Tata Motors, India's largest automobile company by revenue, today posted a drop of 50 per cent in net profit for the last financial year as demand for heavy trucks, its high margin segment, contracted drastically.
This is the lowest net profit reported by the company in the past five years. In 2003-04, the company had posted Rs 810 crore as net profit.
The company, which chose not to disclose its fourth quarterly results separately, posted a net profit of Rs 1,001 crore for the year ended March 31, 2009 as against Rs 2,028 crore reported in the previous year.
Owing to the downturn, Tata Motors has also shrunk its capital expenditure (capex) by about 37 per cent to Rs 2,500 crore for the next two years, from Rs 4,000 crore.
Ravi Kant, managing director, Tata Motors, said, "None of the vehicle development programmes have been significantly impacted, but there are a few projects that have been put on the back-burner for the time being."
Net sales of the company for the reporting year dipped by 14 per cent to Rs 28,292 crore, as compared to Rs 32,885 crore posted in the previous year.
Commercial vehicles like trucks and buses contribute 60 per cent to the top line of the company, while passenger vehicles like cars and utility vehicles contribute the balance 40 per cent.
Raw material consumption and other similar expenses were reduced by a considerable extent following plant shutdowns in Jamshedpur, Lucknow and Pune last year.
Company executives said that some revival is expected in the upcoming months based on improved conditions during the last few months.
"Barring heavy trucks, all segments have done very well recently and we are hopeful that the trend will continue," Kant told reporters.
For reducing the burden on the books of the company, it will reduce its vehicle finance portfolio on stand-alone books, but it will continue with disbursals from its other subsidiaries, like its vehicle finance company Tata Motors Finance (TMFL).
Senior executives said that the vehicle finance size has been reduced to Rs 7,400 crore, of which Tata Motors has a share of Rs 2,000 crore, while TMFL has Rs 5,400 crore.
In addition, the company will reduce its costs by Rs 1,000 crore over a period of three years. It also hopes that raw material costs will roll back to 2008 levels.
Regarding the small car Nano, the company reiterated that deliveries will take place in July as per schedule. Production of the car is being carried out at Pantnagar plant in Uttarakhand currently.
Kant added, "The Sanand plant (in Gujarat) will start its trial production by the end of this (calendar) year while commercial production will commence by the first quarter of next calendar year."
Thereafter, production will be ramped up, possibly to the plants' initial full capacity of 250,000 by the second or third quarter of the next financial year.
Furthermore, the company is also focusing on unlocking the value of its holding in some of its companies to reduce the debt component. Presently the debt to equity ratio is almost 1:1.
C Ramakrishnan, chief financial officer, Tata Motors, said, "Volumes had reduced in domestic as well as in the export market. Input prices peaked last year although a softening was seen recently. The slowdown and liquidity crisis had put pressure on working capital requirement."
The company further hopes that newer launches in the commercial vehicle and passenger vehicle segment will revive demand.
New vehicle emission norms (Bharat Stage IV), set to kick in by April 2010, will also prepone sales, company officials said. Demand for inter-city as well as intra-city buses is also expected to go up due to the JNNURM programme initiated by the government.
Tata Motors will launch the new Indigo, Fiat Grande Punto and the Jaguar and Land Rover (JLR) range during this financial year. The company aims to have dealerships for JLR in five-six key cities in the coming period.
The company also said that it is in discussions with the government to supply armoured Land Rovers to the armed forces. Technical teams of both Tata Motors and Land Rover have held discussions on the issue already.
It will also present the consolidated results of JLR by the end of next month.
