Tata Motors FY net jumps, but input costs worry

Tata Motors FY net jumps, but input costs worry

Mumbai: Tata Motors on Thursday reported full-year profit more than trebled, driven by higher sales at home and at its Jaguar and Land Rover unit, but warned competitive pressures and high commodity prices continued to be a challenge.

Its board also approved a five-for-one stock split.

The company, India’s largest truck and bus maker, expects increased infrastructure investment in the country to boost demand for commercial vehicles, and said it was also very optimistic on volumes at Jaguar and Land Rover.

The Jaguar and Land Rover unit, which Tata bought from Ford Motor Co in 2008 for $2.3 billion, initially was a loss-making unit, but it has turned around in the last few quarters and posted a profit of £1.04 billion for the fiscal year ended March.

“The improved profitability was driven by better volumes and pricing across markets," chief financial officer C. Ramakrishnan told reporters.

Higher fuel costs and interest rates are expected to crimp demand for cars in India, the world’s second-fastest growing auto market after China, with growth pegged at 12 to 15% for this fiscal year.

Auto sales in India grew a record 30% in 2010 to 1.98 million units.

The rising costs of steel, rubber and other raw materials have forced some Indian car makers, including Tata Motors and Maruti Suzuki, to raise prices in recent months.

Beats Forecast

Tata Motors, part of India’s salt-to-software Tata conglomerate, builds utility vehicles, cars and the ultra-cheap Nano. It posted full-year net profit of Rs9,274 crore ($2.05 billion), compared with Rs2,571 crore a year ago.

Consolidated revenue rose by a third to Rs1.22 trillion. Analysts, on average, expected Tata Motors to post net profit of Rs9,062 crore for fiscal 2011, according to Thomson Reuters I/B/E/S.

The company’s consolidated operating margin rose to 14.4% from 9.3% a year ago. Net automotive debt-to-equity ratio was 0.68 times as at March-end.

Last month, India’s top car maker Maruti Suzuki posted a 0.5% rise in net profit to Rs660 crore ($149.1 million) for its fiscal fourth quarter, compared with Rs656 crore in the year-ago period.

Tata Motors shares, valued at about $14.8 billion, are down 13.3% this year after rising nearly 65% in 2010. Maruti Suzuki shares are down 15.5% so far in 2011, while the broader market has lost 13%.

Shares in Tata Motors ended up 2.5% at Rs1,162.40 ahead of the results, in a firm Mumbai market.