Tata Motors shares fall 4%. Here’s why investors are worried about $4.5 billion Iveco gamble

Tata Motors shares crashed 4% to Rs 665.45 on BSE Wednesday as news of the automaker's audacious $4.5 billion bid for Italy's truck-maker Iveco spread through Dalal Street. The mega-deal, set to become the Tata Group's second-largest acquisition after Corus, has investors running for cover amid fears the cash-strapped company is biting off more than it can chew.

The boards of Tata Motors and Turin-based Iveco are meeting on Wednesday to approve the transaction that would make it the automobile major's largest-ever acquisition, dwarfing even the $2.3 billion Jaguar Land Rover purchase in 2008.

"Tata Motors is facing the perfect storm with Jaguar going electric, tariffs hurting premium markets, and huge investments (GBP 3.8 bn for FY26) lined up to update its models to make them ready for EURO VI norms. Another investment of $4.5 billion at this stage would mean borrowings would increase, as cash flow is not sufficient to finance the deal," warned Dr Nitin Balwani, Associate Dean and Professor at NMIMS School of Business Management.


The market is sceptical of huge investments as it fears that the company is spreading itself too thin and it would take time to absorb the acquisition and make it work, he told ET Markets.

Also Read | Tata Motors set to acquire Italian truck maker Iveco for $4.5 billion in its biggest deal to date

UBS maintained its bearish stance, keeping a 'Sell' rating with a target price of Rs 690. The global brokerage noted that Tata Motors may have to spend over €1.5 billion, including the mandatory open offer that would be triggered under regulations.

Under the proposed M&A deal structure, Tata Motors would acquire 27.1% from Exor, the Agnelli family's investment company, before launching a tender offer to buy out smaller shareholder groups. Exor controls 43.1% of voting rights in the truck maker.

The Tata Group is confident of securing 100% of listed Iveco, excluding the defence business, which is being demerged and will not be part of the transaction, ET reported earlier.

JPMorgan's analysis shows Iveco's industrial business derives 70% of revenue from trucks, with buses and powertrain contributing 15% each. The Group commanded a 13.3% market share in 2024 in the Light Commercial Vehicles segment, along with an 8% to 9% share in the Medium and Heavy Commercial Vehicles segment.

The $4.5 billion (€3.9 billion) deal represents a massive bet for Tata Motors, which is already grappling with the challenges of electrifying Jaguar Land Rover while managing substantial capital requirements. The acquisition comes at a time when the company faces mounting pressure from trade tariffs affecting premium markets and the need for massive investments to meet stringent emission norms.

Tata Motors stock has been under sustained pressure and has fallen 42% in the last one year.

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