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Tata Motors disappoints on disclosures

Tata Motors disappoints on disclosures
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First Published: Sun, Feb 13 2011. 09 39 PM IST
Updated: Sun, Feb 13 2011. 09 39 PM IST
Tata Motors Ltd has beaten Street expectations for the seventh quarter in succession. Based on its last-traded price on the National Stock Exchange on Friday, its shares rose by 6% compared with the previous day’s close.
In the last seven occasions the company has announced results, its shares have risen over 5% on six occasions.
Yet, while the company is making a habit of beating Street estimates by a handsome margin, it isn’t being as consistent with its disclosure standards.
It has decided to discontinue its practice of sharing the profit and loss statement of Jaguar Land Rover (JLR) from the December quarter.
It will now only share details such as revenue, operating profit, pre-tax profit and net profit, with no details of various expense heads.
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Last quarter, JLR accounted for about 60% of the company’s consolidated revenue and 68% of earnings before interest, tax, depreciation and amortization (Ebitda).
Without doubt it’s the most important unit in the company, and analysts would now have more difficulty with their earnings models for the company. Tata Motors’ defence is that it is not mandatory to provide detailed results of individual subsidiaries.
The opaqueness aside, the results were impressive. On a year-on-year basis, consolidated Ebitda rose by 58% on the back of a 22% rise in revenue.
Profit growth was driven by JLR, whose profit grew by 141% thanks to a better product mix and higher price realizations. Ebitda of the stand-alone operations (primarily domestic business) was more or less flat despite a 28% rise in revenue.
But a drop in margins was expected because of higher commodity prices this financial year. The company did well to grow stand-alone Ebitda by 7% on a quarter-on-quarter basis. During the same period, Ashok Leyland Ltd reported a 46% sequential drop in operating profit.
So even while analysts were complaining about the reduced disclosures, investors cheered the results—the company’s American depository receipts rose by as much as 9% on the New York Stock Exchange.
Graphic by Paras Jain/Mint
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First Published: Sun, Feb 13 2011. 09 39 PM IST