Zest, Bolt success hold key to Tata Motors car business profits: Moody’s

Aug 15 2014, 19:06 IST
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Tata Motors has Ba3 stable rating from the agency. Reuters Tata Motors has Ba3 stable rating from the agency. Reuters
SummaryThe profitability of the struggling domestic unit of Tata Motors, especially that of its passenger car division...

The profitability of the struggling domestic unit of Tata Motors, especially that of its passenger car division, depends on the success of the newly launched sedan Zest and the forthcoming roll out Bolt, says global rating agency Moody’s.

"The profitability of Tata Motors' passenger car business depends on its ability to sell significant volumes of its new Zest and Bolt models," Moody's said in a statement.

The company has Ba3 stable rating from the agency.

"If TML sells at least 15,000 units a month of the Zest and the Bolt combined, its market share of the passenger car segment would be about 10 percent and re-establish the standing of the car business," Moody's vice-president and senior credit officer Alan Greene said.

"Such a sales figure would be a phenomenal turnaround for the company. It sold an average of 6,300 cars a month in the first four months of the fiscal year," he added.

Tata Motors, this Tuesday launched its first car in four years, in a bid to regain market share and plug losses in its domestic business. The Zest is priced at Rs 4.6 lakh and above and is available in diesel and petrol variants.

The compact sedan Zest competes with the established brands like Maruti D'zire, Honda Amaze and Hyundai Xcent. The company plans to launch the hatchback Bolt by the end of the year.

On the company’s credit profile, the agency sees the company demonstrating weaker consolidated credit metrics this fiscal, but does not see any downgrade as it global arm JLR looks to continue to report strong set of numbers, helping to retain the current high rating level.

JLR revenue rose 31 percent to 5.4 billion pounds, while Ebitda jumped 68 percent to 1.1 billion pounds in the June quarter, helping the parent report the best ever net income growth in the past nine quarters which rose nearly fourfold to Rs 5,398.21 crore for the three months to June.

Strong JLR sales helped boost the company's overall margins by a massive 550 bps to 20.3 per cent from 15.8 per cent a year ago, while margins at the domestic operations fell to minus 2.8 per cent from 2.3 per cent. Revenue from JLR jumped 54 per cent to Rs 54,425.97 crore.

On the other hand, revenue from Tata and other brand vehicles and financing during the quarter were at Rs 9,898.38 crore, down 11.33 per cent. JLR

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