Best Auto Stocks In India: The demand and soft spot in Indians regarding automobiles haven’t seen any love lost. In fact, it is quite the opposite, with the automobile industry making up almost half of India’s manufacturing GDP.
In one financial year (Apr 2021 to March 2022), India produced 22.9 million vehicles. This includes passenger, commercial, two-wheeler, and three-wheeler vehicles. and is on track to become the third-largest automotive market by 2030.
Within the automotive industry, India is already the largest manufacturer of tractors, the second-largest manufacturer of buses, and the third-largest heavy truck manufacturer worldwide.
Here are some of the best auto stocks in India that will benefit from the growth of the automobile industry.
Automotive Industry – India Overview
The Indian automobile industry is worth upwards of $222 billion dollars. The playing field for the top automakers is tilted to benefit domestic players over foreign competition.
8 percent of total exports and 7.1 percent of the country’s GDP comes from just the automobile sector. As the disposable income of the population increases, we can observe a trend in customer preferences in all segments.
The utility vehicle segment saw a 10 percent rise in demand, from 39 percent in FY21 to 49 percent in FY22. The industry is responsible for employing 37 million people, making it one of the biggest employers in the country.
Automobiles define every type of vehicle but the industry is dominated by two-wheelers which make up a 76 percent share of the market. Passenger cars make up just 17.4 percent of the automobile market.
Best Auto Stocks In India – Table
|S. No,||Company Name||Automotive Segment||Market Cap (Rs in CR)|
|1||Maruti Suzuki||Passenger Vehicles||266517.67|
|2||Mahindra & Mahindra||Passenger/Commercial Vehicles||171063.24|
|3||Tata Motors||Passenger/Commercial Vehicles||158408.58|
|4||Bajaj Auto||Two Wheelers/Three Wheelers||112801.06|
|5||Eicher Motors||Two Wheelers/Commerical Vehicles||89784.09|
|6||TVS Motors||Two Wheelers/Three Wheelers||53496.26|
|7||Hero Motor corp||Two Wheelers||51126.93|
|8||Ashok Leyland||Commercial Vehicles||44364.89|
|10||Tata Motors – DVR||Passenger/Commercial Vehicles||11306.53|
|12||VST Tillers Tractors||Tractors||1925.5|
|13||Force Motors||Passenger/Commercial Vehicles||1713.46|
1. Maruti Suzuki
In the passenger vehicle segment, Maruti Suzuki is the largest player in terms of market share. It started as a joint venture between the government of India and the Suzuki corporation in 1982.
Their vehicle models hold most of the top positions in terms of sales, out beating most of its competitors combined. They have held a dominant position in the passenger car segment for decades due to their affordability and fuel efficiency.
Maruti Suzuki is also the largest company on our list of “best auto stocks in India”, with a market cap of ₹2.66 lakh crores.
Financial Performance Of Maruti Suzuki –
|CMP||₹ 8,808||Market Cap (Cr.)||₹ 266,062 Cr.|
|EPS||₹ 246||Stock P/E||35.8|
|ROCE||8.95 %||ROE||7.25 %|
|Face Value||₹ 5.00||Book Value||₹ 1,893|
|Promoter Holding||56.4 %||Price to Book Value||4.66|
|Debt to Equity||0.01||Dividend Yield||0.68 %|
|Net Profit Margin||4.43 %||Operating Profit Margin||8.86 %|
In the past three-quarters of FY23, Maruti Suzuki has posted net sales amounting to ₹85,512 crores, which is close to FY2022’s total annual sales of ₹88,330 crores, their all-time high in sales revenues.
Predictably, the auto giant is quite profitable, but over the years, its operating profit margins have dropped significantly from 15 percent (FY2018) to 7 percent (FY2022).
Hence its FY2018 figures are its best in terms of net profits, clocking in ₹7,881 crores in profits after tax from sales of ₹79,809 crores.
Not only is Maruti Suzuki the biggest auto stock in India, but also the most expensive, at a current price of ₹8,808 per share! Speaking of the stock price, its P/E of 35.8 is slightly higher than that of its industry (31.5).
The company is also debt free, having a very low and positive D/E ratio of 0.01. The company has below-average figures in terms of ROE (7.25%) and ROCE (8.95%), owing to low sales growth of just 5.3 percent in 5 years.
Promoters own 56.3 percent of the company and they haven’t sold any major stake recently. Maruti Suzuki has given a return of just 1.17% in 5 years, which is quite low for a company of its magnitude.
2. Mahindra & Mahindra
M&M is the flagship company of the Mahindra Group. It is primarily an automobile manufacturer in the passenger and commercial vehicle segment, while also having contracts with the government of India.
Their passenger vehicles consist of SUVs and MUVs, while also having their own EV R&D division, and the commercial vehicles consist of trucks, tractors, and other vehicles.
Financial Performance Of Mahindra & Mahindra –
|CMP||₹ 1,361||Market Cap (Cr.)||₹ 169,223 Cr.|
|EPS||₹ 79.5||Stock P/E||19.2|
|ROCE||11.3 %||ROE||14.2 %|
|Face Value||₹ 5.00||Book Value||₹ 406|
|Promoter Holding||19.4 %||Price to Book Value||3.32|
|Debt to Equity||1.65||Dividend Yield||0.84 %|
|Net Profit Margin||7.69 %||Operating Profit Margin||16.5 %|
M&M is the biggest company by market cap under the Mahindra group, having a market cap of ₹1.69 lakh crores. The automobile company witnessed one of its best years in terms of sales in the recent past.
FY22 saw the automobile maker earn ₹90,171 crores in sales, with an improved operating profit margin of 16 percent. Their net profits for the year were ₹7,253 crores, making it one of the best financial years for the company.
While sales and profits are positive and in green, the company’s 5-year sales growth has been low at just 1.48 percent.
They posted higher sales revenue in FY2018 (₹92,094 crores) and FY2019 (₹104,721 crores) consecutively, which were the rank 2nd and 1st in terms of sales in the past 10 financial years.
M&M’s ROE and ROCE are within the ideal range at 14.2 percent and 11.2 percent. At a current market price of ₹1,361, M&M has a stock P/E of 19.2, notably lower than that of its industry P/E ratio of 31.6.
This indicates that the stock is undervalued when compared to its industry. The D/E ratio of the Mahindra stock is 1.65, slightly higher than the ideal figure.
M&M has a lower promoter holding of just 19.3 percent, and it has been reducing fractionally over the years. As of March 2020, promoters held 19.89 percent.
Coming to the return on investment of M&M shares, it has given a net positive return of 88 percent in 5 years. An investment of ₹1,00,000 in 2018 would be worth ₹1.8 lakhs today.
3. Tata Motors
At #3 on our list of best auto stocks in India, we have Tata Motors, the automobile company under the Tata conglomerate. The company has a global presence with its passenger vehicles, commercial vehicles, and its reputed subsidiary – Jaguar Land Rover.
Tata Motors is always making quick work of the growing EV market in India, having launched its own EV variants of its own vehicles.
Financial Performance Of Tata Motors –
|CMP||₹ 439||Market Cap (Cr.)||₹ 157,187 Cr.|
|EPS||₹ -12.1||Stock P/E||–|
|ROCE||1.40 %||ROE||-22.3 %|
|Face Value||₹ 2.00||Book Value||₹ 78.8|
|Promoter Holding||46.4 %||Price to Book Value||5.61|
|Debt to Equity||5.52||Dividend Yield||0|
|Net Profit Margin||-4%||Operating Profit Margin||8.51 %|
Tata Motors is one of the biggest Tata group listed companies, having a market cap of ₹1.57 lakh crores. The company singlehandedly has the highest standalone sales in the entire Indian automobile industry.
For FY2022, the company clocked in sales of ₹2,78,454 crores. A large portion of that figure can be attributed to the JLR division of the company.
While the sales figures of Tata Motors are significant, the company has majorly been loss-making in the past two years. It only recently posted net profits of ₹3,043 crores in Q3 FY2022.
Tata Motor’s ROE (-22.3 percent) is in the negative, while its ROCE (1.4 percent) is quite low, as the company expands its product line and EV division.
The promoters of Tata Motors, Tata Sons own a 46.39 percent stake, up by 4 percent since December 2020. Tata Motors has given a lowly return of just 21.9 percent in 5 years, barely growing investor wealth.
Also Read – Difference Between Tata Motors DVR and Tata Motors!
4. Bajaj Auto
In the auto segment, we’ve covered the top car makers in the stock market. Now, we’re going to take a look at one of the largest two-wheeler & three-wheeler manufacturers not only in India but the entire world – Bajaj Auto.
Part of the Bajaj Group, the 2-wheeler titan has an industry presence spanning decades. The company is the largest manufacturer of three-wheelers and the 6th largest two-wheeler maker worldwide.
Financial Performance Of Bajaj Auto –
|CMP||₹ 3,913||Market Cap (Cr.)||₹ 113,223 Cr.|
|EPS||₹ 203||Stock P/E||20.1|
|ROCE||23.4 %||ROE||19.0 %|
|Face Value||₹ 10.0||Book Value||₹ 900|
|Promoter Holding||55%||Price to Book Value||4.31|
|Debt to Equity||0||Dividend Yield||3.62 %|
|Net Profit Margin||16.4 %||Operating Profit Margin||17.3 %|
Bajaj Auto is the biggest two-wheeler company in India, having a market cap of ₹1.13 lakh crore. While they are not involved in the car segment of automobiles, they have a dominant position in the two-wheeler segment and three-wheeler segments, exporting to over 70 countries worldwide.
The company posted its highest-ever sales and net profits in FY22, at ₹33,145 crores and ₹6,166 crores respectively. While the sales growth in the past 5 years has been slow, the company has been growing its profitability over time.
It has a very positive value when it comes to ROE at 19 percent, and ROCE at 23.4 percent. Additionally, it is debt free, having a D/E ratio of zero.
The stock P/E of 20.1 is a few points above that of its industry (16.5). Promoters have also upped their stake in the company by 1.22 percent between June 2022 and December 2022, bringing the total promoter stake to 54.99 percent.
Despite strong financials and growth, the share price has climbed by only 30.7 percent in the past 5 years.
5. Eicher Motors
So far, we’ve seen both car companies and bike companies in our list of best car stocks in India. Eicher Motors is a diversified automobile stock, that has both commercial vehicles and two-wheelers in its business M.O.
They manufacture commercial vehicles such as buses and trucks through a joint venture with Volvo, named VE Commercial Vehicles, and their two-wheeler segment is the world’s oldest motorcycle company – Royal Enfield.
Financial Performance Of Eicher Motors –
|CMP||₹ 3,289||Market Cap (Cr.)||₹ 89,959 Cr.|
|EPS||₹ 95.8||Stock P/E||34.4|
|ROCE||18.3 %||ROE||14.0 %|
|Face Value||₹ 1.00||Book Value||₹ 485|
|Promoter Holding||49.2 %||Price to Book Value||6.81|
|Debt to Equity||0.01||Dividend Yield||0.65 %|
|Net Profit Margin||16.3 %||Operating Profit Margin||23.6 %|
As of FY2022, Eicher Motors sales figures hit the 5-digit mark (₹ In Crores). FY22 was their best year in terms of sales (₹10,298 crores).
While the company has positive yet slowly growing sales figures, its net profits have not followed the same pattern, as operating profit margins have dropped significantly by 10 percent from FY2018 (31 percent) to FY22 (21 percent).
Eicher Motors has also shown promising figures in terms of its ROE (14 percent) and ROCE (18.3 percent). The company has reduced debt over the years, bringing its overall debt to almost zero.
Promoters of Eicher Motors own a 49.2 percent stake in the company, with no major selling or buying in recent years. The stock price of Eicher has moved marginally, given a 22.8 percent return in 5 years.
The automobile sector is a driving force for the manufacturing industry in India, contributing majorly to the engineering and production employment in the country.
It should come as no surprise that all the top 5 auto stocks mentioned above are part of NIFTY 50. We hope you found our article on Best Auto Stocks In India helpful. Thank you for reading and happy investing!
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