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Business News/ Money / Personal-finance/  Investors continue to punish Tata Motors over China woes
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Investors continue to punish Tata Motors over China woes

In August alone, the stock has fallen more than 14%, the steepest monthly fall since May 2012

The silver lining is that some analysts feel that the Tata Motors stock may now be looking attractive from a valuations standpoint. Photo: BloombergPremium
The silver lining is that some analysts feel that the Tata Motors stock may now be looking attractive from a valuations standpoint. Photo: Bloomberg

Mumbai: Shares of Tata Motors Ltd have fallen over 45% since hitting an all-time high in January on concerns that the slowdown in China may hurt demand for Jaguar Land Rover cars.

The stock, which hit a record of 598.68 on 27 January, has been sliding since. In August alone, the stock has fallen 14.5%, the steepest monthly fall since May 2012. Year-to-date, the stock is down 33%.

A lot of this can be traced to the company’s woes in China.

On 21 August, Tata Motors reported in a notice to BSE that 5,800 Jaguar and Land Rover vehicles were damaged in the recent chemical explosion that killed more than a hundred people at Tianjin Port in China. The company said it was yet to determine the exact extent of the damage, joining other global car makers including Volkswagen AG , Hyundai Motor Co., Toyota Motor Corp., Daimler AG and BMW AG that are still counting their losses.

Not just that, there has been a considerable drop in sales numbers of Jaguar Land Rover Plc in China. Thanks to a general slowdown in the economy and the alleged mis-step of the pricing strategy of the Range Rover Evoque, JLR’s sales in China declined almost 33% in the second quarter of the calendar year.

The company also reported a 49% drop in the fiscal first quarter net profit. Tata Motors’ net profit declined to 2,769 crore in the three months ended June from 5,398 crore in the year-ago quarter. Net sales fell 6.2% to 61,020 crore from 64,683 crore in the same quarter last year.

To add to this, the management recently faced sharp criticism and fielded some tough questions from shareholders at the 70th annual general meeting after it skipped a dividend payout for the first time in 15 years. Shareholders questioned the company’s loss of market share in the commercial vehicle business and expressed concern over the steep decline in share prices.

“We are looking at building the company in the long term. Therefore, sacrifices will have to be made in the short term. It doesn’t give me any pleasure in withholding the dividends," said Tata Motors chairman Tata Mistry as the issue kept resurfacing. “There were no funds in the reserve from which we could have given the dividends."

Investors haven’t liked any of this and have punished the stock. The silver lining is that some analysts feel that the Tata Motors stock may now be looking attractive from a valuations standpoint.

“Tata Motors stock price has corrected 45% over the last six months on concerns over JLR’s China earnings. At CMP (current market price), the stock is currently implying China profits going to almost zero along with no value for the Chery JV. While the eventual outcome in China remains difficult to predict at this stage, the current valuations appear extremely bearish as a majority of the concerns appear to be priced in," foreign brokerage house Barclays said in a note issued this week.

Shares of Tata Motors closed at 334.70 on BSE, down 0.62% from their previous close, while India’s benchmark Sensex rose 2% to end 26,231.19 points.

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Published: 27 Aug 2015, 12:53 PM IST
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