Tata Motors Profit Rises 100-Fold on Jaguar Land Rover Sales
By Siddharth Philip
Nov. 10 (Bloomberg) -- Tata Motors Ltd., the owner of Jaguar Land Rover, posted a more than 100-fold gain in second- quarter profit as the global economic recovery and growing demand in China and the U.S. boosted sales of luxury vehicles.
Group net income, including Jaguar Land Rover, reached 22.2 billion rupees ($502 million) in the three months through September, compared with 218 million rupees a year earlier, the Mumbai-based company said yesterday. Profit beat the 17.1 billion-rupee average estimate of 10 analysts compiled by Bloomberg. Sales rose 36 percent to 287.8 billion rupees.
Jaguar Land Rover returned to a profit in the quarter, with sales up 43 percent on rising demand for $72,000 Jaguar XJ sedans in the U.S. and China. Bayerische Motoren Werke AG and Daimler AG, the owner of Mercedes-Benz, have both raised their profit forecasts. Tata Motors shares have jumped 60 percent this year in Mumbai, triple the gain in the Bombay Stock Exchange’s benchmark Sensitive Index.
“The margins at Jaguar Land Rover look good, and the demand remains strong,” said Juergen Maier, a fund manager at Raiffeisen Capital Management in Vienna. “They have models a lot of people are interested in. Within their niche, they are very well positioned.”
Excluding Jaguar Land Rover and certain other units, profit declined 41 percent to 4.33 billion rupees, trailing the 5.14 billion-rupee average estimate of 19 analysts. The year-earlier figure included a one-time gain from a share sale.
Jaguar Profit
Tata rose less than 0.1 percent to 1,269.9 rupees in Mumbai yesterday before the earnings release.
Jaguar Land Rover’s profit reached 238.1 million pounds in the quarter, compared with a loss of 60.4 million pounds a year earlier, Tata said.
Higher sales of Tata-brand trucks, buses and cars were offset by rising raw-material costs in Asia’s third-largest economy. The company would offset higher input costs with a price increase that took effect Oct. 1 and by streamlining operations, Chief Financial Officer C. Ramakrishnan told investors on a conference call yesterday.
Last month, the automaker raised prices of the Nano, the world’s cheapest car, by as much as 7 percent, or 9,000 rupees. Tata opened a factory in June in the western state of Gujarat that eventually may make as many as 350,000 Nanos a year.
The company plans to retrofit Nano cars to reduce the risk of them catching fire, Tata Chief Executive Officer Carl-Peter Forster told reporters in Mumbai. The cars, a few of which had earlier caught fire, would be fitted with fuse boxes to prevent short-circuits, and catalytic-converter covers to prevent anything that touched them from igniting.
Debt Ratio
Tata Motors’ debt-to-equity ratio has shrunk to 1.16, Ramakrishnan told reporters. The company raised $750 million selling shares overseas, it said on Oct. 12. Tata plans to raise as much as 47 billion rupees to expand operations and pare debt from the purchase of the luxury brands, it said June 28.
The company, also India’s largest commercial-vehicle maker, has outstanding bonds and loans of more than 200 billion rupees, according to Bloomberg data.
Last month the company had its debt rating raised by Standard & Poor’s by one level to “BB-,” three levels below investment grade. The ratings company also gave Tata a “stable” outlook. Moody’s Investors Service also upgraded Tata for the second this time year on Oct. 26.
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