Shares of Tata Motors plunged over 5% in intraday trade on the Bombay Stock Exchange (BSE) on Thursday, in line with the benchmark index, after the auto major reported lower-than-expected earnings for the September quarter of 2022 (Q2 FY23). The market sentiment was further dented after the Tata Group company announced to delist its American Depositary Shares (ADS) from the New York Stock Exchange from January 2023, citing consistent drop in the number of depositary receipts outstanding as a percentage of its outstanding ordinary shares. An ADS is a U.S. dollar-denominated equity share of a foreign-based company available on an U.S. stock exchange.

Extending losses for the second straight session, Tata Motors share price opened 3.4% lower at ₹418.15 against the previous closing price of ₹433 on the BSE. The auto heavyweight declined as much as 4.5% to hit an intraday low of ₹409.3, while market capitalisation (m-cap) slipped to ₹1.37 lakh crore. On the volume front, there was spurt in selling activities as 6 lakh shares changed hands over the counter on the BSE, against the two-week average of 7.6 lakh stocks. In comparison, the BSE Sensex was trading 402 points, or 0.65%, lower at 60,636 levels at the time of reporting.

The share price of Mumbai-headquartered automobile company has underperformed the BSE auto index in the last one year, with Tata Motors shares falling 19% during this period as against 13% jump in the sectoral index. Meanwhile, the 30-share Sensex rose 0.5% during the period under review. On a year-to-date (YTD) basis, Tata Motors shares lost 17%, whereas it has gained 5.5% in the past six months.

Tata Motors share currently trades 20% lower than its 52-week high of ₹536.50 on November 17, 2021, while it hit a 52-week low of ₹366.05 on May 21, 2022.

Tata Motors posts ₹945 cr loss in Q2

The auto major's consolidated net loss narrowed to ₹944.6 crore for the second quarter ended September 30, 2022, compared with net loss of ₹4,441.5 crore a year-ago.

The consolidated revenue from operations climbed 29.7% on a year-on-year basis to ₹79,611.3 crore, from ₹61,378.82 crore in the corresponding period last year, driven by rise in Jaguar Land Rover (JLR) as well as other domestic as well as commercial verticals. Tata Motors' all three main divisions -- JLR, Tata CV, Tata PV -- recorded growth in the quarter. Tata's British arm JLR’s revenue rose 36% YoY in Q2 FY23, with wholesale volumes (excluding China JV) growing at 17.6% YoY to ₹75,307.

On the operational front, Earnings before Interest, Taxes, Depreciation, and Amortisation (EBITDA) stood at ₹7,700 crore and the margin rose 130 basis points to 9.7%.

Going ahead, the company expects demand to remain strong, however, it will remain a key monitorable in wake of global uncertainties. “Improving chip supply and cooling commodity prices will aid revenue and margins recovery and hence aim to deliver strong improvements in EBIT and free cash flows in H2 FY23,” Tata Motors said in its outlook.

Analysts view of Tata Motors’ Q2  

Domestic brokerage ICICI Securities said that Tata Motors’ Q2 performance was a mixed bag with JLR margin back to 10%; however, India margin was impacted by 200 bps (QoQ) due to lag effect of higher input cost contracts trickling into numbers. The brokerage has maintained “BUY” on the stock, with a lower price target of ₹571, compared to earlier estimates of ₹646.

Analysts at Prabhudas Lilladher also maintained their positive stance on Tata Motors, citing improved product mix at JLR. The agency has given a “BUY” call on the stock, with a target price of ₹520, saying that the company’s market share in PV segment rose to 14.2% vs 6.9% in FY19, led by revamped portfolio, customer preference for SUVs, and rising EV penetration. “The commercial-vehicle (CV)volumes gains from cyclical upturn, improving fleet utilisation, freight rates as well as revival in JLR and strong order book to benefit and drive free cash flow (FCF) generation,” it said.

Tata Motors to delist ADS from NYSE

The company in an exchange filing on November 9 said that it will delist its American Depositary Shares (ADS) from the New York Stock Exchange from January 2023. The last trading day of the ADS on the NYSE is likely to be January 23, 2023.

Tata Motors said that since the issuance of ADSs in 2004, the company has witnessed a considerable increase in liquidity and foreign shareholder participation in the equity stock markets in India. “The Company has further considered the consistent drop in the number of ADSs outstanding as a percentage of its outstanding Ordinary Shares. Therefore, the rationale for ADS listing in the United States has significantly diminished,” it said.

As per the company, the delisting of ADS will help simplify its financial reporting requirements and reduce administrative costs. Upon delisting of its ADSs, the company will concentrate trading of its equity shares on the BSE Limited and the National Stock Exchange of India Limited, it said.

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