Thus, even though Tata Motors holds scale advantage, the combination of macro-cycle worries, execution overhang on global acquisitions, and comparably better optics for Ashok Leyland prevents the market from giving Tata a larger valuation premium.
