Tata Motors to delist ADS, net loss in second qtr narrows to Rs 945 crore

Tata Motors said on Wednesday that it planned to delist its American Depositary Shares (ADS) from the New York Stock Exchange (NYSE) from January 2023 and terminate its ADS programme, running since 2004. It also reported a higher-than-expected loss at a consolidated level for the quarter ended September over the corresponding period last year due to semiconductor woes. 

The company’s UK subsidiary, Jaguar Land Rover, faced semiconductor shortage that dented its volumes. Net loss at the firm in the second quarter narrowed to Rs 944.61 crore from Rs 4,441.57 crore in the year-ago quarter. The Street had estimated the company's net losses to shrink to Rs 655-755 crore. The company saw its revenue, profitability, and cash flows improve despite lower-than-planned volumes due to chip supply, Tata Motors said in an investor presentation. 

“Our order book remains strong and growing at this point. We don’t see any near-term concerns on the demand side,” PB Balaji, chief financial officer, Tata Motors told reporters in a post-earnings call.  The carmaker said it had notified NYSE of its intent to voluntarily delist its ADS, each representing five ordinary shares of the company.

The move will help simplify the company’s financial reporting requirements and reduce administrative costs, it said. At 8:40 pm IST, Tata Motors ADR traded at $26.10, down 5 per cent on the NYSE on Wednesday. “Tata Motors now is a very global company. One of the reasons for listing there was to access capital. With the evolution of the Indian market there are enough options here and large capital raising has been happening here successfully,” Balaji told Business Standard.

A total of 87.4 million ADS worth $2.30 billion are outstanding, representing about 13 per cent of Tata Motors’ market capitalisation. Each ADR represents 5 ordinary shares of the company. The Tata group flagship remained cautiously optimistic about the road ahead owing to a strong order book at Jaguar Land Rover Automotive and the India business. This was even as some of its key markets including UK, US, China, and Europe faced headwinds, and supply chain glitches owing to the availability of semiconductors.

However, a higher contribution of pricier models at JLR bumped up the consolidated revenue by 30 per cent to Rs 78,846.92 crore for the three-month period from Rs 60,435.92  crore in the comparable period, it said. “Tata Motors delivered subdued performance in 2QFY23 with an EBITDA margin coming in at 7.8 per cent against our estimate of 8.5 per cent while its adjusted loss is better than our estimated loss,” Mitul Shah, head of Research at Reliance Securities said.

JLR’s Q2 retails dropped to 88,100 units in Q2 from 92,700 units in the same period a year ago.

At the end of the second quarter, JLR had an order book of 205,000 units as compared to 125,000 at the end of the second quarter of FY22. Newly launched models, including the new Range Rover, new Range Rover Sport and Defender accounted for over 70 per cent of the order book, according to the company.

Answering a question on demand scenario in China, which is a significant contributor both in volume terms and profitability for JLR, he said that the luxury segment had remained relatively resilient to the macro economic disruptions.  

Securing chip supplies through strategic tie-ups, ramping up production of the newly launched models, and improving wholesales in the second half of the financial year to over 160,000 units and then step that up further, are some of the key priorities for the company.  JLR plans to have a free cash flow (FCF) of 750 million pounds in the second half of the fiscal and achieve a FCF break-even point for the full year that ends in March 2023.  

“On the domestic front, it’s good to see the passenger vehicle continuing the momentum. We do expect a strong performance across our businesses – JLR, PV and CV,” said Balaji.

Tata commercial vehicles business rose 15 per cent over Q2 FY22.  The passenger vehicles saw a growth of 69 per cent YoY and 10 per cent quarter-on-quarter on back of strong festive demand and debottlenecking actions. EBIT (earnings before interest and tax) margins improved by 200 basis points YoY to 0.4 per cent because of higher volumes, mix and improved realisations, the company said.