Tata Motors share price fell in early trade today on reports its subsidiary Jaguar Land Rover (JLR) would suspend production at its UK plants for one week in November to adjust to adverse market conditions, including uncertainty over Brexit. Tata Motors share price fell 5.02% intra day to Rs 118.25 compared to the previous close of Rs 124.50 on BSE.
Tata Motors stock has lost 47.17% during the last one year and fallen 30.97% since the beginning of this year. During last one week, the Tata Group firm stock has lost 10.68% on BSE. Tata Motors share is trading 50% lower compared to its 52-week high of Rs 239.30 hit on April 18, 2019. On September 4, 2019, the stock hit its 52-week low of Rs 106 on BSE.
JLR would suspend production at all UK manufacturing plants for one week, commencing November 4, 2019, a company official said. Tata Motors-owned automaker has three manufacturing plants in the UK at Halewood, Solihull and Castle Bromwich.
Challenges before Tata Motors
Slowdown at home and challenges faced by its UK arm JLR have hit Tata Motors during last one year. Of late, JLR has been hit by a fall in demand for diesel-powered vehicles and a downturn in China. Tata Motors reported sales of 60,093 units this fiscal so far as against 98,702 units last year. Its market share has fallen by 1.39 percentage points to 5.41 percent in the current fiscal as against 6.79 percent last year.
The Indian firm's global wholesales in August 2019, including Jaguar Land Rover, stood at 72,464, lower by 32%, over August 2018. Global wholesales of all Tata Motors' commercial vehicles and Tata Daewoo range in August 2019 were at 25,366, lower by 45%, over August 2018.
On August 14 this year, Crisil lowered its long-term rating amid weakening risk profile of its UK arm Jaguar Land Rover.
CRISIL said it has downgraded rating on the long-term bank facilities of Tata Motors (TML) to 'AA-/Negative' from 'AA/Negative', but reaffirmed rating on short term bank facility, commercial paper and short-term debt at 'A1+'.
"Continued weak sales volumes and profitability, coupled with sizeable necessary capex continues to constrain the outlook for free cash flows. Moreover, continued uncertainty around the terms on which Brexit is concluded continues to pose risks to JLR's business profile. An adverse outcome on Brexit for JLR may result in significant disruptions to its supply chain, and elongate its working capital cycle," it said.
On July 25 this year, Tata Motors reported a consolidated net loss of Rs 3,679.66 crore for the first quarter ended June 30, 2019, dented by muted volume growth in domestic business as well as in its British arm JLR.
The company had posted a consolidated net loss of Rs 1,862.57 crore in the June quarter of 2018. The profit was impacted by demand slowdown, higher axle loads, liquidity stress and low freight availability for cargo operators.
Jaguar Land Rover (JLR), the UK subsidiary of Tata Motors, reported a 6.7 per cent year-on-year (y-o-y) decline in its retail sales at 34,176 units in August hit by weak demand in overseas market and Europe.
Britain's largest carmaker had posted a 5 per cent increase in sales in July. Sales fell by 9.6 per cent in June, 12.2 per cent in May and 13.3 per cent in April, as consumer sentiments in China and emission regulations continued to weigh on the sales.
Over the years, the firm's financial condition has deteriorated.
Tata Motors share has a price to earnings (P/E) ratio of 46.92 compared to the industry P/E of 17.47. This indicates the stock is overvalued and investors are paying higher price for each Rs 1 of company's earnings.
Earnings per share for the auto company have turned negative at the end of March 2019 fiscal for the first time in ten years. Basic earnings per share (EPS) for fiscal ended March 2019 stood at Rs 84.89 in negative. For fiscal ended March 2009, basic EPS of the firm stood at Rs 48.74 in negative. For fiscal ended March 2018, basis EPS of the firm stood at Rs 26.46.
Similarly, return on capital employed has been falling constantly since fiscal ended March 2011. Return on capital employed for March 2011 fiscal stood at 20.20%. For fiscal ended March 2019, it stood at 2.49%.
Return on assets ratio which indicates how efficiently a company can manage its assets to clock profits during the period paints a grim picture for the Tata Group firm.
For the fiscal ended March 2019, return on assets ratio turned negative to 9.38%. The ratio last entered negative territory for fiscal ended March 2009 when it stood at 3.37.
Edited by Aseem Thapliyal