Tata Motors Shares Crash 42% from Peak, Wiping Off ₹1.8 Lakh Crore in Investor Wealth
Tata Motors, one of India’s leading automobile manufacturers, has been witnessing a sharp downturn in its stock performance over the past few months. Once soaring to record highs, the stock has been on a persistent decline, causing significant losses for investors.
On Wednesday, February 12, Tata Motors’ share price touched a 14-month low of ₹667, marking a 42% fall from its all-time high of ₹1,176 in July 2024. This downward spiral has wiped out a staggering ₹1.8 lakh crore in market capitalization, bringing it down from ₹4.32 lakh crore to ₹2.52 lakh crore.
What Triggered the Massive Fall?
Several factors have contributed to this steep decline, including weaker-than-expected earnings, global economic challenges, and a slowdown in key markets such as Europe and China.
1. Weak Q3FY25 Results
Tata Motors reported a 22.5% drop in net profit for the quarter ended December 2024. The company’s net profit fell to ₹5,578 crore from ₹7,415 crore in the same quarter last year. While revenue increased marginally by 2.7% to ₹1,13,575 crore, the results fell short of analyst expectations.
Jaguar Land Rover (JLR), the company’s luxury car brand, showed improvement in EBIT margins to 9% YoY, but analysts noted that this was largely due to lower depreciation rather than robust business growth.
2. Falling Demand for Luxury Cars
JLR’s performance was impacted by weak demand in China and Europe. The global luxury car market saw a 3% YoY decline in the first nine months of 2024, driven by a 14% drop in China and a 1% decline in Europe. The luxury car segment in Germany and France has been particularly affected by economic downturns.
3. Challenges in the Domestic Market
In India, both commercial vehicles (CV) and passenger vehicles (PV) are witnessing slowing demand. While the PLI (Production Linked Incentive) scheme provided a boost to margins in Q3, overall sales momentum appears to be weakening.
4. Revised Guidance for JLR
Due to the challenges in its key markets, Tata Motors has reduced its FY25E revenue guidance for JLR to £29 billion, down from the previous estimate of £30 billion. However, it has maintained its EBIT margin target at 8.5%.
Brokerage Views: From Bullish to Cautious
Several brokerages have adjusted their outlook on Tata Motors, citing persistent challenges in the luxury car segment and margin pressures.
- Motilal Oswal has trimmed its EBITDA estimates by 3% for FY25 and 5% for FY26, highlighting that JLR’s recovery is likely to be slower than expected. It maintains a Neutral rating on the stock, with a target price of ₹775.
- Jefferies India, which had maintained a Buy rating for 3.5 years, has now downgraded Tata Motors to Underperform, cutting its target price to ₹660 due to weak Q3FY25 results.
Is a Recovery on the Horizon?
Despite the ongoing slump, some analysts expect a recovery in the global luxury car market in the coming quarters.
- China’s Central Bank and Government interventions may help revive demand for luxury goods, including cars, in H1CY25.
- The European Central Bank (ECB) is expected to cut interest rates, which could support a rebound in luxury vehicle sales in the region.
- North America has remained resilient, showing a 1% YoY growth in luxury car sales, which may provide some support to JLR’s performance.
Tata Motors: Key Financial Metrics
| Metric | Value |
|---|---|
| Market Cap | ₹2,51,959 Cr. |
| Current Price | ₹684 |
| High / Low | ₹1,179 / ₹667 |
| Stock P/E | 7.91 |
| Book Value | ₹275 |
| Dividend Yield | 0.44% |
| ROCE (Return on Capital Employed) | 20.1% |
| ROE (Return on Equity) | 49.4% |
| Debt to Equity | 1.05 |
| Industry PE | 17.4 |
| Debt | ₹1,06,549 Cr. |
| PEG Ratio | 0.08 |
| Intrinsic Value | ₹663 |
| Graham Number | ₹758 |
| Piotroski Score | 8.00 |
| Price to Book Value | 2.49 |
| No. of Equity Shares | 368 Cr. |
| ROIC (Return on Invested Capital) | 28.1% |
Final Thoughts
Tata Motors is currently facing headwinds due to weak demand in the luxury car market, margin pressures at JLR, and a slowdown in its Indian business. The stock has corrected sharply from its highs, eroding significant investor wealth.
While analysts remain cautious in the near term, a potential recovery in luxury car sales—especially in China and Europe—could provide some relief. However, the company will need to navigate macroeconomic uncertainties, cost pressures, and demand fluctuations carefully to regain investor confidence.
With Tata Motors trading near its intrinsic value of ₹663, investors should keep a close watch on its upcoming quarterly results and global market trends before making investment decisions.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.