The Hindu Business Line : Tata Motors posts 50 pc rise in third quarter net

TATA Motors Ltd today reported a 50 per cent increase in profit after tax at Rs 316.21 crore for the quarter ended December 31, 2004, from the previous corresponding Rs 210.88 crore.

Backed by a 26 per cent growth in vehicles sales to 98,662 units (78,380 units for the year ago period) its net sales gained by 28 per cent to Rs 4,364.94 crore (Rs 3,399.60 crore).

The company has cautioned of continued pressure on margins from high input costs. Further, costs related to complying with new emissions norms, safety standards, lighting and NVH norms — all would impact from April, when related laws take hold.

At a press briefing, senior officials declined comment on the extent of rise in production cost due to these norms and the likelihood of vehicle prices going up as a result. Mr Ravi Kant, Executive Director, pointed out that truck prices were hiked by 2.5-3 per cent in January but there is a limit to what can be passed on to the market. "Content is going up in all cars,'' Dr V. Sumantran, Executive Director, said. Interest rates firming up were not seen as a threat to vehicle sales as rates had dipped steeply over time.

"Fourth quarter too will see margin pressure,'' Mr Praveen Kadle, Executive Director, said. The company has teams examining further cost reduction and related avenues such as value engineering, supplier partnering and e-commerce. Notwithstanding all this, Tata Motors is on schedule to meet the new regulations.

The industry's rendezvous with April's costly norms could see vehicle purchases being advanced to the fourth quarter resulting in a weak first quarter for FY06. However, there is reason to suspect that truck sales growth, which saw a good first quarter, slipped in second quarter and picked up in the third, may yet sustain, albeit at slackening rates. Domestic truck penetration has a direct correlation with road density. The pace of road building had weakened in the recent past and the Golden Quadrilateral is behind schedule. Pick up in that should influence the traditional truck sales cycle. "The other joker in the pack is fuel price,'' Mr Ravi Kant said.

The company's cars will shortly debut in Turkey. There is a MoU in place with China Brilliance and studies are on to see how best an entry into China can be made. For the nine-month period, Tata Motors had a profit after tax of Rs 848.78 crore (Rs 517.87 crore) on net sales of Rs 12,086.07 crore (Rs 9,079.77 crore).

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