Shares for Tata Motors witnessed a fall to three year low on Monday. The auto sector in India is struggling with rising input costs, hike in fuel prices, rising inflation and interest rates. Moreover, the sector witnesses a further slump in demand for automobiles which reflects poor sales on the balance sheets.
The share prices fell 5 percent to Rs. 426.50 after the news on overrun costs on Nano project along with large overseas fund raising plans and poor outlook on sales of commercial vehicles.
Tata has recently purchased luxury brands like Jaguar and Land Rover which requires the company to raise $1.7 billion from three rights issues as well as raise $400 million from overseas equity issues.
"There is significant pressure from all sides," said V.G. Ramakrishnan, director of Frost & Sullivan's automotive and transportation practice. "For Tata, because of everything it has on its plate, and for the industry as a whole, the optimism we had even six months back has receded because of high oil prices and the impact of inflation and interest rates," He also expects commercial vehicle sales will be flat to slightly negative in 2008/09.
