For many U.S. traders, Tata Motors (TTM, quote) is all about bargain-priced no-frills cars for India’s emerging middle class. Others know that TTM is really about luxury Jaguar and Land Rover sales. And only a few are aware of the company’s military markets.
Today, for example, TTM signed a contract to co-develop a new generation of armored troop carriers with Malaysian conglomerate DRB-HICOM.
In return for DRB-HICOM’s engineering expertise — and presumably government connections — Tata will sell the trucks to the Malaysian military as well as other customers.
While Malaysia is a relatively small market for military hardware by U.S. terms, the country spends $3.5 billion a year on its armed forces.
Tata vehicles, meanwhile, are in use by armies around the Indian ocean, and can readily be found used as far away as South Africa.
The company’s acquisition of Land Rover in particular has raised its profile as a vendor of hardened, heavy-use, all-terrain vehicles for civilian as well as military applications.
Last year, TTM surprised analysts by competing for a $10 billion armored car contract with the Indian armed forces.
While that contract fizzled, news like what we are hearing today proves that this is still a focus area for Tata management.
The markets yawned when Tata tried to reinvigorate its Nano line of low-end consumer vehicles. Given the slight pop shares are getting today, it looks like armored cars — and the margins that go into govenment contracts — are a lot more exciting.
TTM has come a long way in the last few weeks, but still trades at 10.69 times earnings, representing a significant premium compared to other Indian large-cap names available to U.S. traders.