Hindustan Motors has been one of the stunners in trade today. The stock has been buzzing for the past week and has surged 10% to hit an intra-day high of Rs 31.20 on Tuesday, April 23, 2024. In fact it is not just about a one-day gain. The CK Birla owned company shot up a sharp 64.21% over the past five days.
In the last month alone, the stock has seen an impressive gain of 90.24%, indicating a robust upward trend and the stock delivered 99% return over the past 6 months. Year-to-date, Hindustan Motors shares soared 79% and yielded returns of up to 127% in the past twelve months.
What’s driving Hindustan Motors share price?
The question therefore is what’s driving the momentum? The management is putting continuous effort in scouting for tie-ups and potential investment / strategic partners who can introduce new products and infuse capitals in the company. The CK Birla owned car maker is considering various measures including alternative use of Fixed Assets to generate revenue. The two recent developments that provide further boost to sentiment include
- MOA (Memorandum of Agreement) with a Company wherein it is handing over part of surplus land at Uttarpara for upcoming projects.
- MOU (Memorandum of Understanding) and developed stage of discussion for a joint venture with a Company involved in EV Segment.
However the project is stalled at the moment due to a notice from W. B. State Govt. on resumption of H M Uttarpara Land. It had also filed an application before the West Bengal Land Reform and Tenancy Tribunal, seeking relief against the state government order for resumption of its land.
The Government of West Bengal issued an order for resumption of HM Uttarpara land. Application filed before West Bengal Land Reform and Tenancy Tribunal and matter is under hearing.
It also executed an agreement for sale with Vanijya on October 6, 2023 to sell scrap and obsolete equipment lying at its Uttarpara plant in West Bengal.
The iconic automaker from yesteryears had stopped producing the popular Ambassador cars in 2014 as sales dwindled. Due to low productivity, growing indiscipline, shortage of funds and lack of demand for products,the management declared “Suspension of work” at the Uttarpara Plant with effect from May 24, 2014.
Meanwhile Groupe PSA, owners of the Citroen brand also hold the right to use the name Ambassador..
Why do the Q4 earnings matter?
The Q4 results are yet to be announced but in Q3, the Ambassador maker, clocked a net profit of Rs 11.22 crore. This compared to Rs 1.15 crore net loss in Q3FY23 indicates improving financials. Q3FY24 total income came in at Rs 12.55 crore, up significantly from Rs 25 lakh in Q3FY23.
In a regulatory filing it had announced that the company has been in the continuous process of reducing its liabilities & rationalizing the expenses since it declared “Suspension of work” at Uttarpara Plant with effect from May 2014.
The accumulated losses were brought down to Rs. Rs.14,845.52 lakhs as at 31st March 2023 from Rs 14,855.41 lakhs as of March 31, 2022. This has been scaled down from Rs.25,218.07 lakh losses on its books as on March 31, 2017.
The company’s filing on January 24, 2024 further stated that it is practically debt free (Financial debt) barring few liabilities which stand mainly on employee account, trade payables and other liabilities. However, the Company realized that the accumulated loss as on 31.03.2023 stands at Rs.14,845.52 lakhs against the share capital of Rs10,441.44 lakhs and its current liabilities also exceeded its current assets indicating the existence of material uncertainty about the Company’s ability to continue as going concern.
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