India’s biggest carmaker by revenue Tata Motors Ltd posted a smaller-than-expected drop in fourth-quarter net profit as Chinese demand for luxury motors helped to compensate for sliding domestic sales.
Tata, which bought the upmarket Jaguar Land Rover Ltd (JLR) for $2.3 billion in 2008, said JLR’s profit margin rose to 16.9 per cent in the three months ended March 31 from 14.6 per cent in the same period the year before, helped by a favorable exchange rate and record quarterly sales.
Tata had previously announced that sales of Britain-made Jaguar saloons and Land Rover sport utility vehicles (SUV) rose 18 per cent to 115,504 units in the quarter.
Key to that was a 21 per cent rise in sales in China, JLR’s fastest growing market. JLR accounts for more than three quarters of Tata Motors’ group revenue.
The lackluster performance at Tata Motors’ India business, due to high interest rates and slowing economic growth, however, remains a worry for India’s biggest truck manufacturer and the maker of the Nano, dubbed the world’s cheapest car.
“We see the external environment and overall economic scenario very, very challenging and (it) will remain stressed,” said Tata Motors’ Chief Financial Officer C. Ramakrishnan, adding this would have an impact on demand for its products.
Car sales in India are forecast by the automakers’ association to grow by 3-5 per cent in this financial year, a rebound from the first drop in sales in a decade in 2012/13.
Tata Motors, part of the salt-to-steel Tata conglomerate, said net profit for the January-March quarter was 39.45 billion rupees ($705 million), down 36.7 per cent on the same time the year before, with revenue up 10 per cent to 560 billion rupees.
A one-off tax gain had contributed to a significantly higher net profit in the year-earlier quarter. Analysts had on average expected a profit of 28.86 billion rupees on revenues of 518.51 billion, according to Thomson Reuters Starmine.
JLR’s operating margins for the full fiscal year was 15.2 per cent, and Ramakrishnan said the margin was expected to remain in the range of 14-15 per cent for this financial year.
Quarterly revenues for the Indian business fell 32.5 per cent to 110.68 billion rupees, as sales of its vehicles plunged 30 per cent year-on-year to 184,942 units. The profit margin dropped to 3.6 per cent from 9.5 per cent a year earlier.
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