Tata Motors Q3 profit jumps three-fold to Rs 4,805 cr

Profit boosted by strong demand for its luxury Jaguar Land Rover vehicles

Exceptional income from the stand-alone business and continued strong performance by Jaguar Land Rover helped Tata Motors nearly treble net profit and exceed analysts’ estimates in the third quarter financials.

Consolidated net profit of the Mumbai-based company stood at Rs 4,804.80 crore for the quarter ended December 31, an increase of 195 % as compared to Rs 1,627.50 crore reported by it in the quarter previous year.

Net sales at the consolidated level stood at Rs 64,377.64 crore, a growth of 37 % as against Rs 47,054.26 crore reported in the same quarter a year earlier.

The company divested stakes in Tata Daewoo Korea, PT Tata Motors Indonesia, Tata Motors South Africa to raise Rs 1947.9 crore, as part of its restructuring exercise. There was also a tax reversal credit during the quarter of Rs 630 crore.

This helped the stand-alone business report a profit of Rs 1,251.4 crore for the reporting quarter, which otherwise would have reported a loss of Rs 1,200 crore, its biggest quarterly loss ever, say company officials.

Tata Motors stand-alone EBITDA margins were negative at 4.3 % during the quarter. Net sales during the quarter stood at Rs 8458 crore, a drop of 27 % as against Rs 11584 crore reported in the same quarter last year. Net loss for the same quarter last year stood at Rs 458.49 crore.

Vehicle sales slumped sharply to 132,087 units, a fall 36 % during the quarter as compared to 205,291 units. Competition has eaten into Tata Motors market share in the passenger vehicle segment reducing it to just 6%, its worst ever.

In the second quarter Tata Motors had broken stand-alone financial records returning with a operational loss of Rs 804 crore, its fourth straight quarter loss.

C Ramakrishnan, chief financial officer, Tata Motors said, “Market conditions remain depressed during the quarter putting pressure on operations. Operating performance continues to remain a concern at the stand-alone level. This is expected to continue for at least a couple of more quarters.

Prolonged slowdown in economic activity, subdued infrastructure activity, tight financing environment, weak operating economics for transporters due to lower fleet utilization, stagnant freight rates combined with frequent diesel price increases and lower vehicle resale prices, continues to impact the demand for the entire auto industry in general and CV in specific, the company stated.

The sale of stakes in foreign subsidiaries to cash-rich, Singapore-based TML Holdings, which also owns Jaguar Land Rover, will lighten Tata Motors books and is part of a restructuring exercise.

Meanwhile Jaguar Land Rover, remained unaffected and continued to post stellar growth with doubling of profits in the three months. For the reporting quarter the two brands reported Pound 619 million (Rs 6,300 crore), as compared to Pound 296 million (Rs 3000 crore).

EBIDTA margins at 17.9 % for the quarter was led by a richer product mix supported by launch of new Range Rover Sport, new Range Rover and Jaguar F-TYPE, richer geographic mix with increased volumes in emerging markets.

China remained its biggest market consuming one new vehicle out of every four built. Tata Motors has thus decided to accelerate global expansion, announcing a Pound 240 million (Rs 2500 crore) investment in a manufacturing facility in Brazil having annual capacity of 24000 units.

Tata Motors has hiked the capital spending in JLR next year to Pound 3.5-3.7 billion (Rs 35,700-37,800 crore) from the current Pound 2.75 billion (Rs 28,000 crore). Going forward this could increase further.

JLR had cash and financial deposits as of December 31 of Pound 3.2 billion (Rs 32600 crore) and undrawn long term committed bank lines at Pound 1.3 billion (Rs 13200 crore). In December, JLR issued a new $700 million (Rs 4300 crore) bond at 4.125% due in 2018. In January 2014, the company issued a new Pound 400 million (Rs 2500 crore) bond at 5.0% due in 2022.

“Alongside the January bond issue, Jaguar Land Rover made a tender offer for all of the Pound 500 million 8.125% bonds due 2018 and all the $410 million 7.75% bonds due in 2018. Subject to market conditions, it is the intention of the company to redeem the remainder of the above bonds on or before May 2014”, the company stated.

At the stand-alone front the company is banking on new model launches both in the passenger and commercial vehicle segment to arrest the declining sales. New hatchback, sedan, trucks and buses, it said, will hopefully lead to a reversal in demand.