The Hindu Business Line : Other income, lower tax outgo cushion Tata Motors profit

Tata Motors reported a 30 per cent decline in profits on net sales growth of 14 per cent in the first quarter. The rise in revenues was driven by a 7 per cent increase in prices, though total volumes grew by a subdued 4 per cent during the same period.

Higher other income

The fall in net profits for Tata Motors could have been sharper, but for a huge rise in ‘other income’ from Rs 86 crore to Rs 316 crore in the June quarter of this year. Out of this, about Rs 114 crore came from partial divestment of its stake in Tata Autocomp Systems, an associate company. In fact, a one-time income from divestment of its stake in HV Axles and HV Transmissions had cushioned the earnings in the immediately preceding quarter as well. Apart from ‘other income’, lower tax outgo has also come to the company’s rescue.

Tax incidence lower

Higher dividend income (typical of the first quarter) and weighted tax deductions on product development and engineering expenses have partly contributed to the lower tax incidence. The company also had an incremental saving of about Rs 30 crore during this quarter due to its cost reduction initiatives.

Margins under pressure

Going forward, high costs of inputs like steel and aluminium may continue to affect operating margins. Increased interest costs arising out of money borrowed for ongoing capacity expansion, new launches and the buy out of JLR can impact net margins as well.

The shift in production to the Uttarakhand facility and cost reduction initiatives undertaken by the company may help offset this to a certain extent. A further price increase to the customers due to further rise in input costs cannot be ruled out.

From an investment perspective, equity dilution of about 30-35 per cent, likely from the planned rights issue, to fund the JLR deal, may also be a dampener.

Related Stories:
Tata Motors net slips 30% on input cost rise, forex fluctuations
Tata Motors seeks to raise $1 b abroad
Tata Motors sets up learning centre in Hyderabad
High fuel cost may impact CV, car sales: Ratan Tata

More Stories on : Stocks | Financial Performance | Tata Motors Ltd | HCV/LCV/Tractors

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Corporate developments

Daiichi Sankyo open offer to Ranbaxy extended

Orbis Financial to offer custodial services

Hardening rates push investors to debt schemes

Other income, lower tax outgo cushion Tata Motors profit

Areva board okays stock split

Tata Steel, Reliance Capital see healthy rollovers

Aditya Birla Nuvo (Rs 1324.40): Buy

Day Trading Guide

Persistent Systems to tap capital market

Austral Coke IPO price band fixed at Rs 164-196