 "Tata Motors: No major impact during Mistry's tenure")
Cyrus Mistry’s tenure as chairman of Tata Motors did not have much of an impact on the company’s operations, believe experts and brokerages. In fact, key operational metrics especially on the domestic medium and heavy commercial vehicles (M&HCV) front actually deteriorated as the company lost market share to challengers such as Ashok Leyland. On the change in leadership, CLSA analysts believe that the Tata Motors’ business is pretty much driven at the company level and they do not see sentiment weakening for the stock due to changes at the corporate level. While most analysts say that JLR (Jaguar Land Rover) in any case was run as a separate company and its performance continues to improve, things have not been as good at the domestic operations. Says an analyst with a domestic brokerage not wanting to be quoted, “Things continue to be bad at the standalone operations and I doubt he (Cyrus Mistry) has made any meaningful contribution.”
He cites the case of Tata Motors’ performance in the M&HCV space where the company’s market share has come down from 59% in FY12 to 52% in FY16. Similarly, even for passenger vehicles, market share has fallen from a peak of 14-15% in FY12 to about 5% currently.
Analysts are bullish on the product cycle of the passenger vehicles, given the expected launch of Kite sedan and Hexa UV in early 2017 followed by the Nexon SUV in mid of next year. The problem for this business is the capacity utilisation of 25%, which has led to losses at the Ebidta level.
Across segments and on various parameters be it pricing, innovation, service and marketing they (Tata Motors) have been outgunned by competition, he adds. “Despite the steep discounting they have carried out in the M&HCV space the company have lost market share,” he states. Analysts say while the company has been able to come out with good products in the passenger vehicle space, their volumes have not scaled up. The company has not been able to shake off the customer perception on quality and services over the last few years, they add. After Indica which did well in the initial years, the company’s products (Sumo, Safari, Zest, Bolt) have received good reviews but have failed to meet volume expectations. It remains to be seen how Tiago ramps up.
On Nano, where the company has invested about Rs 6,000 crore, analysts believe that the investment in the plant can be recovered as plant is fungible and the company can make other products on the same assembly line. Though the product got international recognition, the company could not market or position Nano properly, feels another analyst with domestic brokerage also not willing to be quoted. Service and marketing have been the Achilles heel of the company and the situation has not changed.
Analysts at Bank of America Merrill Lynch say that there has been no major change in strategy at Tata Motors be it on turnaround of the standalone operations, growth in JLR through new products. The recent appointment of Guenter Butschek as India managing director should lead to continued leadership, they add.
The worries for analysts are more from the global slowdown and impact on profitability due to currency fluctuation and the delay in cyclical recovery rather than on the corporate front.
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