Mumbai: Sharp decline in commercial vehicle (CV) revenues in the quarter ending December has pulled back the gains from Jaguar Land Rover (JLR), making Tata Motors Ltd post 7% year-on-year decline in its Q3 FY2020 topline.
TML’s total consolidated revenue from operations stood at ₹71,676 crore in Q3 against ₹76,916 crore in Q3 FY2019. Even as JLR’s Q3 topline of ₹58,752 crore saw a YoY growth of 1%, the revenues from CVs stood at ₹8,598 crore, down 37% YoY. Meanwhile, the passenger vehicle (PV) revenues declined over 19% YoY at ₹2,741 crore. TML’s overall ebidta margin stood at 9.9%, recording an improvement of 140bps.
The decline in TML’s overall revenues has come on sharp YoY drop of 23% in TML's domestic volumes, which stood at 121,463 units in Q3. In the CVs segment, which is the backbone of the company’s standalone business, TML’s volumes were at 85,109 units, down 22% YoY. On passenger vehicles (PVs), at 36,354 units in Q3, it posted a decline of 27% YoY.
The continued decline in CV volumes can be attributed to axle load norms that created additional load carrying capacity of 25% and the unprecedented economic slowdown in the domestic market that has impacted several sectors including real estate, steel, cement along with shrinking freight movement.
“The domestic revenues are the impact of lower volumes in the market as well as stock corrections. However, we have delivered a positive free cash flow of ₹2,400 crore by correcting inventory, ensuring working capital is kept really tight," said PB Balaji, Group CFO, Tata Motors Ltd.
“This year we have seen significant working capital drain because we just could not accept the fact that the market could go wrong to that extent. It is crucial that dealers become viable and therefore we have knocked off sizable inventory out of the dealers and that has ensured cash flows coming in for them and they are able to henceforth pay to their debtors faster," Balaji told Mint on a phone call adding that positive free cash flow was generated from tightening the working capital, debtors, stock with focus on retail sales.
The tight monitoring of funds also included roll back of planned capex, which Balaji said would amount to ₹4,500 crore for FY2020 for the standalone business as against the planned outlay of ₹5,000 crore. The CFO said that TML’s capex for FY2021 would be about ₹4500 crore.
He said that the company will continue to focus on retail sales going forward under the BS VI regime too to keep the inventory and interest costs lower, which would ensure better cash flows in the future.
“We have to keep focusing on retail and stay close to the customer. Wholesale volume market share is actually a nonsensical metric to follow," Balaji told this publication adding that heavy discounting on CVs has negatively impacted the company’s margins in the past quarter. The senior company official said that BS IV stock of CVs currently is at 15-20 days.
Meanwhile, with similar cost saving approach in JLR, TML said it has already delivered savings of 2.9 billion GBP as against the original plan of 2.5 billion GBP under project charge. Balaji on Thursday said that the management now targets to save another 1.1 billion GBP under the extended plan, called as project charge plus.
“Additional savings to be done under charge plus includes 400 million GBP in Q4 FY20 and 700 million GBP in FY2021. A lot of that will be focused on cost with disproportionate focus on material costs. That’s the plan for overall profitability," he said adding that total cost and cash savings will then add up to 4 billion GBP by March 2021 (under Charge and Charge Plus).
JLR’s capex for FY20 would be 3.6 billion GBP as against the originally planned 4 billion GBP. Even as JLR posted 24% growth in China, its largest market globally, in Q3, Balaji expressed his worry on the fast spreading corona virus in China and its impact on the market demand in near future.