TMPV shares fall
Investors of Tata Motors Passenger Vehicles (TMPV) got a big shock on Monday, 17 November. In the second quarter, the company was in the news as its year-on-year profit jumped by 2110%, but despite this, TMPV shares fell by more than 7% in early trade. Investors were surprised as to why the stock fell even after making such huge profits. The answer lies in the weak performance of the company’s luxury brand Jaguar Land Rover (JLR).
The real reason for the stock decline
Demand for Tata’s passenger and electric vehicles in India is going as expected, but the situation is quite challenging for JLR. JLR sales remain weak in major global markets China, Europe and America. On top of this, a major cyber incident affected the company’s production and supply.
TMPV shares fell to ₹363.15 on BSE, down about 7.2% from the previous close of ₹391.60. Despite record profit growth, investors had their eyes set on JLR’s future, and the signs from there were not good.
Jump in profits, but the real picture is different!
In the second quarter, TMPV showed a profit of ₹ 76,170 crore, which seems quite big. But this profit was mainly due to lump sum gain of ₹82,616 crore. If this one-time amount is removed, the company actually incurred a loss of ₹6,368 crore in the quarter. The company had made profit in the same quarter last year, so actual operations appeared weak. Total revenue also declined by 13.5% to ₹72,349 crore, further increasing investors’ concerns.
JLR’s losses and future projections worsen
JLR suffered a loss of 559 million pounds in this quarter due to cyber attack. Production was halted for several days, due to which the company had to reduce its annual performance estimates. While earlier JLR was targeting 57% operating margin for FY 2026, it has now reduced it to 02%. Free cash flow has also been estimated in the negative range of £2.22.5 billion. It is clear from this that the situation will not be easy for JLR in the coming months.
What did the brokerage firms say?
Motilal Oswal has ‘Sell’ rating on TMPV stock and a target price of ₹312. He says that due to weak global demand and VME (volume-mix) pressure, JLR’s recovery does not seem possible soon. Nuvama has given ‘Reduce’ rating to the stock with a target of ₹385, while ICICI Securities has downgraded it to ‘Hold’ with a target of ₹375. Analysts are clear that due to JLR, the next two-three quarters will be challenging for Tata.