Amid rising debt and a demand disruption because of the Covid-19 pandemic, the India business of Tata Motors has no value, a CLSA report has said.

The brokerage has forecast that Tata Motors’ plan to deleverage will be delayed by four to six quarters as automobile demand has been adversely affected by the pandemic. CLSA analyst Amyn Pirani has further said that the overall net debt at the company will rise from Rs 28,400 crore in 2018-19 to Rs 68,100 crore in 2021-22.

Shares of Tata Motors on Tuesday ended marginally higher at Rs 86.15. The forecast for the home grown auto firm comes days after it had to withdraw a Rs 1,000 crore non-convertible debenture issue. The company had cited higher cost expectations from market participants because of the tight money market conditions.

“Land Rover’s (JLR) cashflow should recover in 2021-22, but its India business will remain free cash flow (FCF) negative… JLR is the only driver of its valuation, we assign zero equity value to the India business,’’ the report said.

The brokerage has now downgraded the Tata Motors stock to underperform from buy and cut the target price by 55 per cent to Rs 85 from Rs 190.

The brokerage is not alone in raising concerns about the company’s cash flow. Last month, the international rating agency Fitch had downgraded the ratings of Tata Motors citing severe free cash flow issues. Apart from downgrading the ratings to B, it also revised the outlook to negative from stable.

“The downgrade reflects our significantly lower expectation for the company's profitability and cash flow over the next few years due to the effect of the coronavirus pandemic,” Fitch said.

in the note. on demand and disruption to its domestic operations as well as to key auto markets globally that are served through JLR,

On the impact of the pandemic on its free cash flow, the agency estimated that it could be a negative Rs 40,000 crore in the first quarter of this fiscal due to lower earnings and working capital mismatch caused by lower sales receipts, while payments continue to suppliers for past supplies. This is against Rs 63,000 core of free cash flow in the same time in 2018-19.

While Tata Motors is yet to declare results for the fourth quarter ended March 31, 2020, operations at its plants in India are yet to resume. Maruti Suzuki today said that it has resumed operations at its Manesar unit in Harayana and that the plan is to initially operate on a single shift.

However, JLR had announced plans to resume production at some of its factories, including Solihull and Wolverhampton in the West Midlands region of England, from May 18.