Why Tata Motors hit a road bump on the Street today

NEW DELHI: Tata Motors’ shares on Wednesday fell over 5 per cent to Rs 250, hitting a two-week low. On Tuesday, the company had posted its worst quarterly earnings in a decade, slipping into the red for the first time in three years. Tata Motors posted a consolidated net loss of Rs 1,863 crore for the April-June period.

“It is the excise duty changes in China and the inventory losses in Europe that really hurt the company’s profitability,” Sanjiv Bhasin, Executive Vice President -Markets & Corporate Affairs, India Infoline told TOI.

Tata Motors’ losses were compounded by the fact that dealers in China delayed purchases for the company’s subsidiary luxury brand Jaguar Land Rover (JLR) to benefit from an import duty cut that came into effect after the quarter ended.



In other markets including Europe, JLR had taken a planned dealer stock reduction as it faced uncertainty over additional diesel taxes in the UK. All these factors resulted in a 7 per cent fall in JLR’s quarterly revenues to 5.2 billion pounds. JLR contributes nearly 90 per cent to Tata Motors’ revenues. The Indian operations reported 14 per cent higher revenue of Rs 67,081 crore during the period under review.

“With regards to JLR, we faced multiple challenges including temporary issues like China duty impact as well as the market issues like diesel concerns in the UK and Europe,", Tata Group Chairman N Chandrasekaran said.

Despite the challenges, the company remains committed to delivering the planned margins it outlined earlier this year, Chandrasekaran added.

“We continue to be impacted negatively by uncertainty over diesels in Europe along with Brexit and additional diesel taxes in the UK. Given these issues, we will remain focussed on driving growth and simultaneously reducing costs and boosting operational efficiency and capability, taking the necessary steps to shape our future,” JLR CEO (Chief Executive Officer) Ralph Speth said.

Market expert Bhasin, however, continues to remain positive on the Tata Motors stock pointing out that it “remains the cheapest four-wheeler stock globally and the worst may be priced at Rs 250.” Local commercial vehicle sales could see an uptick in the coming months, he added.

American financial services company Jefferies, in the meantime has cut the target price for Tata Motors to Rs 355 from Rs 440, maintaining a “buy” rating adding while adding that although this may seem like a one-off (hurt by China import duty cut), such disappointments have been a recurring issue for JLR in a weak environment. Swiss financial services firm Credit Suisse though has maintained its “outperform” rating for the stock while cutting the target price to Rs Rs 440 from Rs 460.

By afternoon, the stock had somewhat recovered to Rs 259.15, however, still down nearly 2 per cent. The Nifty Auto sub-index traded 0.55 per cent down in afternoon trade.

By 1:30 pm, the stock managed to outperform the NIfty auto index, trading in the green at Rs 267.10.

(With Reuters inputs)