Mumbai: India’s largest truckmaker Tata Motors Ltd said net profit for the third quarter rose 8.6% from a year ago as a one-time gain from a stake sale in a unit and investment income offset a slowdown in truck sales.
Net profit in the quarter ended 31 December increased to Rs654.8 crore, from Rs617.2 crore a year ago. On a standalone basis—without taking the earnings of its subsidiaries into account—the company registered a net profit of Rs499 crore, a 2.7% dip from a year ago. Tata Motors sold a 11.1% stake in its fully owned unit HV Axles Ltd in the quarter and registered a gain of Rs65 crore from that.
“The recovery in the commercial vehicle sector will take quite a while,” said Ravi Kant, managing director of Tata Motors. “There is no respite in interest rates and banks have been selective on customers whom they give loans to.”
“Input costs are moving up, staff costs are moving up and profitability is under pressure in the auto sector,” said K.K. Mital, a fund manager with Escorts Asset Management Ltd. “Unless interest rates soften, sales will also not improve.”
The company spent Rs5,752.77 crore on raw materials, 9.9% more than a year ago. Tata, which also makes cars and unveiled the world’s cheapest car, the Tata Nano two weeks ago, sold more vehicles overall and revenues rose by 12% to Rs10,440.9 crore from Rs9,315 crore a year ago.
Analysts believe that the introduction of the Tata Nano and the acquisition of the Land Rover and Jaguar brands of Ford Motor Co. will put further pressure on its profitability. Tata is negotiating with Ford to buy these companies valued at close to $2 billion by some foreign brokerages. “It will depend on the Jaguar-Land Rover and Nano (introduction) both of which are going to be stressful on margins,” said Mahantesh Sabarad, analyst at brokerage Prabhudas Lilladher Ltd. Shares of Tata Motors closed at Rs706.15 on Thursday on the Bombay Stock Exchange, down 1.4 %.