Tata Motors sees 51% slide in net, cuts expansion

Written by Corporate Bureau | Mumbai | Updated: May 30 2009, 06:44am hrs
Incoming MD PM Telang
The countrys largest commercial vehicle maker, Tata Motors, on Friday reported a fall of 51% to Rs 1,001.26 crore in its standalone net profit for the financial year ended March 31, 2009, compared with Rs 2,028.92 crore the previous year. The management has indicated a cutback in expansion plans, saying it would focus on product development instead.

Tata Motors wrote back Rs 417.54 crore in FY09 thanks to changed accounting rules regarding foreign exchange provisions, notified by the ministry of corporate affairs in March. These changed norms do make the numbers look better, otherwise operationally it is testing times for the company, said a manager with a domestic fund.

The company also announced the appointment of PM Telang as the new managing director of India operations with effect from June 2. He replaces Ravi Kant, who will now become non-executive vice-chairman. Telang was executive director (commercial vehicles). No announcement was made on who would fill that vacant post.

Tata Motors total income stood at Rs 25,660.79 crore in FY09, compared with Rs 28,739.41 crore, a drop of 11%. It saw a 15.2% drop in sales of commercial vehicles, 4.8% in passenger vehicles and exports fell 39%.

Indicating that the liquidity crunch, coupled with a drop in industrial production and overcapacity in the market, played spoilsport, CFO C Ramakrishnan said the company would be cutting back on its capex plans and reducing its exposure to vehicle financing.

The capex plan as been reduced from Rs 4,000 crore to Rs 2,500-Rs 3,000 crore for each of the next two years, which typically cuts back capacity creation. It will be mostly spent on product development, said Ramakrishnan. He added that the company would look at de-leveraging its business and raising capital at the appropriate time.

The company plans to reduce costs by Rs 1,000 crore over the next three years. Its debt-to-equity ratio stands at 1:1. Tata Motors has Rs 12,000 crore in debt. Shares of the company closed flat at Rs 336.70, up 1.22% on Friday on the BSE.

Tata Motors did not announce its Q4 09 performance or consolidated annual results including Jaguar Land Rover (JLR). We will be announcing our consolidated result for the year at the end of June, which will include JLR, he said. He said work at Sanand in Gujarat, the new site of the Nano plant, is progressing well and is expected to start operations in the first quarter of calendar 2010.