Q4 Results: Tata Motors Profit Declines 50% In March Quarter, Missing Lowest Analyst Estimate

Tata Motors Ltd.'s profit halved in the March-ended quarter as losses at its Indian business continued and U.K. subsidiary Jaguar Land Rover was hit by slower sales growth.

Consolidated net profit fell 50 percent to Rs 2,125 crore compared to the same quarter last year, according to Tata Motors' stock exchange filing. That was lower than the Rs 3,750 crore estimated by analysts that Bloomberg tracks.

• Consolidated revenue rose 18.2 percent year-on-year to Rs 91,279.1 crore.
• Ebitda rose 3.7 percent to Rs 11,250.3 crore
• Operating margin contracted 170 basis points to 12.3 percent

The drop in profit was largely due to a Rs 2,113 crore investment made by Tata Motors towards new vehicles and technologies during the quarter. “We invested for growth, launched exciting new products and established landmark partnerships,” N Chandrasekaran, chairman of Tata Motors, said in a media statement.

Jaguar Land Rover, that contributes nearly 90 percent to Tata Motors’ revenue, continued to face headwinds in the U.K. However strong retail sales, particularly in China and North America, helped it offset the weakness in Europe, said JLR’s Chief Executive Officer Ralf Speth. The luxury-car unit’s Ebitda margin fell to 12.2 percent from 14.4 percent a year ago. That’s mainly due to “higher depreciation and amortisation as a result of the significant investment in the business and slower sales growth than in recent past”, the statement added.

The global market for JLR will remain challenging, Speth said in the press conference, adding that conditions in U.K. and Europe will be especially uncertain due to Brexit.

• Jaguar Land Rover’s revenue rose 4 percent to £7.56 billion
• Profit before tax fell 46 percent to £364 million
• Overall profit was boosted by a one-off pension credit gain of £437 million
• Deliveries at Tata Motors’ luxury-car unit fell 3.8 percent in the quarter
• Demand for newer models such as the Jaguar E-Pace compact sport utility vehicle and Range Rover Velar failed to offset lower sales of older models.

Tata Motors reported a loss of Rs 500 crore in its standalone business after having seen a profit in the previous quarter. That too was attributed to exceptional investments made in the business and impairment of some assets. There are visible signs of a domestic turnaround, said Chandrasekaran. “We gained market share in both commercial and passenger vehicles with strong improvement in profitability and positive cash flow.”

The Tata group's flagship will continue to heavily invest in both JLR and its Indian business. In 2018-19 Jaguar Land Rover has committed to pump in £4.5 billion towards new models and technologies. CEO Ralf Speth said the automaker will continue with the “over-proportional investments”. Even in India, Tata has launched a new range of trucks as it looks to gain back its falling market share in commercial vehicles. It has been investing Rs 1,500 crore every year, according to Girish Wagh, the head of its CV business, and it will continue to increase that marginally.

Shares of Tata Motors ended 0.6 percent higher at Rs 309.40 apiece ahead of the results announcement. The stock declined 24.3 percent between January and March, posting its highest quarterly profit decline in over two years. That compares with 9.9 percent decline in NSE Nifty Auto Index.