Tata Motors Net Skids 96% in Q3 as JLR Disappoints
Net down to .₹ 112 cr as lower wholesale volumes of UK luxury car unit hurt; revenue falls 4% to .₹ 68,541 cr
Mumbai: Tata Motors, India’s biggest vehicle maker by revenue, on Tuesday posted a 96% drop in thirdquarter consolidated net profit, hurt by lower wholesale volumes at Jaguar Land Rover and higher expenses.
The company posted a net profit of .₹ 112 crore for the October-December period compared with .₹ 2,953 crore a year earlier. Revenue fell 4% to .₹ 68,541 crore.
Net profit for JLR fell 62% to £167 million (.`1,400 crore). The UK-based luxury car unit has propped up Tata Motors’ consolidated results in recent years, offsetting weak numbers in the home market of India, and its latest performance is a worrisome development for the parent.
Tata Motors’ standalone net loss widened to .₹ 1,046 crore from .₹ 137 crore a year earlier. The results were announced minutes before market closure. The stock instantly fell more than 7%, before paring some of the losses and closing still 3.7% lower at .₹ 486.8 on the BSE, where the benchmark Sensex barely changed.
Consolidated earnings margin before interest, tax, depreciation and amortisation narrowed to 8.9% from 13.8% a year earlier. At JLR, the margin fell to 9.3% from14.4%, while on a standalone level, the decline was to 1.5% from 6%.
Chief financial officer C Ramakrishnan called it “a disappointing quarter”. “It was a quarter with certain headwinds in the JLR business,” he said in a post-results meet. Some variable marketing spending increased and some products such
as the Land Rover Discovery ran out of production, he added.
The rise in the costs led to a 31% increase in the company’s other, or non-core, expenses to .₹ 18,834 crore. Ramakrishnan, however, said “the fourth quarter (January-March) will definitely see an improvement in margins (for JLR), and hopefully on the back of the new launches, we should up the levels of margins.”
Wholesale volumes of JLR (excluding its China venture) in the past quarter fell 5% to 130,910 units.
Weak sales at Tata Motors’ biggest money spinner come in the midst of apprehensions stemming from a potential tax to be levied in the US by the Donald Trump government on imported cars and the UK’s exit from the European Union. JLR manufactures most of its products in the UK and sells those in 160 countries.
“Any of these trade barriers or duties will affect the JLR business but it will be premature to critique the impact right now,” said Ramakrishnan. “We are watching this space and closely monitoring the situation. We may have some counter measures but it is early to speak of them right now.” Tata Motors domestic commercial vehicle sales dropped 4.1%. In that, sales of medium and large commercial vehicles declined 9%.
Ravi Pisharody, executive director for commercial vehicles, said demonetisation had a major impact, with commercial vehicle sales falling over 35% in November, month-on-month as well as in comparison with the same month the year before. The government had announced the note-recall on November 8. However, the effect has reduced now and that the situation will improve further, he added.