ValuePickr Forum

Tata Motors - DVR

Head winds are against the sector…My advise is hold and sleep over it. Think you bought a Jaguar and some day you will be able to drive it. The stock price may have bottomed out or may take some more time to find the bottom, but with global slowdown prediction as well as domestic markets showing signs of low demand it will take at least 12 to 24 months to start taking a look at this sector. By the way the whole small cap is down 60% or more form the top. You can find solace that you still have one of the best management to take care of your investment as they are committed to their company’s growth and their is no fraud going in this downfall although surprised how they take hit on their overseas investment every time being a prudent management.

I invested in Suzlon thinking the same. Its shifting from operation table to the morgue now.


I am a novice at investment. However, I was very curious after hearing Mr. P B Balaji’s call and how calmly he was explaining one-off 3 Billion £ asset Impairment charges.
The questions before me were, while all the channels (including International) were screaming biggest loss in the history of Indian Businesses, how was the CFO of the company talking it so lightly.
Well, we could read everywhere after the headlines, mentioned somewhere in the middle where those lines that said, “it is an accounting entry (noncash) accounting entry”
A little search and I came across this article.

Well to save you the read and put it in layman language (because I am one). This usually means that the company’s investment is not doing as good as they wish. However if a company’s investment is not doing well usually is not a news, because investors probably already know about it. This is just an acknowledgement from the management.
As per the article, usually the investors react positively or Neutral to the news, because of the aforementioned reason.
Important thing the Article highlights is “[e]xecutives should also record as much of the impairment or restructuring charges as possible in a single announcement” as a lot of bad news at one time may be easier for investors to digest (and forgive) than a dribble of bad news over a longer period of time.”
Well your views are welcome; however, I view this additional 20% correction in share price was unnecessary. Well if company is not doing good all news will be perceived bad.
The huge impairment loss in one go determine that management wittiness to use the current timing and the bad state of the stock prices, to impair the assets in one go, Instead off impairing it; say in smaller sum’s that would eat up the profit going further.
Well as far as TATA Motors, I am a fan of what is happening in the company. The domestic business launces and turnaround. The new offering from JLR, especially Jaguar with F-type and E-type they are into SUV’s, which are overshadowing sedans everywhere. The increase in market sales in US/Europe/UK by around 15-20% in recent few months is the testimony that they have amazing products.
JLR is in a perfect storm, Brexit uncertainties, China Slowdown to name few. These things are not in companies’ control.
As far as share price are concerned I would like to quote a famous investor’s line.
“Best time to buy a company is when they’re on the operation table”

Note- As mentioned already, I am a novice; this would be my first write-up on any company anywhere Six month ago I didn’t know what Nifty was .
Please make sure you consult your advisor before investing.

disc: Invested recently. (views could be biased)


What is the source for this? 15% increase in market share is too much and does not look real.

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sorry that was a bad auto correct. I meant sales not share.

This may be a dangerous statement with respect to Tata Motors. One needs to see if they are in operation table or coma. If in operation table, he/she could recover. However if one is in long coma, the situation may remain unchanged for years.
Tata motors management had over a decade to fix issues with overall operations but has failed time and again. When looking at the JLR situation, please look at the cash inflow and outflow. The amount of cash going in is substantially high. If I take an example of few successful models, I can see that the payback period is very long and meanwhile the platform becomes obsolete. This makes me think that Tata Motors could be having platforms with negative NPV. Take the D8 platform as an example. It appears that it may take 12 years to get back the platform cost at current sales (expecting China to sell at current levels). However D7a and D7u platforms followed by flexi architecture would take over well before the 12 year period. This seems to hint to us that JLR has to double sales to at least break even in the long term. Just a few cents from my short analysis done last year.

Disclosure: Not invested.


The acute irony here is the fact that JLR was acquired by Tata Motors for ₹9,200 Crores (or) £1.10 Billion on 2nd June, 2008. Almost 10 years and 6 months later, the write off is ₹28,700 Crores (or) £3.10 Billion. Even if you discount this figure at 7.50% (India’s Risk-free Rate) back to 2008, it will stand at ₹13,430 Crores (or) £1.45 Billion i.e. higher than the initial acquisition cost. A Capex-heavy business like Tata Motors could have put the ₹9,200 Crores (or) £1.10 Billion in 2008 (Then, a chunky ~22% of their Capital base) to much better use.

The group’s irresponsible capital allocation was also quite apparent in the Tata Steel-Corus acquisition and the subsequent impairments summing up to ~₹21,000 Crs by 2016.

The management of Tata Motors has now decided to invest ₹1,20,000 Crores in JLR for the next 3 years. This is apparently for their ‘premium segment’ game plan. I don’t know how this will turn out. I wish them all the best.

But let me quickly quote the Yoda of the business world, Mr. Warren Buffett:

> If you’re in a hole, the first thing you should do is stop digging.

So, I don’t think the drop is ‘unwarranted’. It’s due to a heavy mistrust of the company’s capital allocation skills and rightfully so. I’d personally start trusting Tata Motors if they can justify the massive upcoming investment by producing good returns on investment.


Interesting. Odd that Consumer and Retail are part of the same vertical. Personally, it seems like it would have made more sense to keep them separate. And really, they will be better served by getting out of Telecom and Media. It’s hard to see the Tata group operate with the agility required to compete effectively in that space. Tata Sky already has done several missteps, and seem to have frittered away their once strong position.

Back to Green in this Quarter.

Sorry for asking such stupid question but being a novice and seen so many big names failing has shaken my faith. I would like to know that is there a slightest of possibility that Tata Motors can see the same fate like JP or ADAG group? I mean they do have lot of debts in its books.

There is a very high possibility of Tata Motors going out of business due to debt if their capital allocation is misplaced. However they will be bailed out by Tata sons.

So bailed out by Tata Sons means its price will not be hammered like jp or rcom?

Struggling is business is a different thing and going out of business is different. It’s ludicrous to say that the manufacturer of more than 50% of commercial vehicles sold in the country has a high likelihood of going out of business.
Their chances of going out of business is same as that of Maruti or any other large auto manufacturer.

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