A $1.6 billion or over R8,300 crore of non-cash goodwill and impairment charge, mainly for its European operations, dragged Tata Steel?s full year consolidated numbers to a net loss of R7,362 crore in 2012-2013 fiscal, against a net profit of R4,948.5 crore last fiscal. These charges are a reflection of the severely depressed conditions in the UK and Europe.
Tata Steel is not alone. The weak foreign operations of several Indian companies have dragged down the numbers for the consolidated business.
Bharti Airtel?s African operations also continue to fare poorly. The company?s Africa net loss widened to nearly R2,210 crore for the year ended March against R1,329 crore last year.
?Africa continued to drag overall margins lower and missed expectations,? says a Morgan Stanley report dated this May.
?Margins fell 112 bps to 25.4%, against an expectation of an improvement. Traffic declined 11%, and minutes of usage was down 15%; however, the removal of freebies led to an increase in voice ARPM (average revenue per minute),? the report said. The foreign brokerage says the company is looking to gain revenue market share and improve margins in Africa by offering promotional tariffs.
Tata Chemicals posted an unexpected net loss of R188 crore in the fourth quarter ended March as a result of impairment charges of R484 crore taken on the UK-based soda ash assets, under Tata Chemicals Europe.
Tata Chemicals managing director R Mukundan had said the company expects challenging times, both in domestic and international markets. ?This, coupled with liquidity crunch due to delayed payment of subsidy, continues to drag the company?s performance,? he said.
Pune-based Bharat Forge, too, hasn’t had much luck with its overseas operations. Barring its US operations, which registered a 10.2% increase in revenues, European and Asia-Pacific revenues saw a fall of nearly 25% and about 28%, respectively. As a result, the company’s consolidated net profit was pulled down by 40% to R2,476 crore during the year. The company during the year sold its American assets, namely Bharat Forge America, for $11.25 million.
On the other hand, Tata Motors benefited hugely from the good performance of Jaguar and Land Rover (JLR) ? JLR?s revenues last year increased by 17% to ?15,784 million, boosting the consolidated revenue of Tata Motors for the year to R1.88 lakh crore, a growth of 14%. However, profitability remained under pressure as a result of poor performance of the domestic auto business and the absence of deferred tax asset at JLR last year, which impacted the numbers.
Godrej Consumer?s overseas operations have also reported good numbers, registering sharp increases across geographies. The company’s Indonesian firm Megasari Group, for example, reported an increase of 34.5% in revenues during the year, while Mahindra and Mahindra?s Ssyangyong in South Korea narrowed its annual net loss to 106.07 million South Korean won in 2012 against 112.44 South Korean won million in the previous year.
Sun Pharmaceutical Industries reported a 40% increase in net sales to R11,239 crore and net profit jump of 16% to R3,008 crore during the year ended March, led by a strong performance from its US business. The company’s US subsidiary, Taro, reported an increase of 24% in its FY13 sales to $671 million and full year net profit registered a surge of 30% to $266 million. The same holds true for Wockhardt. The company?s US market under Wockhardt USA boosted consolidated revenues for the full year by 29% to R5,609 crore and net profit up from last year to R1,579 crore. US revenues were up by 52% during the year. ?The overseas operations as a result of acquisitions made by Indian companies have seen a difficulty in generating positive results? most Indian companies do not have the management bandwidth to handle large global businesses, with disparate operations spread across several countries. However, if the overseas operations are organic in nature, for example, pharmaceutical or IT businesses, and they have been growing at a measured pace over time, they are easier to manage? such foreign operations usually deliver good results,? says Saurabh Mukherjea, ceo (institutional equities), Ambit Capital.
