The passenger car business continued to bleed as Tata Engineering recorded a net loss of Rs 59.94 crore for the nine-month period of the current fiscal, as against a loss of Rs 76.05 crore during the same period last year.

During the last quarter, Tata Engineering posted an operating profit of Rs 132.54 crore, up marginally from Rs 133.79 crore last year. Net sales shot up from Rs 1,571.74 crore to Rs 2,390.17 crore during the period, while other income declined from Rs 21.74 crore to Rs 5 crore during the period.

Operating margins, however, declined sharply to 5.1 per cent, from 8 per cent during the same quarter last fiscal.

"Our losses during the last quarter was largely on account of the passenger carbusiness. The results reflect the impact of the full commissioning of the Indica plant during the quarter. The commercial vehicle segment, on the contrary, has done well and recorded profits during the last three months," said a senior Tata Engineering official. "We are hopeful of doing much better during the fourth quarter, as the Indica project will fully stabilise by then," the official added.

At the Bombay Stock Exchange, the Tata Engineering stock hit the lower end of the circuit as it lost Rs 18.45 to close at Rs 212.60. During the first nine months of the current fiscal, Tata Engineering rolled out 37,403 passenger cars, while sales during the period stood at 37,158 units. "While the ramp-up of production of the Indica has taken place during the year, the break-even level of operations is expected to be reached towards the end of fiscal 2001," the company has said.

The company's performance was also adversely affected as it could not fully recover the additional cost of fitting Cummins engines toits commercial vehicles. While the new engines involve an additional cost of between Rs 50,000-75,000, only a small proportion has been passed on the consumer.

"We have not fully recovered the full cost of the Cummins engines, and this contributed to our losses," the company official said.

Sales of commercial and utility vehicles during September-December stood at 35,983 units, up from 29,585 units last year. "The industrial recovery witnessed in the first two quarters of the current year has sustained its momentum even during the third quarter. This resulted in a 31 per cent increase in the sale of commercial vehicles during the first nine months of the current year," Tata Engineering said in a statement.

Total expenditure shot up from Rs 1,437.95 crore to Rs 2257.63 crore during the last quarter. While provision for depreciation zoomed from Rs 68.59 crore to Rs 98.52 crore, the interest charges were lower at Rs 99.38 crore from Rs 106.52 crore last year.

"We have been able to bring down our interestliability through better working capital management. The general dip in interest rates have also contributed in this regard," the company official said.

Insight
company has disappointed

Telco's financial results for Q3 have come as a big disappointment. Although the markets had expected a lower loss than the previous year or even a minor profit for the quarter, the company has reported its highest quarterly loss in the last two years. This is despite the fact that it has sold far more vehicles during the quarter. In fact, its December sales are believed to be very impressive. Two reasons are cited for the poor performance of the company: promotional expenses on the Indica and costs incurred on fitting commercial vehicles with Cummins engines. The current quarter too cannot be expected to be much better. The Indica project is unlikely to break even in the current fiscal and the company would continue to incur high promotional expenses. Besides, since Telco has failed to recover theadditional costs incurred on Cummins engines so far, there is little reason to believe that it will be able to do so in the near future.

Sarad Saraf