- Withdrawal of increased debt on Tata Motors may take four to six quarters
- Tata Motors shares performed worst during lockdown
May 12, 2020, 12:48 PM IST
new Delhi. While the demand for automobiles has dropped worldwide due to the Corona epidemic, Capital Market and Investment Group CLSA Ltd says Tata Motors is nothing without its luxury brand Jaguar Land Rover. During the pandemic, the $ 3.7 billion auto company faced steep debt, while its exit could be delayed by four to six quarters.
CLSA said it has already been assisted by parent company Tata Sons Private Limited as a preferential equity allotment, while the brokerage believes it may need further support.
Tata Motors down 53 percent in BSE Auto Induct
- Analyst Amin Pirani wrote in his report that Jaguar is the sole driver of its valuation. Upgrading Tata Motors to reduce buying. “We believe that future equity infusions are likely to be used for loss funding and therefore we do not attribute any equity value to its India business.”
- Demand for passenger vehicles in India was already sluggish before the epidemic. At the same time, no car of any car company was sold in April due to the lockdown. Tata Motors performed the worst during this period, falling 53 percent in the S&P BSE Auto Index this year.
- The virus is also a blow to Jaguar Land Rover, which began to show signs of a change at the end of last year due to the combined negative impact of the slowdown in China, Brexit and European emission regulations. Tata Sons was looking for a strategic partner for the business but did not promise to sell it to JLR.
- CLSA says that both the global luxury unit and the Indian commercial vehicle business should recover in the next financial year. Pirani said the sale of India's passenger vehicle business and its financing arm could increase Tata Motors' equity value by $ 92 billion ($ 1.2 billion).