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After witnessing one of the worst quarterly losses in the company’s history, some of the shareholders of Tata Motors have started asking for the divestment of loss-making Jaguar Land Rover (JLR).
JLR, which contributes over 90 per cent of Tata Motors’ revenue, pulled down the company heavily in the June quarter, leading to losses of ₹1,863 crore. That seems to have made shareholders anxious about the company’s future, given that Tata Motors has been putting most of its profits back into JLR, while shareholders have not received dividends for about three years.
“Ford sold us JLR during tough times. In the light of business significantly deteriorating, we should perhaps give JLR some time and, if it is unable to perform still, look at divesting it,” one of the shareholders commented during Tata Motors’ 73th Annual General Meeting here on Friday.
“It is not fair to individual businesses to get shacked because of one unit’s performance. We should, therefore, look at a demerger of the business,” said another shareholder, pointing towards the impact of JLR’s losses on Tata Motors’ overall financial performance.
JLR reported a loss of £210 million in the June quarter as its revenues fell 6.7 per cent to £5.2 billion due to lower sales and increased incentives in China ahead of the July 1 duty reduction.
A third shareholder asked the company to “do away with JLR if there are no returns.” He said JLR is dragging down Tata Motors with no sign of revival.
Responding to the queries, Chairman N Chandrasekaran said: “It is not the time to talk about JLR divestment. Five years later what we do, we don’t know. The only thing I tell you is we are focussed on returns.”
Sticking to the plan
“We have given a profitable target for JLR. Though the first quarter is loss-making, on a yearly basis, we are sticking to our plan in terms of profitability. The performance will get better from here and we’ll not suffer on a yearly basis. But still, there are challenges which we need to work on,” he further said, adding that Tata Motors will work aggressively towards cutting costs at JLR.
The Chairman also said the company is “committed to deliver the EBIT margin of 4-7 per cent between FY19 and FY21,” and will work closely with the JLR team to achieve the same.
The shareholders also asked Tata Motors about the future of Nano but the company appeared non-committal.
“There are a number of models that Tata Motors has. Going forward, all the investments will go into two new architectures. Also, we’ll upgrade all the models to the new emission norms. So, we’ll have to see what are the investments required for each name plate, what is the business case, based on which all the business decisions will be taken. The whole idea is to have a number of attractive cars that’ll sell in the market,’ Chandrasekaran said.
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