A logo sits on the front of Tata Motors Ltd.’s new Nexon sports utility vehicle (SUV) during a launch event in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Tata Motors Drops Most Ever After Posting India’s Biggest Quarterly Loss   

Shares of Tata Motors Ltd. dropped as much as 29.4 percent, their worst single-day drop on the National Stock Exchange, after it reported the biggest quarterly loss in India’s corporate history.

The owner of Jaguar Land Rover reported a net loss of Rs 27,000 crore for the December-ended quarter, exceeding the deficit reported by Indian Oil Corporation Ltd. in 2012. A slump in China's car market has hit automakers around the world, including JLR.

Tata Motors Drops Most Ever After Posting India’s Biggest Quarterly Loss   

Plummeting sales in China are compounding Jaguar Land Rover’s challenges that include the industry’s shift away from vehicles powered by gasoline and diesel—a stronghold for the company.

Brokerages highlighted their concern regarding the company's "elusive" volume growth and negative cash flows. "Despite cost-reduction efforts, free cash flows are expected to remain negative over FY19-21," Emkay said in a report.

Moody’s Investors Services, S&P Ratings, and Fitch Ratings have put Tata Motors’ credit rating on a “negative watch” as increased risks from a disorderly Brexit could have an impact on business, and its rating.

Also read: BQEdge | Fork In The Road For Tata Motors’ Stock

Brokerages On Tata Motors

CLSA

  • Maintained ‘Sell’ with a price target of Rs 150.
  • Another big miss at JLR, a large asset impairment and weak commentary.
  • JLR: a weak demand outlook, a margin guidance cut and Brexit fears.
  • Cut FY19-21 EPS estimates by 2-66 percent on lower volumes/margin & lower depreciation for JLR .

Emkay

  • Downgraded to ‘Hold’ from ‘Buy’; cut price target to Rs 192 from Rs 256.
  • JLR faces headwinds such as China slowdown and Brexit uncertainties.
  • Cut EPS estimates for the current and the next two financial years by 46 percent, 19 percent and 19 percent respectively due to lower volume/margin in JLR’s China operations.
  • Despite cost-reduction efforts, free cash flows are expected to remain negative over FY19-21.

UBS

  • Maintained ‘Neutral’ with a price target of Rs 200.
  • December quarter review– China reset weighs on JLR margin; India profitability holds up.
  • Impairment supports future EPS but not cash flow.
  • Volume growth to remain elusive; company cuts margin guidance.