Companies

Tata Motors down on lower earnings, board tussle

Parvatha Vardhini C BL Research Bureau | Updated on January 15, 2018 Published on November 15, 2016

That the market has been on a losing streak today has only compounded the trouble for the Tata Motors stock. Lower than expected profits at the consolidated level in the quarter ended September 2016 and the tussle among the company’s Directors in backing the chairman Cyrus Mistry at the Board meeting yesterday, has seen the stock plunge by 7-8 per cent in trading since morning.

Disappointment in profits

For the quarter ended September 2016, consolidated revenue of Tata Motors grew by 7 per cent year-on-year to Rs 65,940 crore. Although the revenues for the domestic business remained flat at best, the top line was backed by strong growth at Jaguar Land Rover (JLR). JLR’s revenues grew by 23 per cent, while its retail volumes (including the China joint venture) grew by 29.3 per cent in the three months ended September 2016 ( over the same period last year). Retail volumes grew in double digits across North America, UK, China and Europe, reflecting strong sales of the F-PACE, XE, Evoque and Discovery Sport.

At the net profit level, the standalone domestic business continued to make losses this quarter too. Nevertheless, strong growth at JLR helped the company record a consolidated profit of Rs 848 crore this quarter. As against this performance, Tata Motors had recorded a consolidated loss of Rs 1,740 crore in the September 2015 quarter. Apart from losses in the domestic business, damages caused to the JLR business by the Tianjin Port explosion had pulled down the consolidated bottomline then, But despite the turnaround in the bottomline in the September 2016 quarter vis-à-vis the year-ago period, the market has been disappointed with the consolidated profit numbers for the quarter ended September 2016. Profits could have been higher but for the realised hedging losses of about Rs 3510 crore , an adverse impact of commodity derivatives to the extent of Rs 187 crore and a one-time provision for new customer quality programmes at JLR.

Outlook

For JLR, prospects look sanguine with the success of vehicles such as the F-PACE, the recently launched long wheelbase version of the XF ( for the Chinese markets) and upcoming launch the all-new Discovery in the last quarter of 2016-17. Back in India, while medium and heavy commercial vehicle sales have taken a breather, the company will be banking heavily on upcoming launches in the passenger segment to turnaround. While the Tiago has received a favourable response, the company will launch the Hexa SUV in January 2017. The Kite and Nexon are expected to follow soon.

In the meantime, the stock may continue to display nervousness , given that Tata Sons has called for an extraordinary general meeting to oust the Chairman and an independent director of the company.

Published on November 15, 2016
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