Tata Motors net gets rupee push

CORPORATE SCORECARD

Tata Motors, the country's top vehicle maker, today announced a 22 per cent rise in the quarterly net profit on the back of gain from appreciation of the rupee, offsetting the fall in bus and truck sales and rising material costs.

Net profit stood at Rs 467 crore in the quarter compared with Rs 382 crore in the corresponding period a year ago. It posted a currency gain of Rs 206 crore in the quarter when the rupee appreciated 6.8 per cent against the dollar, its biggest quarterly surge in over three decades.

Tata Motors emerged as the second firm from the Tata stable after Tata Steel and the third Indian company to gain from the appreciating rupee. Jet Airways yesterday announced rise in net profit due to currency gain.

Operating margin has actually come down to 9 per cent (13 per cent), excluding forex gains. Margins had come under pressure also due to high commodity prices, crude oil, interest rates and inflationary pressures.

Analysts remained concerned about higher interest rates and the slowdown in the commercial vehicle business in the country. Also, the raw material cost, including prices of aluminium and steel, are going up.

Praveen Kadle, finance director of Tata Motors, said in a press conference that the sales were expected to rise in the coming quarters.

Sales in the June quarter went up by 5.3 per cent to Rs 6,057 crore (Rs 5,750 crore). Tata Motors' share prices today fell 1.1 per cent to Rs 699.3 in a strong market. Its truck and bus sales in the domestic market fell 2.3 per cent to 61,633 units. Sales of the pricier and more profitable medium and heavy trucks declined 11 per cent to 32,655 units.

Kadle said, "The company has taken cost saving measures such as rationalising the workforce, reducing the working capital and reducing the fixed costs during the quarter which has helped the company perform better. The company aims to continue to perform better in the coming three quarters of this year."

Not only has the truck sales gone down during the period, but even its market share has dipped to 59 per cent (64 per cent).

Its truck production was hit due to supply bottlenecks created by Cummins, the company which supplies engines for Tata trucks. However, Ravi Kant, MD, added that the problem would be resolved by August.

Sales of passenger cars grew marginally by 0.74 per cent to 41,800 units (41,489 units). The company has lost out on market share due to growing competition for the small car Indica and the mid-sized sedan Indigo during the quarter.

Passenger vehicles sales climbed 3.9 per cent to 51,840. Tata Motors, India's third-largest car and sports-utility vehicle maker, has tied up with Fiat SpA, Italy's largest automaker, to build a factory and sell new models in India.

With regards to the '1 lakh car,' Kant mentioned that the company is on schedule to achieve the mid-2008 deadline to commercially launch the car with a possible showcasing of the vehicle at the 2008 Auto Expo.

Even as rising costs have impacted overall margins, Kant was hopeful that Tata Motors would stick to the Rs 100,000 sticker price of the car. "It is a tough challenge for the company to keep costs under control, but we are striving hard to meet the target," said Kant.

The company will also soon ink a deal with Fiat's commercial vehicle arm Iveco for manufacturing and sales of trucks and other vehicles in the South American market and other regions which also includes India.

The company is also talking to southern states including Karnataka, Tamil Nadu and Andhra Pradesh for putting up a bus manufacturing facility for the joint venture with Marco Polo. An announcement is due in the coming few weeks.