Tata Group stock falls 4% as Jhunjhunwala eyes exit from multibagger

The Jhunjhunwala family first invested in Tata Motors in the September 2020 quarter, when Rakesh Jhunjhunwala picked up 4 crore shares of the company

In Short

• Tata Motors shares fall 4% after Jhunjhunwala exit signal
• Drop in sales of Jaguar Land Rover (JLR)
• Analysts remain cautious on Tata Motors despite recent gains

Shares of Tata Motors, a key stock in the Tata Group, fell by 4% on Tuesday following a corporate filing from the firm. The stock dropped to Rs 893.90, down from Rs 928.10 on Monday, erasing part of its earlier gains. This comes after the stock had delivered nearly 800% returns since Rekha Jhunjhunwala, and previously her late husband, Rakesh Jhunjhunwala, started investing in it.

Rekha Jhunjhunwala's name was missing from the key shareholders list of Tata Motors as of the quarter ending September 30, 2024. In the company’s September 1 filing, she held 4,10,29,000 equity shares, representing a 1.11% stake. This indicates that she may have sold part or all of her stake, as shareholders with less than 1% ownership do not need to be listed.

The Jhunjhunwala family first invested in Tata Motors in the September 2020 quarter, when Rakesh Jhunjhunwala picked up 4 crore shares of the company. After his passing, Rekha Jhunjhunwala continued to hold the stake.

Tata Motors, India’s largest automobile company, has been a strong performer in the past few years, delivering multibagger returns for its shareholders. However, recent developments have impacted its stock price. One of the key factors contributing to the drop in shares is the performance of its subsidiary, Jaguar Land Rover (JLR).

JLR reported a 3% decline in retail sales in the second quarter of FY25, selling 1,03,108 units. This drop in sales was attributed to supply chain issues, particularly disruptions in the supply of aluminium during the first quarter. Production was also down, with JLR producing 86,000 units in Q2 FY25, a 7% decrease compared to the same period last year.

Despite the decline in sales, JLR remains optimistic about the second half of the financial year. The company believes that it will recover as supply chain issues are resolved. However, analysts are divided on whether the recovery will be strong enough to offset the challenges the company is currently facing.

Analyst views on Tata Motors

Motilal Oswal, a leading brokerage firm, remains cautious about Tata Motors. It expects JLR’s profit margins to remain under pressure from rising costs and the company’s investment in electric vehicles (EVs). Additionally, both the commercial vehicle (CV) and passenger vehicle (PV) segments in India are experiencing weaker demand. The brokerage has maintained a 'neutral' rating on Tata Motors, with a target price of Rs 990.

In contrast, Emkay Global has a more positive outlook. The brokerage is optimistic about Tata Motors’ long-term prospects, particularly the improvements in JLR’s operational performance. Emkay expects JLR to become net-debt free by FY25 and sees strong potential in Tata Motors’ domestic business, with a recovery expected in both the CV and PV segments. The firm has reaffirmed its 'buy' rating on Tata Motors, with a target price of Rs 1,175.

The drop in Tata Motors’ stock price comes at a time when the broader market is facing volatility. Rising crude oil prices, geopolitical tensions, and global economic uncertainty are weighing on investor sentiment. Foreign portfolio investors (FPIs) have also been pulling out money from Indian stocks, which is adding pressure to the market.