Will take a call on Tata Motors post monitoring margins for next 1-2 quarters: Kotak Institutional Equities

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Published: February 17, 2017 12:55:41 PM

Stating that the sharp increase in incentives for Tata Motors is concerning, Sanjeev Prasad, Kotak Institutional Equities on Friday said that he will take a call on Tata Motors post monitoring margins for next 1-2 quarters.

"I don't expect private capex to take sometime to recover and I don't think metal, power, oil & gas, telecom, roads will lead investment cycle," he added.“I don’t expect private capex to take sometime to recover and I don’t think metal, power, oil & gas, telecom, roads will lead investment cycle,” he added.

Stating that the sharp increase in incentives for Tata Motors is concerning, Sanjeev Prasad, Kotak Institutional Equities on Friday told ET Now that he will take a call on Tata Motors post monitoring margins for next 1-2 quarters. Talking about the banks he said, “It is clear that private banks will continue to grow faster than PSU banks. Valuations of HDFC Bank also looks rich currently”. “I don’t expect private capex to take sometime to recover and I don’t think metal, power, oil & gas, telecom, roads will lead investment cycle,” he added.

Earlier this week, Tata Motors said that its fiscal third quarter net profit fell by a baffling 96% on-year to Rs 112 crore, as weak JLR performance and big domestic business loss ate into the operating profits and bottomline, against expectations. Its actual Oct-Dec net profit was minuscule compared to the Reuters’ analyst poll estimate of Rs 2,248 crore, and ET Now poll estimate of Rs 2,635 crore. All the other major financial metrics except for the consolidated revenue fell way short of estimates. Its consolidated EBITDA (earnings before interest tax depreciation and amortisation) at Rs 5,161 crore was lower than ET Now poll of Rs 8,600 crore, while the consolidated operating margin was at a mere 7.7% against the expected 12.8%.

JLR earnings were the major drag on consolidated results. The luxury car unit reported an EBITDA of GBP 611 million vs ET Now poll estimate of GBP 910 million, while its operating margin at 9.3% was sharply lower than the 14% expected by the analysts. Tata Motors said that its M&HCV segment (medium & heavy commercial vehicles) shrunk while LCV segment (light commercial vehicles) results were flat. “During the quarter, commercial vehicle segments of the company witnessed demand shrinkage due to the demonetisation. M&HCV segment witnessed major pressure with a fall of 9% on-year,” Tata Motors said.

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However, car segment grew, partially offsetting the commercial vehicles performance, it said. “Passenger vehicles segment grew by 25.4% on-year with car segment growth of 31.1% on-year on the back of continued strong response to the Tiago,” Tata Motors said, adding that exports grew by 34.6% on-year.

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