JLR is facing stress and it is visible in the EBITDA margins, said SBICap's Mahantesh Sabarad.
Tata Motors shares fell over 22 percent on February 8 after the company reported a consolidated net loss of Rs 26,961 crore for the December 2018 quarter. Mahantesh Sabarad, head of research at SBICap Securities, spoke to CNBC-TV18 about the earnings.
"The results have been quite bad. The domestic business has done well, Jaguar Land Rover (JLR) is facing stress and it is visible in the EBIT and EBITDA margins. EBIT is negative for the quarter. As far as the impairment is concerned, it seems to be just a financial range, we don't know how deep or what furthermore can we expect going ahead. The stock price is factoring in all this uncertainty ahead," Sabarad said on February 8.
According to Sabarad, there could be more impairment in the offing.
"There is Brexit uncertainty right now which tells you that the assets that they have within the British geography in an event of a no-deal Brexit with a very unfavourable kind of situation, the assets within the UK geography are likely to be impaired furthermore so you cannot rollout impairment of assets on that account. Also, we don't know what is the warranty cost, are they sufficiently provided on the warranties for all those vehicles that are running on the roads right now given the situation that you have structurally – automobiles moving on the electrification side. If you recall, most of the vehicles sold by JLR are diesel vehicles. Therefore, I don't know whether they are sufficiently provided on warranty side and in terms of R&D incurred so far, we don’t know how much of that is further left in terms of impairment," he added.
Unlock 75% more savings this festive season. Get Moneycontrol Pro for a year for Rs 289 only.
Coupon code: DIWALI. Offer valid till 10th November, 2019 .