The rise and fall of the Tata Motors stock

Stocks

oi-Sunil

By Sunil Fernandes

Published: Friday, March 22, 2013, 10:09 [IST]

In 2012, Tata Motors was by far the best performing stocks from the Sensex companies gaining an astounding 79 per cent.

Hope of a better then expected performance at its Jaguar Land Rover (JLR) unit, saw frenzied buying in the scrip through 2012.

In 2013 the scrip has underperformed the Sensex and is down 18 per per cent since the beginning of the year. The Sensex is also down, but, just about 5 per cent.

In fact, earlier in January it scaled a record high of Rs 337, only to fall to the current levels of Rs 277. On Thursday the stock shed 4 per cent as China tightened fuel efficiency guidelines, which analysts say would hurt sales of Jaguar Land Rover units. The stock was the top loser from the Nifty index on Thursday.

China accounts for 20 per cent of JLR's overall revenue and 40 per cent of JLR's EBITDA or earnings before interest, tax, depreciation and amortization, according to reports. Analsyts say that the new guidelines could hit the company, though JLR is confident of meeting guidelines.

"The company was expecting the publication of the final ruling by the Chinese government and has been taking the necessary product and technology actions to comply with its legislative obligations," JLR said in a statement. "Jaguar Land Rover expects to comply with the Stage III fuel consumption legislation target that has to be met in China by 2015 and our forecast shows compliance throughout this period."

To compound the company's woes domestic sales, particularly of passenger vehicles has taken a hit. Only recently the company came out with an assured buy back scheme.

Analysts believe that the Tata Motors stock could recover and the company has enough abilities to innovate and ensure that it can meet fuel consumption guidelines. If that remains the case, Tata Motors could be an excellent contrarian bet.

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