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Jaguar Land Rover may deepen Tata Motors' losses in Q2FY21

  • Of the past 10 quarters, Q2FY21 would be the eighth quarter of loss for Tata Motors as the company struggles to turn around and aggressively cut costs at JLR

MUMBAI: Tata Motors Ltd is yet again expected to report a sizable loss for the September quarter due to subdued performance of its luxury arm Jaguar Land Rover, and commercial vehicle business globally.

Of the past 10 quarters, Q2FY21 would be the eighth quarter of loss for Tata Motors as the company struggles to turn around and aggressively cut costs at JLR, while facing trade disruptions led by the coronavirus pandemic. The automaker will announce its September quarter earnings on Tuesday.

According to Emkay Global Financial Services Ltd, Tata Motors could post a loss of up to 3,212 crore for the September quarter while recording a 22% year-on-year decline in its consolidated revenues. The brokerage estimates that the company is also likely to post a near 58% drop in its earnings before interest, taxes, depreciation and amortization or Ebidta.

Tata Motors posted a consolidated loss of 217 crore in Q2FY20, while revenues fell 9% YoY to 65,432 crore. For the June quarter, consolidated net loss stood at 8,444 crore on revenues of 31,983 crore.

“We expect consolidated revenues to decline YoY due to a fall in JLR sales," the brokerage said, adding that JLR’s revenues are expected to decline by 35% due to a 39% drop in volumes.

“JLR Ebidta margin is expected to contract to 6.8%, owing to adverse currency impact and lower scale," it added.

Emkay expects Tata Motors’ standalone revenues to grow 1% for the past quarter due to a 5% growth in its wholesale volumes.

Tata Motors Group global wholesales in Q2FY21, including JLR volumes, were at 202,873 units, down 16% YoY. Overall CV and passenger vehicle wholesales stood at 56,614 units, down 29% YoY, and 146,259 units, down 9% YoY, respectively.

Total JLR wholesales (including Chery Jaguar Land Rover in China) for the September quarter stood at 91,367 units, down 32% YoY. To be sure, even as the British luxury carmaker recorded a 34% growth in its CJLR wholesales for the past quarter, it continues to witness a YoY decline in other regions like the UK, North America and Europe as global demand remained subdued during the period.

ICICI Securities expects Tata Motors to post losses in excess of 2,100 crore and estimates the company to record a 14% decline in its total revenue for Q2FY21.

“We expect JLR to post revenues of ~GBP 4.3bn, down near 29% YoY, with adjusted Ebidta margin of 9%, down 475bps YoY. On operational basis, we expect JLR to report a loss of about GBP 130 million," the brokerage said.

Discounting trends across JLR’s key markets, demand and inventory levels, outlook on capital expenditure and R&D and the domestic business turnaround strategy are some of the key monitorables for the company’s performance, the brokerage pointed out.

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