Tata Motors posts consolidated Q1 loss on JLR unit

Tata Motors posts consolidated Q1 loss on JLR unit

Mumbai: Tata Motors, India’s largest vehicle maker, posted a consolidated loss for its fiscal first quarter, but remained confident about the prospects of its loss-making Jaguar and Land Rover (JLR) unit.

The company, which controls about 60% of the world’s fifth-biggest truck and bus market, said on Monday that increased borrowing to support investments and new product development caused an increase in depreciation and interest costs.

It said JLR unit’s sales fell about 52% in the quarter from a year ago due to adverse global market conditions.

“When volumes are down so much, it is a challenge. We need a little bit of support from the market," vice chairman Ravi Kant said.

“I have no doubt that JLR will be a very profitable company when the market starts to revive," he said.

The unit was focused on aligning production with demand, reducing costs and working capital requirements, chief financial officer C Ramakrishnan said.

“The improvement in margins at an operating level to 2.4% in the quarter from 1.7% (for the year ending March 2009) is encouraging; it shows that there is an uptick in performance. That gives some confidence," said Vaishali Jajoo, an analyst with Angel Broking.

The company reported a Rs329 crore ($67.4 million) consolidated loss for April-June.

In the year-ago quarter, Tata Motors posted a net profit of Rs720 crore, but said the figures were not comparable as the previous period contained JLR numbers only for 2 June- 30 June.

Tata said JLR made a loss before tax of £62 million ($100 million) during the fiscal first quarter. JLR sold 35,900 units during the quarter, up from 32,600 in the March quarter.

In July, Tata Motors reported a standalone net profit of Rs514 crore for its Indian operations.

Consolidated net sales for the quarter rose to Rs16,290 crore from Rs14,410 crore a year ago.

Last week, chairman Ratan Tata said there were signs of a recovery in the global auto market, but warned the company would have to work harder to make a turnaround.

“As far as India is concerned, conditions are improving but infrastructure spend is yet to kick off and give benefits," Kant said.

Auto sales in India have been rising on an improving economy, easier finance and new launches, including Tata Motor’s Nano, the world’s cheapest car, which hit the roads in July.

Presently, Nano production was 2,500-3,000 untis per month and that would rise to 4,000 in a couple of months, Kant said. A dedicated Nano plant opens early next year, with production to be ramped up to full capacity of 250,000 cars during 2010.

The company’s consolidated debt at the end of June stood at Rs24,000 crore. The company has said it would look at capital raising at an appropriate time to deleverage its balance sheet.

Analysts have said the company needs to raise about $1 billion in fresh equity and asset sales to deleverage its balance sheet and cut its debt-to-equity ratio to reasonable levels.

Shares in Tata Motors, valued at $4.5 billion, ended down 0.06% to Rs489.35, while the main index fell 1.6%. Its shares have more than trebled so far this year.