InvestorQ : What should I do with Tata Motors and is the company trying to sell out JLR?
Dhwani Mehta made post

What should I do with Tata Motors and is the company trying to sell out JLR?

Khushi Patel answered.
2 years ago

In a nutshell – Play cautiously. Eventually JLR sale may happen

The stock of Tata Motors has been weak after the results where the profits did come under pressure. The big overhang for the stock has been the JLR unit which is seeing a slowdown in sales in China and also there is a huge debt to service. In the latest quarter, the JLR unit has seen some traction in the US and UK markets but that is still not sufficient to make up for the weak Chinese demand. Also, the domestic auto market has been under pressure for the last 2 quarters with most buyers postponing purchasing till there is clarity on the political and liquidity front.

The Tata group has a much bigger challenge at the group level. For example, the group is already having $2.2 billion debt on Tata Steel books and it has another $14 billion debt on the books of Tata Motors. The servicing of the debt is becoming increasingly difficult as the world’s biggest auto market in China is slowing down. Tata Motors along accounts for nearly 40% of the total group debt of $36 billion. From the group point of view, it is not making sense to sink so much of capital into a business. It is entirely likely that eventually Tata Motors may like to hive off JLR to reduce the burden. But it is not clear how complicated the process will be considering what we saw in the Tata Steel case.