TATA Motors surprised the market on Wednesday by reporting a 19% rise in its second quarter net profit, attributing the performance to new product launches, strong sales in certain categories and cost reduction initiatives.
However, the company said its net profit of Rs 527 crore includes a Rs 199 crore gain from noncore business.
Tata Motor’s revenues for the quarter rose marginally by 1.3% to Rs 6,673 crore. For the fiscal half year, it’s net profit stood at Rs 993 crore on revenues of Rs 12,729 crore. On a consolidated basis, the company’s net profit was up 6% to Rs 570 crore.
Tata Motor shares fell marginally by 1% to Rs 757 on the Bombay Stock Exchange, on a day when the broader index was down 0.3%.
It has been a tough year for most automobile companies which saw sales slacken due to steep input costs and higher interest rates across commercial and passenger vehicles impacting operating margins, said the newly-annointed Tata Motors executive director (finance) C Ramakrishnan. “However, we are confident at maintaining operating margins at 10% for the next two quarters,” he said, adding that marginal price increases across the CV category and cost reduction initiatives will help maintain the margin.
Mr Ramakrishnan was recently appointed to his current post after the former ED Praveen Kadle, was moved to the group’s new company, Tata Capital, as managing director.
Automobile companies were hit after RBI raised interest rates to beat inflation making it expensive for retail borrowers, who deferred their purchases. The slowing sales also forced Tata Motors to cut production at its Pune unit and bench some of its workforce to counter the downtrend.
Interest costs for the company has more than doubled to Rs 214 crore in the July-September quarter. The company had early this year announced a Rs 12,000-crore capex plan for expansions in all their product categories mainly to ramp up its presence in the fast growing auto market.Speaking to reporters at a conference in Mumbai, Mr Ramakrishnan said the company improved its marketshare in medium and heavy trucks, but lost its presence in the bus segment, mainly on account of supply chain shortages. In passenger vehicles, there has been a marginal loss of marketshare due to new entrants in a slowing market and delays in certain product introductions, which should see corrections the next year.
Tata Motors, has indicated it is interested in bidding for the high profile Ford Motor’s marquee brands Jaguar and Land Rover and the bids are likely to be finalised by early November. The company is also scheduled to roll out the much-hyped one lakh car in the middle of FY08-09.