Tata Motors shares tank over 8 per cent amid shortage of chip supply

New Delhi: Shares of Tata Motors on Tuesday went into a tailspin erasing early gains and closed over 8 per cent lower.

Fag-end selloff emerged at the counter and the stock closed 8.41 per cent lower at Rs 316.95 on the BSE.

The stock started the trade in the green and gained 3.48 per cent to Rs 358.10 during the day. After the selloff emerged, it tanked 9.99 per cent to the day's low of Rs 311.45.

On the NSE, the stock closed at Rs 316.90, down 8.43 per cent wiping out initial gains.

In traded volume terms, 73.77 lakh shares were traded at the BSE and over 16.40 crore units at the NSE during the day.

Tata Motor's owned Jaguar Land Rover (JLR) on Tuesday reported a 68 per cent increase in retail sales for the first quarter ended June 30 at 1,24,537 units as compared with the same period of the previous fiscal.

The company had retailed 74,067 units in the April-June quarter of 2020-21.

However, wholesales, in particular, were lower than demand would have permitted due to semiconductor supply issues affecting the global auto industry, JLR noted in a statement.

Looking ahead, the chip shortage is presently very dynamic and difficult to forecast, the company said.

Based on recent input from suppliers, the automaker now expects chip supply shortages in the second quarter ended September 2021, to be greater than in the first quarter, potentially resulting in wholesale volumes about 50 per cent lower than planned, it added.

"We expect the situation will start to improve in the second half of our financial year. However, the broader underlying structural capacity issues will only be resolved as supplier investment in new capacities comes online over the next 12-18 months and so we expect some level of shortages will continue through to the end of the year and beyond, " JLR said.

While the present supply constraints continue, the company will continue to prioritise production of higher-margin vehicles for the chip supply, it added.

"In the scenario above, we expect an operating cash outflow of about 1 billion with a negative EBIT (Earnings before interest and taxes) margin in the second quarter and a substantial improvement in underlying* operating cash flow in the second half of the financial year as chip supply improves," the automaker noted.

"Tata Motors plunged over 8 per cent due to semiconductor shortage issue and expectation of negative EBIT margin by JLR," said Mohit Nigam, Head - PMS, Hem Securities.