Q1 Results: Tata Motors Reports Fourth Loss In Five Quarters

Tata Motors Ltd.’s losses widened substantially in the June quarter as the automaker was hit by bleak demand in India while sales of its luxury unit Jaguar Land Rover Automotive Plc continued to struggle.

Net loss increased to Rs 3,680 crore from Rs 1862.7 crore year-on-year, according to its exchange filing. Analysts tracked by Bloomberg were expecting a loss of Rs 1,970 crore.

• Revenue fell 7 percent to Rs 61,647 crore.
• Operating margin narrowed 130 basis points to 7.5 percent.
• Margin for JLR fell 200 basis points to 4.2 percent.
• JLR’s revenue fell 3 percent to £5.07 billion.

JLR, which contributes the bulk of Tata Motors’ profit, is facing global headwinds due to slowing sales in China, technology disruptions and rising cost of debt. Increased protectionism in the U.S. and uncertainty around Brexit also threatens to impact business and JLR’s competitiveness.

But Tata Motors’ problems don’t end there. India is in the midst of one of the worst auto sector slowdowns with sales having fallen for nearly a year. The severity of the slowdown has led automakers to lay off workers and shut showrooms across the country.

The automaker had to dole out higher discounts in commercial vehicles to boost sales. That has impacted standalone performance, too. Tata Motors’ margin in India declined to 6.7 percent from 8.4 percent.

Tata Motors couldn’t avoid a loss due to the domestic auto industry declining “sharply and significantly”, the automaker in a statement. The performance of JLR reflects the impact of seasonality in the backdrop of weak markets, it said.

“The continued slowdown across the auto industry due to weak consumer sentiments, liquidity stress and the impact of axle load effect, particularly in medium/heavy duty (segment), impacted overall demand,” said Guenter Butschek, chief executive officer and managing director of Tata Motors. “With the budget announcement and upcoming festive season, we expect some tailwinds for the remaining FY20.”

Fitch Ratings Inc. has downgraded Tata Motors’ rating and lowered its outlook to negative, citing risks from its already poor profitability and free cash generation.

“Uncertainty around an orderly outcome of Brexit negotiations and the evolving global tariffs situation pose risks, in particular to JLR business, which faces a significant level of production-sales mismatch due to concentration of its production base in Britain,” it said in a statement.

JLR is betting on electric vehicles to counter its damp sales and plans to offer electric variants for all of its models by 2020. However, Fitch remains cautious of unexpected delays for that plan.

Other Highlights

• JLR Wholesales fell 10 percent to 1.18 lakh units during the quarter.
• Sales volume in India declined 22.7 percent over last year.
• Commercial vehicle wholesales fell 16 percent.
• Passenger vehicle wholesales fell 30.1 percent.
• Finance costs increased by nearly five times to Rs 1,712 crore. These included Rs 112 crore of lease liability due to accounting charges.

On Thursday, Tata Motors shares fell 4.56 percent to Rs 144.35 apiece on the BSE while the benchmark Sensex shed 0.04 percent to end the day at 37,830.98 points.