Tata Motors Q3 profit jumps 195% on Jaguar Land Rover sales

Tata Motors posts a consolidated net profit of Rs.4,805 crore compared with Rs.1,630 crore a year ago

 
 British luxury car maker Jaguar-Land Rover, which Tata Motors bought in 2008, has been propping up 
 profits at its parent for the past two years. Photo: Eddie Keogh/Reuters

Mumbai: Tata Motors Ltd said its profit almost tripled in the three months ended 31 December, beating Street expectations, as its UK unit Jaguar Land Rover Automotive Plc (JLR) reported robust sales of luxury cars and premium sport utility vehicles, countering another dismal quarter for its domestic operations.

Net profit rose to Rs.4,804.8 crore in the quarter from Rs.1,627.5 crore a year ago, the Mumbai-based company said on Monday. Net sales rose 38.6% to Rs.64,377 crore. A Bloomberg poll of analysts had estimated net sales at Rs.61,004.5 crore and net profit at Rs.3,514.2 crore.

During the quarter, JLR’s wholesale (despatch to dealers) and retail (sales to buyers) volumes grew 22.7% to 116,357 units and 26.5% to 112,172 units, respectively.

The earnings, officials at the company said, have been driven by a richer product mix and strong response to new models like the Range Rover and Rover Sports across key markets, including China and the US. Typically, in the initial launch phase of a model, buyers tend to opt for the top-end variant, and this in turn propped up the average price realization and boosted margins, taking analysts by surprise.

“The JLR margin at 17.9% is much higher than our estimate of 15.5%,” said Joseph George, an analyst at brokerage IIFL Ltd.

Top company executives remain optimistic about maintaining the growth momentum despite concerns over slowing growth in China, which accounts for one in every four models sold by JLR globally. With the price per unit in China commanding a premium compared with other markets, the high contribution of sales out of China has been driving profits at JLR.

“There is a lot of headroom for growth in China,” said Ralph Speth, chief executive at JLR. Separately, in a conference call with analysts after the earnings announcement, chief financial officer of Tata Motors C. Ramakrishnan said the company is confident of sustaining the momentum, owing to a strong order book and a waiting period of four-six months for some of its models. “We are cautiously optimistic of the world economy,” he said.

Backed by strong earnings growth, JLR announced plans to invest £3.5 billion in fiscal 2015 (FY15) for research and development and expansion into newer markets. This is a sharp increase from the £2.75 billion it invested a year ago. The capital expenditure is likely to remain at elevated levels for another two-three years, Ramakrishnan told analysts.

This, however, is unlikely to have an impact on the company’s free cash flow as Tata Motors has £3 billion in cash on its books, along with a £1 billion line of credit from banks. 

NITESH KUMAR SINGH

PGDM 2nd

SOURCE-MINT LIVE NEWS