Tata Motors' shares tumble on demand, JLR growth concerns

Tata Motors’ stock price fell sharply on stock exchanges on Monday, despite reporting record annual revenue and profit. The share price sank amid concerns about the demand in the domestic market and growth in Jaguar Land Rover margins.

Tata Motors' shares fell as much as 9.5 percent in intraday trading on the National Stock Exchange to Rs 947.20, before settling at Rs 959.75, an 8.3 percent decline from Friday’s closing.

On Friday evening, the automaker posted its highest-ever revenue and profit numbers for the full financial year 2024, with robust earnings across all three segments. It also said India's business became debt-free and is on track to become net automotive debt-free, on a consolidated basis, in the current financial year.

However, the company noted that it remains cautiously optimistic about domestic demand over the full year and expects the first half to be relatively weaker.

During the investor call, the management noted that overall volume in the commercial vehicle segment is likely to remain flat or might see a slight decline during the year. On the passenger vehicle front, the company expects the industry growth to moderate to less than 5 percent on a high base and high inventory level.

Tata Motors expects JLR’s earnings before interest and taxes (EBIT) margin in the current financial year to remain at the FY24 level of 8.5 percent. The benefits of a better product mix are likely to be offset by higher marketing spending. JLR, however, retained its FY26 EBIT margin guidance of 10 percent.

Tata Motors has also lined up Rs 43,000 crore for investment in the current financial year, in Jaguar Land Rover, and passenger and commercial vehicle units, for product and technology development. In 2023-24, the automaker invested a total of Rs 41,200 crore.

Several brokerages are concerned about the company’s ability to sustain the growth momentum going forward, given the declining order book at JLR and slowing global sales in the segment. Three major global brokerages Goldman Sachs, Morgan Stanley and Nomura have reportedly downgraded the stock, while Citi has suspended its rating on the stock following a weaker outlook for FY25.

Emkay believes the best may be behind for all Tata Motors’ businesses amid declining JLR order book, the subdued outlook for passenger and commercial vehicle growth in India, and higher marketing expenses.

“While there is no doubt that TTMT has delivered an extremely robust performance across its key segments in FY24, there are clear headwinds ahead that are likely to hurt its performance,” Motilal Oswal said in a report.

Tata Motors’ stock price has more than doubled in 2023 and was the top performer in Nifty 50 stocks last year amid investor optimism over the company’s reducing debt and improvement in financials at domestic and JLR businesses. 

At 1:55 PM IST today, Tata Motors shares were trading at Rs 965.95 on the National Stock Exchange, up 0.7 percent from the previous close.