Domestic Performance A Drag On Tata Motors

Tata Motors announced its Q1FY14 numbers on August 07, 2013. The company’s financials witnessed the same trend as it has been seeing since the last few quarters. On a standalone basis, the performance of Tata Motors has been extremely disappointing while the performance of Jaguar Land Rover (JLR) has been robust.

This trend in financials was predictable, considering the sales volumes for Q1FY14. In the quarter under review, Tata Motor’s domestic sales were lower by 19.33% over that in Q1FY13. Its Commercial Vehicle sales were down by 7% and Passenger Vehicle sales dropped by 42.87% on a yearly basis. Rxports dropped by 12.52%. This led to the overall sales dipping by 18.86% in the quarter.

In contrast, JLR sales grew by 10.45% over those in Q1FY13. Driven by the demand for XF and the newly launched F-Type, the sales of Jaguar expanded by 28.02%, on a yearly basis. In the same period, Land Rover sales grew by 7.13%. Robust demand for the Freelander and the New Range Rover kept overall sales strong. In terms of geographies, good traction was seen in the UK, China and Asia Pacific.

On a standalone basis, Tata Motors' revenues declined by 14% to Rs 9104.5 crore. Its EBITDA declined by a massive 84.97% to Rs 105.19 crore. However, the net profit grew by 10.23% to Rs 703.26 crore. The company reported ‘Other Income’ of Rs 1620.55 crore, which is 3.62x higher than that seen in Q1FY13. Coupled with a flattish trend in finance charges and lower exchange loss, this resulted in a boost in the bottomline.

While the performance of Tata Motors has been dismal, JLR posted a good performance, with the latter's Q1 revenues growing by 12.62% to GBP 4097 million. Its operating profit increased by 28.1% to GBP 675 million and the net profit grew by 28.8% to GBP 304 million. As a result of an increase in volumes, favourable exchange rates and a richer product mix, JLR saw improvement in profitability.

On a consolidated basis, the revenues of Tata Motors grew by 8% to Rs 46784.66 crore as compared to those in the previous year corresponding period. The EBITDA came in 8.07% higher at Rs 6219.2 crore. Its consolidated net profit, however, declined by 23.82% to Rs 1762.81 crore. The major reasons for this were a decline in the ‘Other Income’, higher finance costs and higher tax.

We expect this trend of underperformance by Tata Motors and JLR's outperformance to persist over the next few quarters.