Estate of late Rakesh Jhunjhunwala lost over Rs 325 crore in notional value on his investments in Tata Motors, as the stock fell more than 9 per cent in Thursday's trade following the Q3 results miss, leading to a sharp correction in the stock and downgrades from the brokerage houses.
Jhunjhunwala held 4,77,70,260 equity shares, or 1,30 per cent stake in the Tata Motors firm as on December 31, 2024. The value of this stake was worth Rs 3,594.47 crore at its closing price of Rs 752.45 on Wednesday. The stock tumbled 9.06 per cent to Rs 684.25 in the early trade, with its total market capitalization barely holding Rs 2.5 lakh crore mark. However, the correction dragged Jhunjhunwala's stake to Rs 3,268.68 crore, eroding a notional wealth of Rs 325.8 crore.
Tata Motors' third-quarter profit missed the Street estimates by a wide margin as the bottom line fell 22 per cent on a year-on-year (YoY) basis to Rs 5,451 crore. However, the revenue from operations of the leading auto company rose 3 per cent YoY to Rs 1.13 lakh crore. Ebitda dropped 15 per cent YoY to Rs 13,032 crore, with margins contracting 240 bps to 11.5 per cent for Q3.
A sharp slowdown in its luxury Jaguar-Land Rover business, fall in margins and a cautious demand outlook for key markets like China affected Q3 performance of the Indian carmaker.
Overseas brokerage firm Jefferies downgraded Tata Motors stock to 'underperform' from 'buy' rating, slashing its target price by 30 per cent to Rs 660. "Its UK arm JLR faces weak demand in China and Europe, along with a rise in customer acquisition costs and higher warranty expenses," Jefferies said, adding the Tata Group firm faces a slowdown in demand for both commercial and passenger vehicles.
Among other global brokerage firms, Goldman Sachs has maintained its 'neutral' rating on Tata Motors with a target price of Rs 800, while Morgan Stanley slashed its target price to Rs 853 apiece, with an 'equal-weight' stance. CLSA has maintained its outperform rating on the stock with a target price of Rs 930 per share.
Tata Motors experienced a tepid quarter during the fiscal, falling short on expectations on all fronts. Despite this, there's a silver lining with gradual recovery in financial performance on a sequential basis. The top-line growth was largely supported by the robust contribution of JLR, which had shown sluggishness in the previous quarter, said Sagar Shetty, Research Analyst, StoxBox.
"Going forward, we maintain a cautiously optimistic outlook for Tata Motors. Key uncertainties related to demand in the US and China warrant close monitoring. Additionally, management's commentary on the global demand scenario for JLR will be crucial for future performance," he said.