Improvement in medium and heavy commercial vehicle (M&HCV) volumes and production cuts during the March quarter is expected to see Tata Motors trim its losses on standalone basis for the quarter. It had reported net losses of R458.49 crore for the December quarter.
Meanwhile, Jaguar Land Rover that makes almost all of Tata Motors? profits is expected to continue to boost profits on the consolidated basis for the March quarter. Though analyst estimate profits to be more realistic as the tax credit they accounted for last year would be missing this time.
?We expect losses to reduce a bit in Q4FY13 as the company has taken certain cost cutting measures and there has been improvement sighted in the M&HCV segment during the quarter,? said Mahantesh Sabarad, senior analyst, Fortune Financial Services.
In the March quarter, Tata Motors sold 34,203 M&HCVs against 31,482 units in the previous quarter, a growth of 9%.
He, however, added that the overall volumes continue to be down with 30% fall on year-on-year basis for March quarter and 4% down on sequential basis. The company sold 1,96,370 units in March quarter against 2,79,998 units in the same period last year. In December quarter, Tata Motors sold 2,03,853 units.
?Tata Motors saw around 3% growth in the first half of FY13. However, the second half has been tough with M&HCVs and passenger vehicles (PVs) de-growth,? said a Mumbai-based auto analyst.
He added that Q3FY13 (December quarter) saw a sudden drop in sales of Nano coupled with the M&HCV slowdown that decelerated its sales. Other reasons for the fall in demand are rising fuel prices and now the additional 3% excise duty talked about government on the sports utility vehicle (SUV).
According to a Icra?s report dated April 2, the PV industry?s domestic volume growth is expected to be around 2% in FY13, as small car segment that accounts for 55-60% of the industry?s volumes is likely to continue to grow at a rate slower than other PV segments.
Moreover, analysts believe Tata Motors may look at cutting down its capex plans for FY14 to make up for the losses. Moreover, Tata is expected to hit the market soon to raise funds equivalent to its losses to fund it.
?Tata Motors (on standalone basis) may look at short to medium non-convertible debentures or at non-payment of dividend to make up for losses,? said an auto analyst from a foreign brokerage. For the September quarter, the company?s consolidated debt stood at R41,724.48 crore.
In an inventor call for December quarter results on February 14, C Ramakrishnan, CFO, Tata Motors, said, ?At a consolidated level, the total capital expenditures and product development expenses stood at close to around R14,000 crore that includes Tata Motors and Jaguar Land Rover. Again, at a consolidated level, net automotive debt-to-equity ratio stood at 0.37:1.?
?In Tata Motors, the product development and capital expenditure for the nine-months period was around R2,000 crore and net debt-to-equity ratio has gone up slightly and stood at 0.89: 1,? he added.
Ramakrishnan further said that the company was ?fairly okay in terms of overall balance sheet, leverage and borrowing.?
Since January, Tata Motors has undertaken production cuts at its plants. The company has also been discounting heavily to lure customers for its vehicles.