Tata Motors has entered the new financial year with one of its highest losses. With Covid-19 impact felt on the majority business the company’s consolidated net loss widened to Rs 8,444 crore during the April-June quarter compared to over Rs 3,679 crore in the same period last year. However, the losses were narrower than street estimates as the company engaged in stringent cost-saving measures. Fall in vehicle volumes impacted the revenues during the quarter. The company’s consolidated revenues nearly halved on a year-on-year basis to Rs 31,983.06 crore. PB Balaji, group chief financial officer, Tata Motors, said that broadly Rs 20,000 crore drop came in from JLR and about Rs 10,000 crore from Tata Motors’ domestic business. Sharp plunge in vehicle sales volumes especially commercial vehicle segment in India contributed to the dismal performance. Retail sales in Jaguar Land Rover were down 42% y-o-y to 74,067 units, while at Tata Motors in India CV volumes tanked 97% to 3,100 units and passenger vehicle volumes fell 55% to 18,600 units.
Jaguar Land Rover (JLR), which contributes 78% of the company’s overall revenues reported a 44% y-o-y drop in revenues to £2.9 billion and loss before tax of £413 million. The Ebitda (earnings before interest, tax, depreciation and amortisation) margins at JLR stood at 3.5% aided by cost savings coming through Charge+ programme of £500 million during the quarter. The company said in the second quarter of FY21, volumes may not pick up sufficiently to generate a profit at JLR, however, cash flow is expected to be positive, supported by improved working capital and continued savings. “As much as we take out cost and reduce cash burn in this business recovery of demand is an important lever for this business. It is a high fixed cost business, and while we are working on those, demand is a very important factor there,” Balaji said.
Tata Motors’ consolidated Ebitda during the quarter fell a sharp 78.2% y-o-y to Rs 831.5 crore, however, the margins came in at a positive 2.6% (-360 basis points y-o-y) aided by the cost saving programme of Charge+ at JLR which contributed £1.2 billion of cost and cash savings during the quarter. In India, the company has committed a Rs 6,000 crore cost and cash savings programme for the year, of which Rs 1,000 crore was achieved during the June quarter. The company had earlier said that it would be saving £1.5 billion under Charge+, but has now increased that target to £2.5 billion for FY21.
Tata Motors standalone, the domestic business, reported 80% y-o-y decline in revenues to Rs 2,700 crore on the back of around 80% drop in vehicle sales, while reporting a loss before tax of Rs 2,190 crore. Ebitda for the quarter was impacted by significant operating leverage even though cost and cash savings programme delivered Rs 1,000-crore savings during the quarter. Balaji said that 98% of the retailers at JLR are fully or partially opened and the company is seeing a month-on-month improvement in volumes. For the quarter China was down 2.5%, in North America there was an uptick in the month of June and so did in UK. “Every region is showing an improvement on month-on-month basis,” he said. “Overall we are starting to see gradual improvement in demand both in JLR and particularly in the passenger vehicle business in Tata Motors.”
However, commercial vehicle business continues to struggle. “Unlike PV, CV has started of much slowly since the lockdown started to be lifted. It still has its earlier issues of axle-load norms, financing issues, BS VI cost increase and lower GDP growth playing out and it is not out of the woods as yet,” Balaji said. While heavy commercial vehicle sales are slowly starting to pick up, medium and heavy commercial vehicle segment is extremely weak and will take another six months to start turning. Balaji said that the subsidisation of the passenger vehicle (PV) business scheme has been approved by the board on Friday and it will now go through the National Company Law Tribunal (NCLT) process soon. “It will be a key focus area for us in the coming nine months.” The company has ended the quarter with £4.7 billion of liquidity in JLR and close to Rs 7,000 crore in Tata Motors with debt maturities well spread out. The company’s net debt at the end of June 30, 2020, stood at Rs 68,000 crore.
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