Swaraj Baggonkar Moneycontrol News
Jaguar Land Rover is proving to be a drag on Tata Motors' financials, so much that N Chandrasekaran-led carmaker's market capitalisation currently is even lesser than that of two-wheeler companies Bajaj Auto and Eicher Motors.
At Rs 73,300 crore, Tata Motors' market capitalisation has now slid to the fifth spot in the auto segment, owing to JLR's flagging sales in high-growth markets such as China and Europe. The market cap has fallen from the Rs 1.7 lakh crore-mark it hit in September 2016.
The drop comes despite Tata Motors standalone business becoming the fastest-growing in recent quarters. The company’s commercial and passenger vehicle divisions have seen a double-digit growth in the past five quarters on the back of new product launches.
Notwithstanding the market capitalisation slide, Tata Motors is still the country's biggest automotive company in terms of revenue share. In FY18, it clocked a consolidated revenue at Rs 2.95 lakh crore, which is more than thrice of Maruti Suzuki’s Rs 80,000 crore.
The Pecking Order
In a comparison of scale, Bajaj Auto, the most valuable among two-wheeler stocks, remains the third-most valued automotive stock on BSE with a market capitalisation of Rs 81,500 crore. Eicher Motors, which owns the Royal Enfield bike brand, has a market capitalisation of Rs 79,350 crore and is fourth most valued automotive stock in India.
Meanwhile, India’s largest carmaker Maruti Suzuki, which has held onto its lead over Tata Motors since mid-2015, has a market capitalisation of Rs 2.5 lakh crore followed by utility and tractor maker Mahindra & Mahindra at nearly Rs 1.2 lakh crore.
New car launches such as Swift and Baleno have helped Maruti Suzuki cement its position, and continuing demand for tractors and medium and heavy trucks have pushed M&M edge past Tata Motors.
The Drag
Between January and August 2018, worldwide retail volumes of JLR dipped by 2.6 percent on-year to 3.9 lakh units. Trade tensions and tariff changes in China have resulted in a fall of 38 percent in that market during the given period. Fall in demand for diesel-powered vehicles too impacted volumes in Europe.
Following the slowdown, parent company Tata Motors has been forced to cut production at one of JLR’s UK plants, bringing down the work week to three days from October until the start of December.
JLR has an overwhelming effect on Tata Motors as more than 80 percent of the consolidated revenues of Tata Motors comes from the two British brands. JLR chief executive Ralf Speth had cited uncertainty over Brexit and confusion over government policy on diesel engines as factors limiting JLR’s prospects.
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