Home >Companies >Company Results >Tata Motors posts net loss of 4,450 cr in  April-June

Tata Motors Ltd plunged to a wider-than-expected consolidated loss in the June quarter as a shortage of semiconductor chips hit production at its Jaguar Land Rover (JLR) unit.

The Mumbai-based automaker posted a loss of 4,450 crore for the three months to 30 June. The figure far exceeded the 2,774.10 crore loss estimated in a Bloomberg survey of analysts.

Tata Motors had a year-earlier loss of 8,443.98 crore when its operations globally were impacted following lockdowns imposed in several countries to combat the covid-19 pandemic.

The June-quarter loss, however, narrowed from the 7,585.34 crore loss in the March quarter.

Wholesales, or factory dispatches, of JLR vehicles were 30,000 units less than its targets during the June quarter .

Last month, the British carmaker guided for a cash outflow of about £1 billion with a negative Ebit (earnings before interest and taxes) margin in the September quarter as it would not be able to make vehicles in line with market demand.

Tata Motors’ consolidated revenue more than doubled to 66,406.5 crore, with sales of JLR improving in markets such as China and the US.

On a sequential basis, revenue fell from 88,627.9 crore in the March quarter as JLR was unable to meet its wholesale target, and the Indian business was affected by the second covid wave.

P. Balaji, Tata Motors’ chief financial officer, said the JLR management is doing rigorous follow-up with suppliers, redesigning vehicles to use fewer chipsets and planning a long-term arrangement with suppliers to resolve the ongoing crisis caused by the scarcity of semiconductor chips.

“We expect wholesales of 65,000 units in this quarter for JLR, which is 50% less than the internal target. As a result, we are expecting a negative Ebit margin and cash outflow of £1 billion," said Balaji.

He said there is no short-term reprieve from this current disruption, but the company expects gradual improvement from this quarter onwards.

“While we believe lower capex and government’s stimulus would support JLR, improving PV (passenger vehicles) business and focus on cost control would improve Tata Motors’ standalone margin," said Mitul Shah, head of research, Reliance Securities. “Moreover, tight control on capex and R&D (research and development) would lower its automotive debt to a greater extent over the next 2-3 years," said Shah.

Tata Motors made a strong recovery in operating performance in the third and fourth quarters of FY21, backed by higher sales of JLR vehicles in key markets such as China and the US.

The company, however, does not expect the growth momentum to continue in the first half of this fiscal in view of the chip crisis.

JLR had a loss before tax of £110 million in the June quarter, compared to a year-earlier loss of £413 million. Revenue jumped 74% from a year earlier to £5 billion, buoyed by a 73% rise in vehicle sales to 84,442 units.

The India business recorded a narrower 1,320.74 crore net loss in the June quarter, compared with a year-earlier loss of 2,190 crore.

This was helped by higher revenue as sales in the year-earlier quarter was severely hit by curbs imposed to contain the first wave of the pandemic.

The domestic business had a profit of 1,645.69 crore in the March quarter.

Revenue for the India business improved sharply by 343% to 11,904.19 crore due to the low base of last year.

On a sequential basis, revenue declined from 20,045.90 crore in the March quarter.

“We do expect to see a recovery from the second quarter and, at the moment, semiconductor is not prominent issue for the domestic businesses. So, we expect to improve our market share," said Balaji.

He said increased prices of steel and precious metals have impacted margins and cost, and the company will take price increases when necessary.

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