Rekha Jhunjhunwala May Exit Tata Motors: Shares Fall 4%

Seasoned investor Rekha Rakesh Jhunjhunwala might have exited her position in Tata Motors, a leading company in the automobile sector, as indicated by her absence from the latest key shareholders’ list. Her potential exit follows a remarkable holding period during which the stock delivered substantial returns.

According to the company’s most recent filings, Jhunjhunwala was not listed among the shareholders who hold more than one percent of the company as of September 30, 2024. Previously, she owned 4,10,29,000 shares, or 1.11% of Tata Motors, as indicated in a filing from September 1, 2024. This absence suggests she may have divested her stake in this quarter.

Tata Motors, known for its significant presence in the automobile industry, saw its shares decline by 4% on the trading day to Rs 893.90. The stock had closed at Rs 928.10 on the previous day. The market capitalization of Tata Motors has now dipped below Rs 3.3 lakh crore.

Initially, the stock was acquired by the late investment tycoon Rakesh Radheshyam Jhunjhunwala, who purchased 4,00,00,000 equity shares in the third quarter of 2020. Following his passing, Rekha Jhunjhunwala maintained the position until the recent development seen in the latest corporate filing.

The disclosure of major shareholders is a requirement for all public companies at the end of each quarter, and only those holding more than one percent are specifically named. Consequently, a reduction in stake below this threshold does not necessitate disclosure, leading to the absence of certain investors’ names from the list.

Tata Motors’ subsidiary, Jaguar Land Rover (JLR), reported a 3% decline in retail sales during the second quarter of FY25, with sales dropping to 1,03,108 units compared to the same period last year. For the first half of the fiscal year, however, JLR saw a 3% increase in retail sales to 2,14,288 units year-on-year.

Production constraints were apparent, as Q2 FY25 production was limited to 86,000 units, a 7% decrease from the previous year. This decline was attributed to disruptions in aluminum supply during the first quarter, impacting overall performance and stock valuation.

Analysts have mixed perspectives on Tata Motors’ outlook. While Jaguar Land Rover has shown potential for recovery in upcoming quarters, as noted by analysts, challenges linger due to divergent market conditions, especially when compared to other luxury segment peers. Motilal Oswal expects the JLR division’s margins to endure pressure from rising costs between FY24 and FY26, and anticipates flat margins for Tata Motors’ Indian operations.

Emkay Global remains positive about Tata Motors, reaffirming a ‘buy’ rating with an unchanged target price of Rs 1,175. The firm notes structural improvements across operational parameters at JLR and projects the company to become net-debt free by FY25E, further buoying its positive outlook on the firm.

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