Tata Motors Ltd’s results for the September quarter are a mixed bag. The company’s operating performance has dropped sharply, while its European subsidiary did better than expected. On a consolidated basis, however, the results look respectable, with both revenue and earnings before interest, tax, depreciation and amortization (Ebitda) growing 8% compared with the June quarter.
This is higher than the estimates of most analysts. Still, Tata Motors’ American depository receipts opened about 3% lower on the New York Stock Exchange on Monday. Investors seem to be disappointed with the performance of the parent company. While volume and revenue growth was decent at 7% and 9%, respectively, margins fell by 120 basis points. At merely 7.2%, they are now close to the record low levels. This is largely owing to a rise in raw material costs, although the company has also been hit by lower capacity utilization in the passenger car business that witnessed a 21% drop in volumes on a year-on-year basis. According to the firm, “Domestic passenger vehicle sales were affected by rising interest rates, fuel price hikes, inflationary pressures and intense competition.”
Also See | Slower Pace (PDF)
*** Quarterly Performance (PDF)
Jaguar Land Rover (JLR), on the other hand, reported an 8% sequential increase in revenue and a 7% rise in Ebitda. Volume growth was strong at 9.5%, aided by a good response to the newly launched Evoque. Interestingly, margins fell by only 20 basis points, despite the launch expenses related to Evoque. It appears that the firm benefited at least marginally by forex-related gains in its reported profit.
The results, especially those of JLR, should comfort the markets, which have been rather bearish on Tata Motors’ shares. In the past year, the stock has dropped 29%, much more than the 12% drop in the Nifty. Apart from concerns about high interest rates in the domestic economy, there have also been worries about the global slowdown affecting sales at JLR. While the domestic performance has been subdued, JLR has continued to drive growth.
Graphics by Yogesh Kumar/Mint
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