Tata motors(TM), a company with a market cap of nearly 74 thousand crores, has been steadily falling since the last one year.In fact it is at the price where it was 5 years back; although Tata motors is a established player, this current price is worrying to many investors because the markets are at record highs and Tata motors is struggling.
This well known brand is going through some troubled times. There are many reasons
1. The JLR arm, Jaguar/Land rover of TM is not doing well in terms of sales and revenue generation.In July alone there was a 21.6% fall in JLR sales.
2. Adverse impact of BREXIT and abscence of free trade with European union. JLR has exports upto 80% of its production and it is expected to loose 1.2 billion pounds in a year.
There are some rays of hope, in the sense, Tata sons, have bought back shares via block deals to the tune of Rs 673 crores over the last few weeks and increased their stake. This indirectly implies the confidence that this fall is temporary and TM can recover in time.
The domestic market is better and should be able to support
Many experts feel that this stock still has life in it and can raise to nearly 50-55% of the current prices (Rs 250/share). The journey to the top may not be too soon.
Should we buy it?
Going by valuations, this is a good stock to buy. There is still concern that it can drop further around the Rs 225-Rs230 mark(TM). If one has a long term horizon, we can start picking up in small aliqouts.
If you see the sales vs purchase today, around 66 thousand have been sold and 35 thousand shares bought. So, there are people who may be thinking long term.
The other issue that may not have a direct impact is the ouster of Mr.Mistry and the tussle to buy back the TM shares in his portfolio by tata sons, the need for the court to intervene between the two is not good news.