Tata Motors narrows Q3 losses quarter-on-quarter as chip shortage eases

It is optimistic of being a net debt-free company by 2024

Tata Motors pared its consolidated loss quarter-on-quarter in September-December 2021 as better availability of semiconductors is helping Jaguar Land Rover (JLR) ramp up production, the company said on Monday.

The Tata group flagship reported a net loss of Rs 1,451 crore in the quarter ended December 31, 2021. This is narrower when compared with a Rs 4,415-crore net loss in the September quarter. For the year-ago quarter, it had posted a net profit of Rs 2,941 crore.

Revenue from operations during the three-month period declined 4 per cent year-on-year (YoY) to Rs 72,229 crore against Rs 75,653 crore in the corresponding period, the company said.

“We are seeing all businesses starting to improve sequentially. As the semiconductor crisis eases and commodity prices stabilise, we should see a strong Q4 and beyond.” said P B Balaji, group chief financial officer (group CFO), Tata Motors, in a post earnings call.

Notwithstanding all the disruptions, Tata Motors is optimistic of being a net debt-free company by 2024, he said. This will be driven by a positive cash flow coupled with monetisation of non-core assets and pumping in top-up equity as and when required, he said. 

“We are confident of getting there,” said Balaji.

At the end of the third quarter, Tata Motors automotive net debt stood at Rs 60,000 crore, down from Rs 64,000 crore in Q2 of FY22 and Rs 61000 crore in Q2 of FY21.     

Meanwhile, the transformation programme embarked upon by the firm a year ago, delivered £1 billion of value year-to-date. It is now expected to achieve £1.4 billion of value in FY22, beating the company’s target of £1 billion.

Dented by the chip shortage, JLR’s retail sales declined 37 per cent YoY to 80,126 in the December quarter. With the chip supply situation gradually improving, production volumes jumped 41 per cent to 72,184 units over the second quarter of FY22. The sequential improvement reflected in the earnings. 

While the revenue at £4.7 billion, was up 22 per cent sequentially, a rich product mix bumped up the EBIT (earnings before interest and tax), masking the low volumes. It reported an EBIT of 1.4 per cent in the December quarter of FY22 from a negative 4.7 per cent in the previous quarter.

JLR’s order book hit a record of 155,000 units, up 30,000 sequentially, reflecting strong demand for the New Range Rover, the company said.

“We believe lower capex and the government’s stimulus would support JLR, improving passenger vehicles’ business and focus on cost control would improve the standalone margin. Moreover, tight control on capex and R&D would lower its automotive debt to a greater extent over the next 2-3 years,” wrote Mitul Shah, head of research at Reliance Securities.

Revenue for the India business during the quarter rose 43.3 per cent to Rs 2,959 crore while EBITDA margin fell 350 basis points to 3.3 per cent. 

For the India business, both revenues and market share have grown YoY but the company needs to rein in the cost inflation, said Balaji. He added that with steel prices stabilising, the company expects profitability to improve.