Telco May See Sales Dip 4-5% In Fiscal

Tata Engineering (Telco) has issued what could be interpreted as the first official profit warning from the ailing auto giant. Executive director Ravi Kant said at the sidelines of a press conference yesterday that the company was expecting a 4-5 per cent dip in sales of commercial vehicles for fiscal 2000-01.

"The sales can at best equal those posted by the company in the previous year," he said.

Kant said that on an year-on-year basis, the drop will be primarily because of a decline in sales of its medium commercial vehicles (MCVs), which has fallen by almost 40 per cent this year.

He attributed the drop in sales to the sales-tax hike on commercial vehicles from 4 per cent to 12 per cent, and an improvement in the performance of railway's transportation business and, finally, the increase in diesel prices.

Several analysts said that Kant's statement was in line with their projections.

"We are expecting Tata Engineering to post losses of over Rs 200 crore for the full year. With HCV sales down, margins will take a severe beating. Passenger car sales will also be lower," said an analyst with a foreign brokerage.

He said that earnings before interest, depreciation and tax per annum is likely to take a 3 per cent hit this year, resulting in a net loss of close to Rs 230 crore. The company has posted a Rs 74 crore loss in the first quarter.

The only respite has been some gain in the utility vehicles category where Tata Engineering has wrested some market share from Mahindra & Mahindra.

Analysts said the company has incurred an additional expense of between Rs 40,000 and 50,000 to make its trucks Euro-I compliant. The company has desisted from passing on the entire additional cost on to the customers, taking hit on the margins.

At the same time, prices of both steel and aluminium have gone up over last year's, said an analyst.