Investors hammer Tech Mahindra down 14%, Tata Motors 7% after poor results

Shares of Tech Mahindra and Tata Motors took a sharp beating on the bourses in early Wednesday trade, after both the companies reported disappointing fourth-quarter earnings a day before triggering sharp unwinding of positions by investors. Sharp fall in the stock prices weighed heavily on their respective indices on the BSE. IT major Tech Mahindra saw its share plunge 14 percent to touch the day’s low of Rs 550.10, Tata Motors eased to Rs 464, down nearly 7 percent from its previous close. At 10.37 am, shares of Tech Mahindra were trading at Rs 563.80, down 12 percent while Tata Motors was down over 5 percent at Rs 470.40. [caption id=“attachment_2264826” align=“alignleft” width=“380”] Reuters[/caption]As a result of the fall, the BSE IT index crumbled 1.34 percent or down 147 points to 10,810.46, while the BSE Auto index slumped 1.21 percent or 230 points at 18,841.84. While Tech Mahindra stock has gained nearly 5 percent in the month so far, Tata Motors shares have been down nearly 2 percent in the current month. Weighed down by cross currency movement, wage hikes and acquisitions, Tech Mahindra’s consolidated net profit for the quarter ended March dropped 23 percent year-on-year to Rs 614.2 crore against consensus estimates of Rs 724 crore. The company’s revenue during the quarter was up 21 percent on year at Rs 6,116.80 crore. Foreign brokerage CLSA in a post-earnings report said Tech Mahindra missed dollar revenues driven by loss of momentum in large telco accounts and significant EBIT margin slippage of 500 bps. The brokerage has maintained sell rating on the company while cutting target price by 4 percent. Kotak Securities, meanwhile, cut Tech Mahindra’s EPS (earnings per share) target by 9-12 percent amid disappointment on all counts. “Tech Mahindra disappointed with 1.7% revenue miss, 500 bps EBITDA margin contraction and 33% miss at the net profit level. The reason for the miss was all-round poor execution,” Kotak said. Similarly, Motilal Oswal downgraded the stock to neutral from buy and cut EPS by 12 percent. “While we expected tepid growth in telecom, sluggishness in manufacturing was a negative surprise, driven by aerospace and energy sub-segments,” the brokerage said in its report. Also, Barclays has maintained its underweight rating with a revised price target of Rs 545 from Rs 560. Automobile major Tata Motors, too, posted dismal fourth quarter earnings after the company reported lower-than-expected consolidated net profit at Rs 1,717 crore owing to lower-than-expected operating performance at Jaguar Land Rover (JLR) and mark-to-market (MTM) loss provisioning at JLR. However, the company’s consolidated revenue rose 3.5 percent on-year to Rs 67,576 crore on the back of increase in volumes and richer product mix in standalone business and JLR. Foreign brokerages Credit Suisse has cut Tata Motors’ target price to Rs 610 from Rs 620, while Barclays has slashed target price of Rs 685 from Rs 745.