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TataMotors Drops 11%, One-Timers in Results

Tata Motors crashed over 11% today. It seems markets didn’t like their results, which showed a doubling of profits on a year-on-year basis.

Consolidated profits were at Rs. 13,516 crores (Rs. 135.16 bn) a good 45% above last year’s profit of Rs. 9,274 cr (92.74 bn). The EPS went up 40% at 40.81 from 29.06. But much of this was due to a tax credit of Rs. 1,826 cr., a one-time item. At a more normal tax rate of, say, 20%, the EPS growth would reduce to about 10%.

They also added about Rs. 660 cr. (66 bn) to the profits in the December quarter (and potentially, some more in the March quarter) in amortization. Currency losses in foreign currency loans were otherwise supposed to be accounted for by the end of the year, but a change in laws on December 29, 2011, allowed companies to charge such losses over the remaining period of the loan instead. That’s another one-off item this year.

Further, margins on JLR were lower than expected, with flattening global sales and combined with sluggish growth in India, the outlook dropped further. Tata Motors has some FCCBs due in 2012 as well.

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A small part of the down gap opened on 16 may remains unclosed (284 to 292) and that will be the upside resistance, while the next big technical support way below at 216 or so. It’s broken a strong support at the 260 levels which corresponded to at least two earlier highs or lows.

The volumes indicate this wasn’t an ignorable fall; more likely than not, there will be heavy movement in this stock in the next few days.