The Hindu Business Line : Tata Motors tumbles on lack of confidence

According to analysts, lack of confidence generated by deteriorating fundamentals, including its subsidiaries has put the counter under selling pressure. There is a strong element of uncertainty regarding Jaguar and Land Rover operations.

According to a recent Emkay report, after the brokerage conducted a conference call with the management, it could not assign any value to JLR as it felt that Tata Motors was unlikely to share information on JLR before the first quarter of 2009-10. Emkay further said that the performance of key subsidiaries also came under pressure in the recent months.

“While the performance of HV Axles and HV Transmission was in line with our expectations, the performance of Tata Finance and Tata Daewoo was below our expectations,” it said.

According to Sharekhan, the acquired JLR business is significantly larger than Tata Motor’s existing business and exposes the company to new product segments and geographies and hence will have a significant bearing on the company’s future prospects. While the acquisition would help the company attain a global footprint and provide an access to latest automotive technologies, the challenges in managing these premium brands are expected to remain significant.

Job cuts

JLR is planning to trim 400 jobs by end of January 2009 on top of the recent 196 staff reduction. It has also resorted plant shut down and its Halewood plant is scheduled for “non-production week” next month. The production workers have also been offered three month’s leave at 80 per cent of their normal pay.

“In case, the refinance plan for the bridge loan taken for the funding of JLR acquisition gets delayed, the loan may have to be rolled over, which could strain the financials,” Sharekhan said.

The Tata Motors management informed Emkay that the $3-billion bridge loan was linked with LIBOR with a three month reset. The management also indicated different spread for differing time period (ranging from 0.75 per cent to 1.75 per cent). “Currently, the rate of interest is around 5 per cent, the brokerage report said.

Meanwhile, the company has stated that Tata Sons’ voting rights after the rights issue has gone up to 29.55 per cent, including those with differential voting rights of one for 10, from 21.91 per cent.

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