The Hindu Business Line : ‘Pull-out unlikely to hit Tata Motors’ stock valuations’

Mumbai Oct. 3 Mr Ratan Tata’s announcement on Friday evening that Tata Motors is driving Nano out of Singur in West Bengal and relocate the plant elsewhere has ended a long period of uncertainty.

And, if a cross-section of Mumbai-based brokers and auto analysts are to be believed, this may well guide the movement of the company’s stocks in the next few days.

“There will not be much impact on the valuations of the stock, as the development has already been discounted for in the past few weeks,” Ms Vaishali Jajoo, auto analyst with Angel Broking, said.

She, however, points out that while the news is positive to the extent that there is more clarity on the issue, the downside is that the investments made in Singur and the additional costs incurred for relocation of the plant will have to be written-off.

Tata Motors stocks on BSE slid 2.5 per cent to close at Rs 300.70 today, while the Sensex was down by 4.05 per cent.

In fact, ever since the company suspended operations at Singur, fearing threat to its employees due to the agitation, on September 2, Tata Motors stocks shed 23.07 per cent, as against the Sensex’s fall by 16.7 per cent during this period.

Sources close to Tata Motors say that the company has been preparing itself for the Singur denouement for quite some time and has made arrangements to relocate the plant. Initially, it may look at bringing out a few units from its Pune or Uttarakhand facilities, while simultaneously lay the groundwork for setting up a new plant.

Several States, including Karnataka and Maharashtra, have already rolled out the red carpet to the company to set up a Nano plant.

“While the delay on account of the launch will have some negative weight, on the whole it is a positive development, as there is more clarity now and the period of uncertainty is over,” an auto analyst with a Mumbai-based broking firm, said.

Also the details are not yet out as to how much loss the company would have to bear for relocation of the plant, he pointed out.

Rights issue

The Singur developments unfolded even while Tata Motors is going through a rights issue of Rs 4,200 crore to part finance its $2.3-billion acquisition of the Jaguar and Land Rover brands from Ford Motor Co.

It had to prune its originally proposed rights issue of Rs 7,200 crore due to souring of market conditions.