Subdued sales, Q3 results dent auto stocks; Tata Motors down 17%

Mumbai: High interest cost and financing constraints continued to slow down the overall sales of the Indian automobile industry, denting not just company performances but also equity prices.

The grim picture of sales downtrend in the segment has been reflected in most of the third quarter results declared by the automobile companies so far.

The Tata Motors, including the performance of JLR, reported a consolidated net loss of Rs 26,961 crore on Thursday. The company stock emerged as the top loser on the Bombay Stock Exchange (BSE) on Friday. The company’s scrip closed at Rs 151.30 a share, down Rs 31.60, or 17.28 per cent, from its previous close on the BSE.

According to the group, its net profit was impacted by an exceptional item of “Asset Impairment” in Jaguar Land Rover (JLR) worth Rs 27,838 crore (3.1 billion pounds).

However, on the standalone basis, the company — Tata Motors — reported healthy quarterly numbers. Its net profit during the quarter under review rose to Rs 617.62 crore, from Rs 211.59 crore reported for the corresponding quarter of the previous year.

The BSE auto index declined over 3 per cent. Other major losers included MRF, Eicher Motors and Motherson Sumi.

Deepak Jasani, Head-Retail Research, HDFC Securities, said: “After the Thursday’s jump in the auto stocks owing to the rate cut, investors took to booking profit.”

Besides, the data from the Society of Indian Automobile Manufacturers (SIAM) showed that overall sales in January fell 4.68 per cent to 2,019,331 units.

The data revealed that sales of passenger vehicles in the domestic market declined by 1.87 per cent on a year-on-year basis in January to 280,125 units.

Announcing the fiscal’s final bi-monthly monetary policy review on Thursday, the Reserve Bank of India (RBI) had noted that “high-frequency indicators of the services sector suggest some moderation in the pace of activity”.

The central bank said that the sales of motorcycles and tractors imply weakening of rural demand in December, while the those of passenger cars, which are an indicator of urban demand, contracted, “possibly reflecting volatility in fuel prices and mandated long-term insurance premium payments”.

“Commercial vehicle sales also shrank in December 2018 from a high base of the previous year,” the RBI said.

According to Grant Thornton India Partner Sridhar V: “The overall performance has dipped on a YoY basis which indicates the struggle the sector is going through on account of continuing negative factors like financing availability, pricing and cost of finance the past few months.

“These conditions have shown some improvement, which has resulted in the month on month trend showing a significant positive movement, which indicates improvement in sentiments as well. With RBI relaxing interest rates by 0.25 per cent, we can expect to have a positive improvement.”

Recently, brokerage house Centrum Research in a note said that country’s passenger vehicle (PV) segment might miss growth expectations of 7-9 per cent in FY19 due to tight liquidity conditions and high interest cost.

In a research note on January automobile sales — 2019 Starts in the Slow Lane — the brokerage house said that higher inventory levels, low consumer sentiment, tough market conditions and tight liquidity dampened sales in the domestic auto market during January 2019.

“Elections and low consumer market sentiment could continue to keep growth in PVs under check in the coming months as well,” the note said.


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