The market capitalisation of one of the country’s largest two- and three-wheeler makers surged to Rs 2.09 lakh crore on Tuesday, crossing M&M’s market value of Rs 2.03 lakh crore. Maruti Suzuki is the most valuable automaker, followed by Tata Motors.
Bajaj Auto shares gained 1.55% on Tuesday to close at Rs 7,094, extending their winning run in the past year after the company announced a share buyback at a 43% premium over Monday’s closing price.
The company’s board on Monday approved a Rs 4,000 crore share buyback program at Rs 10,000 per share. It is set to acquire 40 lakh shares through the tender route, equivalent to 1.41% of the company’s outstanding shares.
Foreign portfolio investors have consistently increased their stake in the company for the past nine quarters, from 10.20% in December 2021 to 14.64% in December 2023.
The stock has nearly doubled in this period as investors are bullish on the company’s diversification into the electric vehicle (EV) sector. Optimism around the impending IPO of OLA Electric, an electric two-wheeler maker, is also rubbing off on Bajaj Auto.
“We believe that the listing of OLA Electric would unlock the valuation for its (Bajaj Auto) EV business as it also enjoys around 10% market share in the electric two-wheeler market and indicating that its electric three-wheeler business is not a margin dilutive proposition,” said Abhishek, analyst, Sharekhan. “Ramp-up in Triumph’s distribution network, market share gain in EV segment, its new product launch strategy and expectation of gradual improvement in exports.”Analysts said Bajaj Auto’s debt-free status and dividend-paying track record have boosted investor interest in the stock. The company’s annual cash generation exceeds Rs 5,000 crore, while it has maintained a dividend payout ratio that exceeds 70%.
The company’s revenues surged by 45%, escalating from Rs 25,210 crores in FY2018 to Rs 36,455 crores in FY23.
“We continue to expect volume growth in the domestic premium segment and subsequently the company to gain market share led by the 125cc segment with a market share of about 30%,” said Akshay Karwa, research analyst, Anand Rathi Institutional Equities. “The 3W segment grew strongly in FY24 and is expected to better last year’s volumes. Furthermore, EV volumes are expected to improve significantly as they expand the dealer network across the country.”