Despite Nano, Tata Motors scrip falls from day’s high (Lead)

March 23rd, 2009 - 9:00 pm ICT by IANS  

Mumbai, March 23 (IANS) The Tata Motors scrip slipped from the day’s high as investor interest waned over the much talked about Nano launch and analysts claimed that the car would not bring about a turnaround for the $62.5-billion Tata group.
The Tata Motors scrip, which shot up over 8 percent in Monday morning trade, fell from its day’s high to end 3.2 percent above its previous close at Rs.166.05. The stock had opened at Rs.168.75.

The commercial rollout of the small car took place around 4.30 p.m. in Mumbai - after the closing bell - at a ceremony at the Taj Mahal Palace and Tower, a hotel partially destroyed by terrorist attacks last November.

Analysts were, however, sceptical about Nano providing the much-needed succour to a debt-ridden Tata group as the company would have to sell about two-three million cars just to break even.

“While Nano’s launch will be seen in positive light by Tata Motors lenders, it won’t have a significant impact on the group’s fortunes as there is not enough capacity to roll out a huge number of cars,” said Jagannadham Thunuguntla, equity head with SMC Capital.

“One also needs to verify how much of a margin the company will make on each car. Till some more clarity comes through, markets will remain sceptical,” Thunuguntla added.

Showcasing the Nano prototype last year, Tata Motors had announced it would cost Rs.100,000 ($2,000) at the factory gate - cheaper than any other car on the road now.

The four-door car has a 33-bhp engine at the rear and is targeted at the Indian middle class population that aspires to trade its two-wheelers for the Nano.

Tata Sons, the holding company of Tata Motors, is reeling under heavy debt after buying firms like Tetley Tea, Daewoo Commercial Vehicle, Corus Steel and Jaguar-Land Rover.

Analysts said about $2 billion of Tata’s debt is due in June, and the company will have to come up with a plan fast to stem losses.

“Tata’s big ticket acquisitions were a mistake. It seems they got carried away by the bull run,” said Thunuguntla.

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