The Hindu Business Line : Higher borrowing costs dent Tata Motors net

Mumbai, Jan. 31 Tata Motors on Thursday reported a 2.8 per cent drop in its third quarter stand-alone net profit, as high borrowing costs curtailed demand for vehicles.

Its profit during the quarter dipped to Rs 499 crore from Rs 513 crore in the year ago period. Other factors that pulled down the vehicle maker’s profits included high input costs and increased competition. The decline in profit was despite a 5.2 per cent rise in the revenues.

The revenues were Rs 7,251.83 crore as against Rs 6,895.75 crore in the corresponding period last year. The domestic sales volume for the quarter was 1,31,852 units, a one per cent increase from the year-ago period. The export volumes rose to 12, 756 vehicles compared to 11,610 vehicles in the year ago period, a rise of 10 per cent.

The consolidated profit showed 8.8 per cent increase, from Rs 602 crore to Rs 654.8 crore. The consolidated revenue surged to Rs 9,238.48 crore from Rs 8,179 crore, registering a growth of 13 per cent on a year-on-year basis

“The vehicle market continues to be impacted by interest rates. We are not seeing any respite. Margins will be under pressure in the medium term due to overall high commodity prices,” Mr Ravi Kant, Managing Director, said.

Fund withdrawals

He said banks had become “selective” in car financing, which was leading to withdrawal of finances. This, in turn, was causing “stress in the market”.

The company said there had been a loss of market share due to new entrants and delays in some of the company’s product introduction.

Mr Rajiv Dube, President, Passenger Car Business Unit, Tata Motors, pointed out the financial year started with eight models in the small car segment. “But today there are 14 models. Even the appeal of some of the new models is short-lived,” he said. In the nine-month period, the market share in the core business of the commercial vehicle segment has slightly slipped to 63 per cent from 64.8 per cent.

The company hopes the ongoing cost reduction initiatives and new product launches will help improve performance. Tata Motors’ new launches in the last quarter include new Safari DICOR, Sumo Victa Turbo DI, Indica V2 Turbo, a 9-tonne fully built tipper, a 16-tonne tipper, 31-tonne and 25-tonne multi-axle trucks and tippers.

Tata Motors shares close at Rs 706 on BSE on Thursday, up by 1.44 per cent from its previous close.

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