Shares of Tata Motors kicked off August 20 session on a bumpy track as the stock declined over 1 percent but rebounded soon to trade with a gain of about half-a-per cent.
The stock swung between gains and losses a day after CARE Ratings downgraded its long-term credit rating, in the light of the weak financial performance of its British subsidiary Jaguar Land Rover Automotive PLC (JLR).
CARE Ratings downgraded the rating on the long-term bank facilities of Tata Motors to 'AA-/Negative' from 'AA/Stable' but reaffirmed rating on short term bank facility and commercial paper at 'A1+'.
In a similar move last week, CRISIL downgraded the rating on the long-term bank facilities of Tata Motors to 'AA-/Negative' from 'AA/Negative' but reaffirmed rating on short term bank facility, commercial paper and short-term debt at 'A1+'.
Hit by the weakness in the global economy amid the US-China trade war and Brexit woes, JLR's sales have been deteriorating of late. Its wholesale volumes declined about 10.8 percent in fiscal 2019 over the previous fiscal and were about 10 percent lower year-on-year in Q1.
Reduction in volumes has been largely driven by a slowdown in China, ongoing uncertainties around diesel vehicles in Europe, and weaker volumes in overseas markets.
Given the high operating leverage in this business, declining volumes have impacted profitability, reflected in operating margins of 8.2 percent in FY19 and 4.2 percent in Q1 FY20, down from 10.8 percent in FY18 and 6.2 percent in Q1 FY19.
Shares of Tata Motors traded at Rs 121.35, up to Rs 0.60 or 0.50 percent on BSE around 0945 hours.
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