Tata Motors plunges 10% on reports of CCI probe, coronavirus woes

Shares of Tata Motors tumbled 10 per cent to Rs 130.50 on the BSE on Friday on reports that the Competition Commission of India is examining allegations that the company and two finance firms of its $100 billion parent group abused their market position while selling commercial vehicles. Besides, heavy selling was seen at the counter as concerns on China-originated coronavirus becoming a pandemic soured sentiment. China is one of Tata Motors' most significant markets in terms of volume and profit.

The automobile company allegedly dictated terms around the quantity and type of vehicles its former dealer in northern India - Varanasi Auto Sales - should stock, news agency Reuters reported. The latest complaint, filed last year by a family member of the dealer, alleged Tata Motors broke rules by working in concert with Tata Motors Finance and Tata Capital Financial Services while advancing dealer credit, the report said.

"The automaker would stop supplying vehicles to the dealer if repayment of loans advanced by the two finance firms was delayed, indicating they were colluding," the report said quoting unnamed sources.

Tata Motors, however, told Reuters it had made submissions to the CCI and would provide full support to the watchdog. It added the CCI was "conducting a preliminary enquiry to determine if there are any merits to the case".

For the quarter ended December 2019, the vehicle manufacturer reported a profit before tax was Rs 1,350 crore, as against a loss before tax of Rs 29,228 crore reported during the same period last year.

During the post-result media address, P B Balaji, chief financial officer for the Tata Motors group, cautioned that demand in China could be hit with the Coronavirus outbreak, derailing the margin targets for the ongoing financial year.

“A few things on the horizon worry us, the big one being this,” Balaji had said. Saying they expected a three per cent Ebit (earnings before interest and tax) margin for Jaguar Land Rover (JLR), he cautioned that this could be hit by the virus outbreak, which needed to be “watched closely...It’s a developing situation and people are in the midst of a Chinese New Year break till February 8”. JLR’s retail sales in China rose rose 34.6 per cent, contributing 19.4 per cent in total sales. JLR’s overall sales during the quarter contracted 2.3 per cent to 141,200 units.

At 9:48 am, the stock was trading 7.7 per cent lower at Rs 133.75 apiece. In comparison, the benchmark S&P BSE Sensex was down 1,147.6 points, or 2.89 per cent, at 38,602.62 level. A total of 3.01 crore shares have changed hands on the counter on the BSE and NSE till the time of writing of this report. So far in calendar year 2020, the stock has plummeted 22 per cent on the BSE, compared with a 3.6 per cent decline in the S&P BSE Sensex.