Robust festive demand and new launches helped the country’s largest automotive company, Tata Motors, to swing to a third-quarter net profit of Rs 400 crore. The company had made a net loss of Rs 263 crore in the three months ending December 2008.
The results, however, fell short of market expectations, with high input prices eating into the margins. The company had recorded a net profit of Rs 729 crore in the second quarter.
The demand pattern of both commercial vehicles (CVs) and cars was severely affected during the third quarter of last financial a year after the global economic recession began. The company was also forced to observe plant closures.
Volumes from CVs led the growth, with a rise of 89 per cent to 93,520 units, while passenger vehicle sales grew by 46 per cent to 61,593 units. Net sales grew 89.45 per cent to Rs 8,929 crore for the reporting quarter, against Rs 4,713 crore posted in the same quarter last year.
The company stated that prices of commodities such as steel, aluminium and rubber had created an impact on the margin, with the cost of raw material consumption going up by 68 per cent to Rs 4,984 crore. It says if the trend continues, this could further impact margins.
It has already raised prices by one per cent on CV’s and of Rs 1,500-3,500 on passenger vehicles like cars and SUVs, with effect from this month. Said C Ramakrishnan, chief financial officer: “Today’s decision by the Reserve Bank of India to hike the CRR (cash reserve ratio, for banks) will have an impact on vehicle demand. Besides, withdrawal of the stimulus package, lack of clarity on emission norms and commodity price hikes will have an impact on the performance.”
The notional exchange loss on revaluation of foreign currency in the reporting quarter shrank to Rs 24 crore, against Rs 225 crore in last year’s quarter, further boosting margins.
Tata Motors is gearing up to launch three more cars in 2010. It is in the final stages of starting production of the Nano car at the Sanand facility in Gujarat. The machinery has been put in place and production is expected to begin before the end of March. The company is targeting a further increase in production of the mini car to 200 units per day from 180 units per day from the existing site in Uttarakhand, an excise-free zone. So far, 17,537 units of the car have been delivered to their customers.
Ramakrishnan also stated the management was looking at bringing down the debt to equity level further through various means, including unlocking value at some of its holdings in group companies. Currently the ratio is 1.44, down from 1.6 recorded at the end of September 30, 2009.
