Home >News >India >Tata Motors seen posting large loss in Q4, cost-savings may subdue pain wee bit
Edelweiss Securities said weakness in the domestic and JLR businesses would weigh on overall profitability and free cash flow profile. Photo: Bloomberg
Edelweiss Securities said weakness in the domestic and JLR businesses would weigh on overall profitability and free cash flow profile. Photo: Bloomberg

Tata Motors seen posting large loss in Q4, cost-savings may subdue pain wee bit

  • Brokerage Motilal Oswal said covid-19 has put brakes on JLR product and market mix improvement
  • Analysts expect the company to write off bad investments or losses as exceptional items such as BSIV stock liquidation

MUMBAI: Tata Motors Ltd (TML), India’s largest commercial vehicle manufacturer, is expected to report sizable net loss for the March quarter along with a sharp drop in its revenue from operations on the back of steep fall in the vehicle sales.

“Covid-19 has put brakes on JLR product and market mix improvement," the brokerage said, estimating TML's net operating income to fall 29% YoY with negative profit after tax (Pat) of over 3,300 crore, Motilal Oswal Financial Services Ltd said in a note to its clients.

According to the Mumbai-based brokerage, the prolonged economic slowdown in India would hurt TML’s operating deleverage. The consolidated debt of the company increased to 1.06 trillion in FY19 from 65,804 crore five years ago.

Tata Motors-owned Jaguar Land Rover (JLR), which contributes about 75-80% of the company’s total consolidated revenues, was on its way to recovery during Q2-Q3 FY20 when the coronavirus pandemic disrupted the global markets originating from China, one of the largest markets for luxury cars.

Tata Motors group global wholesales in Q4FY20, including JLR, were at 231,929 units, down 35% YoY. That included the global wholesales of commercial (CVs) and passenger vehicles (PVs).

The company’s group global wholesales of all CVs including the Tata Daewoo range in Q4 FY20 were at 72,608 units, lower by 49% over the year-ago period.

Group level global wholesales of PVs in Q4 FY20 were at 159,321 units, down 26% as compared to Q4FY19. PV wholesales included global JLR volumes, which were at 126,979 units.

On the retail front too, the British luxury carmaker’s sales for the March quarter stood at 109,869 units, down 31% compared to the year-ago period. That included retails of 81,581 Land Rover SUVs (down 26% YoY) and 28,288 Jaguar luxury sedans (down 43% YoY).

The company’s standalone business is also expected to report poor performance on the back of the ailing economy hit by the pandemic-induced lockdown in March.

In Q4FY20, TML’s total wholesales stood at 101,069 units, down 47% YoY from 192,339 units in the year-ago period. The India business for the March quarter saw CV sales drop 50% to 69,069 units and the PV sales fall 40% YoY to 32,000 units.

While the analysts expect that the company could write off bad investments or losses as exceptional items such as BSIV stock liquidation among other areas, they said the cost saving program – project charge and charge plus at JLR – would provide much needed cushion in terms of liquidity.

The company plans to save 4 billion GBP by March 2021 wherein it has already saved 2.9 billion GBP as against the planned 2.5 billion GBP by December 2019.

As per Edelweiss Securities, weakness in the domestic and JLR businesses would weigh on overall profitability and free cash flow profile.

“As per our assumptions, Ebitda would decline by 30% YoY compared with our original estimate of 13% growth," the brokerage said in its report.

Earlier, in a regulatory filing on 2 June, Tata Motors said that as of March 31, 2020, the company had cash and cash equivalent of Rs4,700 crore and the undrawn credit facility of Rs1,500 crore.


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