Tata Motors shares plunge to 52-week low despite jump in net profit; here are 4 reasons

By: | Published: August 10, 2017 11:01 AM

Shares of Tata Motors fell sharply over 6% to a 52-week low after it reported a 41.54% jump in net profit to Rs 3,199.93 crore for the June quarter of the current fiscal, benefiting from one-time gain relating to changes made to JLR pension plans.

Shares of Tata Motors listed on New York Stock Exchange also hit over a year-low, closed down 6% at .5 on Wednesday. (Image: Reuters)

Shares of Tata Motors fell sharply over 6% to a 52-week low after it reported a 41.54%  jump in net profit to Rs 3,199.93 crore for the June quarter of the current fiscal, benefiting from one-time gain relating to changes made to JLR pension plans. The stock of the heavyweight automaker tumbled 6.63% to the 52-week low of Rs 388.25.

Net Profit dilemma:

The net profit of the automaker has advanced nearly 42% helped by a one-time gain related to changes to Jaguar Land Rover’s pension plans, masking a fall in company’s income. The first quarter results have not met our expectations, said Tata Motors MD & CEO Guenter Butschek.

On a standalone basis, Tata Motors posted a loss of Rs 467.05 crore for the April-June quarter of 2017-18 fiscal as compared to a profit of Rs 25.75 crore in the same period of 2016-17. Tata Motors said, “consolidated profit before tax for the quarter includes a one-time gain of Rs 3,609 crore relating to the changes made to the Jaguar Land Rover pension plans.”

Total revenue:

The total income from operations during the April-June quarter fell 9.59% to Rs 59,818.22 crore, as compared to Rs 66,165.89 crore in the year-ago for the same quarter. Total income from operations on a standalone basis dropped 9.26% to Rs 10,375.32 crore for the quarter ended in June 2017 versus Rs 11,434.91 crore in the same period year-ago.

British arm JLR reported a revenue of GBP 5.6 billion, up GBP 244 million. JLR’s profit before tax was GBP 595 million, up from GBP 399 million in the year-ago period. This included a 437 million pounds one-off credit relating to recent changes designed to improve the sustainability of the company’s defined benefit pension plans, Tata Motors said.  

The decline in sales volume:

Volume sales, including exports of commercial and passenger vehicles for the quarter stood at 1,11,860 units, down 11.8% when compared to the corresponding quarter last year, it said. JLR retail sales for the quarter was at 137,463 units, up 3.5% from the year-ago period.

Tata Motors said its operating performance broadly reflected JLR’s lower wholesale volumes excluding China JV and continuation of higher competitive incentive levels and launch and growth costs seen in FY17. In the domestic market, there has been significant de-growth in the medium and heavy commercial vehicles segment, flat light commercial segment and moderate growth in passenger vehicles segment.

Executives take:

Tata Motors MD & CEO Guenter Butschek said, “While the first quarter results have not met our expectations, we are working with renewed focus and energy to improve the performance of our commercial and passenger vehicle businesses.”

Jaguar Land Rover Chief Executive Officer Ralf Speth said, “We continue to deliver rising volumes and revenues across the business, reflecting strong demand for new models such as the Range Rover Velar and established global award winners such as Jaguar F-PACE.”

Shares of Tata Motors listed on New York Stock Exchange also hit over a year-low, closed down 6% at $31.5 on Wednesday.

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