Comments
Tata Motors Ltd shares had their biggest drop in 26 years after the company posted a record loss in Indian corporate history because of a writedown in its luxury Jaguar Land Rover Automotive Plc unit.
The stock drop of as much as 30 per cent was the biggest since February 1993 on intraday basis and sent Tata Motors shares to their lowest level in almost a decade. The net loss was ₹26,960 crore in the three months through December, exceeding the deficit reported by Indian Oil Corp. in 2012.
Plummeting sales in China are compounding Jaguar Land Rovers challenges that include the industry’s shift away from vehicles powered by gasoline and diesel, a stronghold for the company. Its heavy production presence in the UK exposes it to a disorderly Brexit, the likelihood of which has risen over the past few weeks, Fitch Ratings said this week. The rating company has placed Tata Motors on negative credit watch .
The overall performance continued to be impacted by challenging market conditions in China, Ralf Speth, head of Jaguar Land Rover, said in a statement on Thursday. We continue to work closely with Chinese retailers to respond to current market conditions.
Tata Motors shares were down 15 per cent at Rs 155.40 as of 9:38 am. They had already slumped more than 50 per cent in the past 12 months through Thursday on concerns about Jaguar Land Rovers waning sales, profitability, high capital-expenditure need and the impact of Brexit.
Carmakers around the planet are getting hurt by the slump in China, whose car market shrank for the first time in more than two decades last year. Daimler AG and BMW AG reduced profit forecasts last year amid pressures from the US-China trade war that’s hit auto demand, while Hyundai Motor Co. said last month its letting workers go as it reviews production plans in the worlds biggest market.
Jaguar Land Rover said its overhauling its China operation, cutting back on deliveries to reduce stock. Its also streamlined its commercial policies to help compensate for retailers losses, and launching extensive on-site training programs to improve the customer experience as well as operations.
Tata Motors wrote down its investment in Jaguar Land Rover by $3.9 billion due to market challenges, especially in China, technology disruptions and rising debt costs. The parents net loss compared with a profit of Rs 12 billion a year earlier, and also missed the average analyst estimate that called for a profit.
Tata Motors has bitten the bullet, Ajay Bodke, the Mumbai-based head of investment strategy at Prabhudas Lilladher Pvt. Ltd. said by phone. They are reinforcing that they are serious about achieving a turnaround, saving costs and taking measures that might be tough.
As part of Jaguar Land Rovers plans to achieve 2.5 billion pounds ($3.2 billion) of investment, working capital and profit improvements by March 2020, the company in January said it would slash its global workforce by 4,500. This is expected to result in a one-time exceptional redundancy cost of around 200 million pounds for the luxury unit of Tata Motors. The cost of the voluntary scheme will be recognized in the quarter ending March 31, the company said.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.