Covid fallout: Tata Motors reports loss of Rs 9,894 crore in Q4

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June 16, 2020 3:20 AM

The company had a consolidated net loss of Rs 9,894 crore for the January-March 2020 period, against a consolidated net profit of Rs 1,108 crore in the corresponding quarter last year.

It is a complete reversal of the gains that the company had reported in the second and third quarters on the back of improvement seen in Tata Motors’ domestic and in the Jaguar Land Rover businesses.

Tata Motors reported one of its highest quarterly losses as the Covid-19 pandemic impacted its India and overseas businesses. The company had a consolidated net loss of Rs 9,894 crore for the January-March 2020 period, against a consolidated net profit of Rs 1,108 crore in the corresponding quarter last year.

It is a complete reversal of the gains that the company had reported in the second and third quarters on the back of improvement seen in Tata Motors’ domestic and in the Jaguar Land Rover businesses. JLR, which contributes around 78% of the company’s overall revenues, had a rough run during the March quarter, washing out the profits made during the second and third quarters.

PB Balaji, group chief financial officer, Tata Motors, said, “Fourth quarter results were significantly impacted by the pandemic. Business is taking hard calls to navigate this crisis”. As a result of lower sales, JLR suffered a loss of £501 million in the fourth quarter and reported revenues of £5.4 billion. Covid impact on margins was almost £800 million.

The company said it is seeing encouraging recovery in China with all its dealers now open, and with sales of 6,828 vehicles in April, down only 3.1% year-on- year, and 8,068 in May, up 4.2% year-on-year.

In India, demand which was already adversely impacted by the general economic slowdown, liquidity stress and stock corrections due to BSVI transition, was further affected by the lockdown. “Steep volume decline, particularly MHCV, and resulting negative operating leverage impacted profitability and cash flows,” he said.

The company reported a sharp 28% year-on-year decline in revenue from operations at Rs 62,493 crore, while the operating income (earnings before interest, tax, depreciation and amortisation) came in lower by 66% at Rs 2,875 crore. Consequently, Ebitda margins also contracted by a sharp 510 basis points to 4.6% during the quarter. For the full year ended March 31, 2020, the company reported a consolidated net loss of Rs 12,000 crore, while the consolidated revenue from operations declined 14% to Rs 2,61,068 crore compared to previous year. Consolidated Ebitda margins declined 50 basis points to 8.4%

Tata Motors further said that the first quarter of the current financial year is expected to be significantly weaker in both JLR and Tata Motors domestic business, with the full impact of lockdowns being reflected in the results.
The company had reported a consolidated net loss of Rs 26,961 crore in the quarter ended December 2018 on account of an exceptional item of asset impairment in its UK arm, Jaguar Land Rover (JLR) of Rs 27,838 crore.

However, the net loss in the quarter ended March 2020 is its highest ever on an operational basis. The company had reported a consolidated net loss of Rs 3,679 crore at the beginning of the year. In December 2008, the company posted a consolidated net loss of nearly Rs 2,599 crore.

Balaji said that despite all the challenges, the second half of the year saw a strong cash flow generation of Rs 4,000 crore and businesses taking significant interventions to reduce the cash burn, and is undertaking strong capex rationalisation and reduction in structural costs of the business.

“We are calling out a set of strategic actions that we will be taking in the coming days to significantly deleverage Tata Motors Group, with JLR turning cash positive on a sustainable basis from FY22 onwards,” he said.

On Tata Motors’ domestic business, he said that the company is restricting its capex spends in the domestic business, dropping them by 66% to Rs 1,500 crore in the current year. The company has also planned a cost reduction plan to take out almost Rs 1,500 crore of cash and cost from the system and an additional capex and working capital savings of Rs 4,500 crore. “So a total of Rs 6,000 crore of cash reduction plan is being planned which will deleverage business,” he said. The company has deferred or cancelled low margin and non-critical investment as part of the strategy. In JLR too, capex is being pruned and brought down to £2.5 billion in FY21.

Tata Motors standalone posted a 48% y-o-y decline in revenue from operations at Rs 9,733 crore in the March quarter, while the Ebitda margin declined 1,250 basis points to 5.5%; the company posted a loss before tax at Rs 4,786 crore.

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