The Hindu Business Line : Analysts divided over impact

Mumbai, Jan. 3 With Ford announcing Tata Motors as the preferred bidder for taking over ‘Jaguar’ and ‘Land Rover’ cars, analysts are divided over the possible impact the move could have on the stock performance of the Indian company.

However, an immediate impact could be ascertained from the ADR movement at the New York Stock Exchange. At 8.50 pm IST, the Tata Motors ADR was up 2.11 per cent at $19.86 and in fact, the biggest gainer among the listed ADRs in the US bourses. It also clocked volume of 2.71 lakh ADRs.

Negative impact

Some analysts expect the takeover to have a negative impact on its balance sheets, leading to the stock underperforming at least in the short term.

IDFC SSKI analysts, Mr Ramnath S and Mr Ashish Shah, ‘see a downside of 48-65 per cent’ to their FY09 earnings estimate for Tata Motors.

“The excess debt on the balance sheet will act as a negative trigger for the stock, ” said Mr Navin Matta, Auto Analyst, with the Mumbai-based Dolat Capital Markets Ltd.

Shareholder value

However, Mr Vishwas Agarwal, an independent technical analyst, believes that the move could significantly enhance shareholder value and hence help the stock to open with a positive gap in subsequent trading sessions. The stock could see a similar trading pattern to what was witnessed post the Tata-Corus deal last year, he added.

Flat movement

Ever since Tata emerged as the front runner for the deal in mid-November last year, the performance of the company scrip on the bourses has been flat. It is only in the last one week that the stock picked up momentum.

On a week ago basis, the scrip has gone up by 7.81 per cent higher on the BSE. Today, the stock closed almost unchanged, clocking a 0.01 per cent rise to Rs 794.25 on the BSE.

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