Tata Chemicals shares fall over 4% on first-ever quarterly loss in nine years; Kotak Equities screams sell

Tata Chemicals reported a consolidated net loss of Rs 850 crore in the quarter ended March 31, compared to a profit of Rs 709 crore a year ago.

“The company reported weak earnings for 4QFY24, as expected, amid pricing pressure on soda ash across geographies. Earnings seem likely to remain near current run-rates through most of FY2025 in the context of continued oversupply; the large impairment charge in the UK is perhaps an indication,” said a report by Kotak Institutional Equities.

The primary reason for the earnings to stay near current run rates, says KIE, is that US and UK domestic volumes have already contracted for CY2024, while US export volumes have contracted by more than 80% for 1HFY25. The US alone accounts for around 60% of TCL’s global soda ash sales volumes.

The world soda ash market remains oversupplied; while management suggested that prices have bottomed out, there are no signs of any meaningful recovery for now, KIE added.

“Despite the collapse in earnings (down from Rs91.7 in FY2023 to an estimated Rs 25.9 for FY25), the stock has held up surprisingly well, perhaps on hopes of an IPO of Tata Sons—which, however, does not seem to be happening, given news that Tata Sons is working on repaying debt to avoid going public. Any hopes around a large expansion into battery chemicals seem misplaced as well,” said Jaykumar Doshi of KIE.

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