What’s the euphoria behind Tata Motors stock?
The company said it has resumed operations at all plants with the Jamshedpur unit, also getting approval on 27 May to restart productionThe company’s joint-venture plant in Changshu, China has been operational since March
MUMBAI: Shares of Tata Motors have seen a spurt in the last few trading sessions as the auto major has gradually resumed operations at its manufacturing units in India and overseas, including China, a key market for its luxury car segment Jagaur Land Rover (JLR). On Friday, the stock ended at ₹110.70, up ₹12.20 or 12.39% on the BSE.
In June, the stock has seen a steep climb of 23.4% against a rise of nearly 6% of its benchmark BSE Auto. The stock, however, has lost nearly 42% in this year so far. It had touched low of ₹63.60 per share on 24 March.
The company said it has resumed operations at all plants with the Jamshedpur unit, also getting approval on 27 May to restart production. “70% of the 3-S (showroom, sales and service) outlets and 43% of the 1-S outlets opened for commercial vehicles covering 56% of the retail market. For passenger vehicles, 59% of the showrooms resumed operations covering 69% of the retail market. Demand gradually starting to improve," it said in a statement to exchanges on 2 June.
The company’s joint-venture plant in Changshu, China has been operational since March as vehicle sales recover there and customers return to showrooms following easing of the lockdown.
The company said it is gradually resuming production at Solihull plant in the UK, the Slovakia plant, and contract assembly line in Austria.
In the last 60 days, Tata Motors has raised incremental liquidity of ₹5,600 crore by way of commercial papers and TLTRO, it said.
However, the company has seen multiple downgrades in the last few months as analysts do not expect the company to improve its profitability even after a recovery in sales. Tata Motors Ltd's India business has no equity value, brokerage firm CLSA had said in May. “We assign zero equity value to (Tata Motors’) India business," it said. JLR is the only driver of its valuation, CLSA said.
In April, Fitch had downgraded Tata Motors to 'B' with a negative outlook. The downgrade reflects Fitch's significantly lower expectations for Tata Motor’s profitability and cash flow over the next few years due to the effect of the coronavirus pandemic on demand and disruption to its Indian operations as well as to key auto markets globally that are served through its fully owned UK-based subsidiary, Jaguar Land Rover Automotive plc.
It estimates that Tata Motor's consolidated EBITDA generation will drop by nearly 50% year-on-year in FY21 and will remain below FY19 levels in FY22 even with a recovery.
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