Investors seemed to have got wind of Tata Motors Ltd posting a better-than-expected performance for the March quarter. The stock closed 2.7% higher at 303.80, even an hour before the company announced results.

Rightly so, as the company’s results shot past both Bloomberg and StarMine estimates on all counts. Repeating the December performance, strong traction in Jaguar Land Rover Automotive Plc’s (JLR) sales across regions translated into a 10% rise in Tata Motors’ net revenue to 56,001.6 crore from a year ago. Strong demand for JLR products, mainly utility vehicles, a favourable product mix, high operating leverage and exchange gains more than offset the weak domestic milieu for medium and he

But the clincher was JLR’s operating margin of 16.9% versus the Street’s expectation of 15.5%. Kaushal Maroo, analyst at Emkay Global Financial Services Ltd, in his results note said that margin improvement was also fuelled by improved raw material/sales ratio. However, the stand-alone entity’s operating margin paled in comparison—3.6% compared with 9.5% a year back. JLR, therefore, shored up consolidated margin to 14.9%, a neat 100 basis points higher than estimates and 80 basis points higher than the year-before period. A basis point is one-hundredth of a percentage point.

JLR’s march forward has been led by China, which accounted for almost 20.5% of its sales. The management, at its media briefing, stated that the region may soon overtake Europe in absolute sales numbers. During fiscal 2013, JLR’s sales in China grew 48%, the highest across regions. Asia-Pacific sales grew by around 27%. No wonder the company is committed to increasing capacity in this region in the future as part of its £2.75 billion (around 23,240 crore) capital expenditure planned for the current year. The reported slowdown in China does not seem to worry the management or investors at this juncture. Perhaps new products and aggressive marketing will continue to drive sales momentum.

In the final analysis, the story was similar to that of the December quarter. The stand-alone entity posted a net loss of 312 crore in the quarter. Although JLR’s net profit was lower than a year ago, it partially negated the gloom. Consolidated net profit at 3,945 crore was no doubt 36.7% lower than a year ago, but one has to bear in mind that the year-ago period had the advantage of tax credits too. Net profit again was significantly higher than the Street’s estimates of about 2,900 crore. The stock, therefore, seems insulated from downward risks, though a major increase will be seen when the domestic market sales improve.

Going by the monthly auto sales numbers, growth prospects for Tata Motors in the next two-three quarters will continue to be led by JLR. Analysts expect green shoots in commercial vehicle and passenger car sales on domestic terrain only from the second half of fiscal 2014. Clearly, what was a liability on the parent firm’s balance sheet at the time of the acquisition just a few years ago has turned into a money-spinner.

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