Tata Motors share price rose for the second consecutive session today after the stock surged nearly 10% yesterday on UK and European Union agreeing to a new Brexit deal. Tata Motors share price rose 2.64% to Rs 141.80 in trade today compared to the previous close of Rs 138.15 on BSE. The Tata Group stock has lost 22.8% during last one year and lost 19.84% since the beginning of this year.
On Thursday, Tata Motors share price closed 9.82% higher at Rs 138.15 compared to the previous close of Rs 125.80 on BSE. Tata Motors has exposure to both UK and European nations and the signing of the deal bodes well for the business of the company.
The stock has been under pressure since September 27 after the firm announced its subsidiary Jaguar Land Rover (JLR) would suspend production at UK plants for one week from November 4 to adjust to adverse market conditions, including uncertainty over Brexit.
Tata Motors-owned automaker has three manufacturing plants in the UK at Halewood, Solihull and Castle Bromwich. On October 10, the automobile manufacturer informed the exchanges that the group's global wholesale amounting to 89,912 units went down by 27% in September 2019 as compared to the same period last year.
Post the announcement, Tata Motors share fell 3.81% to hit the intraday low of Rs 116.25, against the previous close of Rs 120.85 on the BSE. JLR's parent Tata Motors continued its weak performance in September 2019. Total domestic sales fell 50% to 32,376 units last month compared to 64,598 units in the corresponding month of previous fiscal. Commercial vehicles sales too declined 45.4% to 28,079 units compared to 51,419 units in September last year.
Over the years, the Indian auto firm's financial condition has deteriorated.
Tata Motors share has a price to earnings (P/E) ratio of 53.65 compared to the industry P/E of 23.49. 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.
In the first quarter of current fiscal, Tata Motors reported a consolidated net loss of Rs 3,679.66 crore dented by muted volume growth in domestic business as well as in its British arm Jaguar Land Rover (JLR).
"The company had posted consolidated net loss of Rs 1,862.57 crore in June quarter of 2018 and profit of Rs 1,117.48 crore in March quarter 2019," Tata Motors said.
The company said profit was impacted by demand slowdown, higher axle loads, liquidity stress, low freight availability for cargo operators. Consolidated revenue declined by 7.84 per cent to Rs 61,467 crore as compared to Rs 67,701 crore in the year-ago period.
Operating profit, or EBITDA (earnings before interest, tax, depreciation and amortisation) dipped 130 basis points (bps) YoY to 6.2 per cent, while EBIT margin plunged 170 bps to a negative 2.5 per cent.
BY Aseem Thapliyal