NEW DELHI: Tata Motors Ltd (TML) has nearly doubled its consolidated net loss in the June quarter weighed down by woes at its Jaguar Land Rover (JLR) unit and a slowdown in the automobile industry in India.
The Mumbai-based automaker posted a net loss of ₹3,680 crore in the three months ended 30 June, compared with a year-earlier loss of ₹1,863 crore.
Consolidated revenue from operations fell 8% year-on-year (y-o-y) and 29% sequentially to ₹60,830 crore.
TML’s commercial vehicle (CV) and passenger vehicle (PV) businesses put together reflect a bigger decline in segment-specific revenues when compared with that of JLR. The CV and PV businesses posted Q1FY20 revenue of ₹14,309 crore, declining from ₹17,290 crore a year earlier. In comparison, JLR’s Q1FY20 revenue fell to ₹45,661 crore from Q1FY19 revenue of ₹48,215 crore.
This shows that the British carmaker has been able to narrow the losses it has been accumulating for some time, as a result of continued cost-cutting steps such as savings from employee exits, material costs, lower capex, and tightening of working capital needs.
“Q1FY20 was the worst in terms of market demand as the slowdown turned out to be more than what was anticipated. The first quarter saw stress in liquidity and financing for CVs and PVs. However, this should ease out now," said P.B. Balaji, chief financial officer, Tata Motors. The demand environment in the China market, the single-biggest for JLR where the carmaker had reported a sharp drop of 34% y-o-y in sales in FY19, is turning stable as the company continued to make interventions, Balaji said.
“We have been correcting inventory, working on dealer profitability and focusing on retail growth on the back of new product launches. All these fundamental interventions made by us is resulting in turning the China business stable," Balaji said.JLR is slated to introduce the Discovery Sport in China next month, and the Defender, which is expected to be rolled out in September. JLR reported total sales of 128,615 units for Q1FY20, 11.6% lower from the year earlier.
On the domestic front, the total PV sales of Tata Motors declined 29% y-o-y to 42,034 units in the June quarter. Sale of CVs, the backbone of the domestic business, reported a decline of 15% y-o-y to 89,845 units last quarter. This translated into a more than 20% y-o-y decline in the company’s CV revenue to ₹11,079 crore.
Revenue from the PV business dropped 6% in the quarter to ₹3,188 crore. This clearly reflects that the slowdown in CV sales is a bigger worry for the company than PVs, which are faring relatively better on the back of its new SUVs such as Harrier and Nexon.
Weak consumer sentiments, liquidity stress, and the implementation of axle load norms has particularly impacted sales of medium and heavy CVs in the domestic market.
“The Ebitda for PVs is at 1.2% despite a decline of 7% in retail and 30% in wholesale numbers. This only reflects that our Turnaround 2.0 strategy is bearing fruit. Besides tightly controlling the inventory, we have also simplified the supply chain as we will focus on retail over wholesale," said Balaji, who estimates 3-4% Ebitda margins for Tata Motors and JLR over the next 2 years. Ebitda is earnings before interest, taxes, depreciation and amortization.
Balaji expects the current liquidity squeeze in India to improve in the coming quarters on the back of government intervention. The government in the 2019 budget has provided credit guarantee to state-run banks to buy high-quality loans from non-banking financial companies.