Tata Motors Share Price Falls 5% After JLR Lowers Margin & Cash Flow Outlook for FY26
Tata Motors share price took a sharp hit on Monday, June 16, falling over 5% intraday after its UK-based luxury car subsidiary Jaguar Land Rover (JLR) reported a weaker financial outlook for FY26. This includes significantly reduced EBIT margins and flat free cash flow projections, raising concerns among investors.
At 12:02 PM IST, shares of Tata Motors were trading at ₹683.40, down ₹28.65 or 4.03% on the NSE. Earlier in the day, the stock had slipped as much as 5.2% to ₹674.70 on the BSE, becoming the top loser on the Nifty 50 and Nifty 500.
🔻 Why Did Tata Motors Shares Fall?
The fall in Tata Motors stock price is directly tied to an announcement from JLR, which contributed around 70% of Tata Motors' revenue and 80% of its profitability in FY25. JLR shared its FY26 financial outlook, projecting:
- EBIT margin between 5% and 7% (down from 8.5% in FY25)
- Free cash flow to be "close to zero" in FY26 (vs £1.5 billion last year)
This sudden drop in expected profitability has alarmed shareholders, especially considering that JLR is the growth engine for Tata Motors.
📊 Tata Motors Share Price and Technical Analysis
The tata motors share price has been volatile in recent months. As of June 16, it trades at ₹683.40, significantly lower than its 52-week high of ₹981. Analysts have noted that the tata motor share has declined 28% over the last 12 months, although it's still up 75% over the last three years.
Key Support Zone: ₹665–₹675
Resistance Level: ₹705–₹720
If the stock fails to hold the ₹665 support, it could test lower levels near ₹640. However, some market experts view this as a short-term correction triggered by JLR’s cautious commentary.
📉 What JLR Said: Margin, Cash Flow, and China Strategy
According to JLR's management, FY26 will see slower financial momentum. However, they have outlined medium-term goals:
- Targeting EBIT margin improvement back to 10% (timeline unspecified)
- Free cash flow rebound expected in FY27 and FY28
- Growth focus in China through licensing of the Freelander model to its local JV
The first China-manufactured Freelander SUV is expected to arrive in the second half of FY26. JLR continues to hold its leadership in the premium market and was No. 1 in May despite broader headwinds.
📦 Revenue Still Solid, But Pressure is Visible
In FY25, JLR posted:
- 71% contribution to Tata Motors' revenue
- 80% of the company’s overall profitability
- Flat average revenue per unit above £70,000
This shows that volumes were healthy but margin compression is a concern. The reduction in EBIT margin guidance reflects rising costs, tariffs, and flat pricing power in premium markets.
📢 Tariffs & Global Trade Impact
The company also mentioned ongoing engagement with the Trump administration regarding the UK–US trade deal, which may reduce tariffs from the current 27.5%. However, tariffs on products from Slovakia remain unchanged, posing another headwind for JLR exports.
🔐 Moody’s Reaffirms Tata Motors Rating
Despite the stock fall, Moody's Ratings reaffirmed Tata Motors’ Ba1 Corporate Family Rating (CFR) and maintained a positive outlook. The rating agency also upgraded JLR’s rating from Ba2 to Ba1, citing:
- Improving credit profile of both Tata Motors and JLR
- Strong promoter backing from Tata Sons
- Disciplined financial policy and global brand presence
Moody’s also mentioned Tata Motors’ plan to demerge its commercial vehicle (CV) business into a separate listed entity by October 2025. Post-demerger, Tata Motors will fully own JLR and PV businesses, with JLR expected to contribute over 90% of consolidated EBITDA.
📌 What Should Investors Do?
The recent correction in tata motors share is a response to near-term concerns around JLR’s performance. However, there are long-term positives to consider:
- Resilience in JLR sales volumes
- China expansion via local JV
- Continued premium segment dominance
- Strong credit ratings and promoter confidence
Analysts suggest watching the ₹665 support zone. A sustained breach could signal further downside. On the upside, if the stock recovers above ₹700 with volume, it may resume its medium-term uptrend.
📢 Expert View
Kaustubh Chaubal, Senior VP at Moody’s Ratings, said:
"The affirmation reflects the sustained strengthening in TML's consolidated credit profile driven by gross debt reduction and earnings expansion, which are accelerating deleveraging even as the global automotive industry faces challenging conditions."
Moody’s noted the potential for “extraordinary support” from Tata Sons if required, which adds a level of comfort for long-term investors.
🔍 Conclusion: Tata Motors – Buy the Dip or Wait?
The sharp fall in the tata motors stock may be a knee-jerk reaction to JLR’s FY26 guidance. While near-term volatility may persist, Tata Motors remains a strategically strong player with robust fundamentals, strong promoter backing, and long-term potential in both the Indian and global auto sectors.
Long-term investors can consider accumulating in staggered fashion near support zones, while short-term traders should wait for trend confirmation.
Disclaimer: This blog is for informational and educational purposes only. It is not investment advice. Please consult your financial advisor before making any investment decisions.
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