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| Jaguar Land Rover likely to break-even by FY11 |
| Press Trust of India / New Delhi Aug 17, 2009, 18:46 IST |
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Fueled by improved volumes and expected recovery in the global economy, Tatas-owned British marquees Jaguar Land Rover (JLR) are expected to break-even by financial year 2011, says a brokerage report.
Further, a break-even scenario for the luxury car maker could substantially boost the earnings of its parent Tata Motors.
"We expect a recovery in JLR volumes by FY11, led by the anticipated recovery in the global economy as well as new model launches.
"We believe the twin effect of volume-recovery and aggressive cost cutting measures would likely lead to break-even for JLR by FY11," brokerage firm IDFC SSKI said in a report.
Tata Motors acquired JLR from American car maker Ford Motor last year for about $2.3 billion.
JLR has been severely hit by the ongoing financial turmoil and has witnessed falling sales. Moreover, Tata Motors reported a loss of Rs 2,300 crore for the fiscal year 2009, primarily bogged down by the losses at JLR.
"Given the substantial stress on Tata Motors' earnings on account of losses at JLR (TML posted a Rs 23 billion loss in FY09 due to the Rs 22 billion loss at Jaguar Land Rover), even a break-even situation at JLR is expected to significantly boost Tata Motors' earnings going forward," the report said.
The brokerage firm in its report expects JLR to fund its own financing requirements in the coming months.
Last week, Tata Motors said it has arranged funds for JLR.
"With the positive trend in the external environment in financial markets and improvement in general liquidity, these arrangements (the funding requirements for JLR) have been and are expected to be concluded without necessitating guarantees from the UK government, for which discussions had been ongoing for some time," Tata Motors said in a statement on August 11.
The companies also anticipate the long-term loan of 340 million pounds from the European Investment Bank, sanctioned to JLR, to be secured in the coming weeks.
"These developments signal increased easing of credit as well as rising comfort on JLR's business prospects going forward. Hence, we expect JLR to be able to fund its own financing requirements going forward," the report noted.
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