Tata Motors profit lags as demand cools

MUMBAI Wed Nov 7, 2012 6:02pm IST

Jaguar Land Rover Freelander 2 vehicles are displayed on the production line for the media at their production plant in Pune, 190km (118 miles) south of Mumbai, May 27, 2011. REUTERS/Danish Siddiqui/Files

Jaguar Land Rover Freelander 2 vehicles are displayed on the production line for the media at their production plant in Pune, 190km (118 miles) south of Mumbai, May 27, 2011.

Credit: Reuters/Danish Siddiqui/Files

Stocks

   

MUMBAI (Reuters) - Tata Motors Ltd (TAMO.NS) net profit fell short of expectations as rising marketing costs hurt its margins and slowing economic growth curbed demand for its commercial vehicles.

India's largest car maker by revenue said net profit rose to 20.75 billion rupees in July-September from 18.77 billion rupees a year ago, while revenue increased 20 percent to 434.03 billion rupees on rising demand at its key Jaguar Land Rover subsidiary.

Analysts expected profit of 24.41 billion rupees on revenue of 441.91 billion rupees, according to Thomson Reuters I/B/E/S.

The operating margin for its India business fell to 5.9 percent for the quarter down from 7.2 percent in the year ago period.

Tata Motors' Chief Financial Officer C. Ramakrishnan said that the company expected to improve its India profit margins, as it continues to focus on cutting operational costs, but the demand outlook was clouded by the slowing economic growth.

"We continue to see sluggish economic activity," he said. "We continue to see demand pressure in the market."

Tata Motors, which depends on JLR for 90 percent of the group's profit, said the iconic British brand's operating margin stood at 14.8 percent in July-September, down from 14.9 percent a year earlier.

Revenue at the luxury British brand rose 12.8 percent to 3.29 billion pounds in the period, less than the 34.4 percent gain seen in the previous quarter.

Tata has grown dependent on JLR, which it bought for $2.3 billion in 2008, as domestic sales of its own models struggle.

JLR's recent success has also driven Tata's stock price 50 percent higher over the past 12 months.

Profit from the company's Tata-branded Indian business, which had fallen for four straight quarters, rose nearly eight-fold to 8.67 billion rupees. That was mainly because the company took an exceptional charge in the year-earlier quarter.

Domestic sales of Tata's own brand of cars and trucks have sagged due to India's cooling economy.

Tata also faces strong competition in India from global carmakers such as Ford Motor Co (F.N) and Volkswagen AG (VOWG_p.DE) and truck manufacturers such as Daimler AG (DAIGn.DE) as they scale up operations in the company's backyard.

Shares in Tata Motors ended 0.9 percent higher ahead of earnings announcement at 269.35 rupees, while the main Mumbai market index closed 0.5 percent higher.

(Reporting by Kaustubh Kulkarni; Editing by Louise Heavens)

Photo

After wave of QE, onus shifts to leaders to boost economy

DAVOS, Switzerland - Central banks have done their best to rescue the world economy by printing money and politicians must now act fast to enact structural reforms and pro-investment policies to boost growth, central bankers said on Saturday.

Republic Day

Reuters Showcase

Coal Mining

Coal Mining

India to open coal to commercial mining firms soon, minister says  Full Article 

RBI Loan Rules

RBI Loan Rules

RBI relaxes overseas loan recast rules   Full Article 

E-commerce Firms

E-commerce Firms

Amazon, e-commerce rivals fuel commercial property boom in India  Full Article 

Growth Forecasts

Growth Forecasts

Indian economic growth forecasts pegged back, despite rate cuts: Reuters Poll.  Full Article 

Uber is Back

Uber is Back

Uber back in Delhi; govt says must await approval.  Full Article 

Markets at Record

Markets at Record

Sensex rises to record after ECB stimulus programme.  Full Article 

Pharma Sector

Pharma Sector

Ipca Labs hit by FDA ban on plant for standard violations.  Full Article | Related Story 

Forex Reserves

Forex Reserves

India FX reserves at record high as RBI fortifies defences  Full Article 

QE for Euro Zone

QE for Euro Zone

ECB launches 1 trillion euro rescue plan to revive euro economy.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage