The much-awaited deal between Tata Motors Ltd (TML) and the struggling American auto giant Ford finally saw the light of day on Wednesday, but the stock of the company was always on the investors? radar ever since the company showed its intentions to acquire the brands Jaguar and Land Rover (JLR).
Even as the news of the deal was buzzing in the market on Wednesday, the stock of the company kept fluttering in a range of Rs 40, touching a high of Rs 690 and a low of 651.10 to finally close the day at Rs 679.40. Around 6.7 lakh shares exchanged hands against the previous two-week average of 1.75 lakh shares, as the stock marginally lost Rs 0.55 or 0.08% with respect to its previous day?s close.
As the company showed its intentions for acquiring the brands, investor sentiment appeared to be dampened, as the market turned cautious of the nature of the deal and the stocks of the company witnessed some volatile days in an already troubled secondary market. Following the Tata Group making its interest in JLR public on August 26, 2007, the traded volumes of the stock shot up way above its daily average of around two lakh shares. On the next two subsequent days, around 11 lakh shares of the company were traded. The stock reached its 52-week low of Rs 535 on January 22. The company lost more than 30% since it attained its peak on January 3.
Vaishali Jajoo, senior research analyst, Angel Broking said, ?The uncertainty in the deal had led to some apprehensions in the investor?s mind ever since the announcement was made by the company. Also, the cash flows after the deal would reflect on the balance sheets of the company and the exact structure of the deal would decide the fate of the stock in the days to come. However, the stock has lost a lot since the meltdown and further fall seems to be limited.?
On the future prospects of the counter, Abhishek Gaonshinde, automobile analyst, Almondz Capital Markets, said, ?The stock will be watched, as the buy will put pressure on the balance sheet and earnings of the company in the short-term because it will increase the interest burden. We still have to see the structure of the deal and payback time for the loans. But in the long-term, it will enhance Tata Motors? portfolio with the luxury brands and there will be technology benefits.?
According to a press release by the company, the transfer of ownership to Tata Motors is expected to close by the end of the next quarter, subject to applicable regulatory approvals.