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Tata Motors turns in a profit for the first time in two years

The Mumbai-based automaker posted a consolidated net profit of 2,597.71 crore in the three months ended 31 December, compared with a loss of 1,516.14 crore a year earlier. Analysts polled by Bloomberg had estimated the company to deliver a 1,060 crore net profit during the quarter.

The homegrown passenger and commercial vehicle maker last made a net profit in the third quarter of fiscal year 2021. An improvement in margins in the domestic passenger vehicle (PV) and commercial vehicle (CV) businesses, as well as a sequential increase in sales at British luxury car arm JLR helped prop up consolidated revenue to 88,489 crore, up 22.5% on a yearly basis. Earnings before interest, taxes, depreciation and amortization (Ebitda) margin improved by 90 basis points to 11.1% from a year earlier.

Meanwhile, Tata Motors has issued a draw-down notice to obtain the second tranche of 3,750 crore investment from climate-focused fund TPG Rise, which had committed 7,500 crore in the company’s electric PV business last year. Tata Motors is expected to receive the funds by the end of the month, P.B. Balaji, group chief financial officer, Tata Motors, said in a conference call with reporters.

The company expects availability of semiconductor chips to improve in the subsequent quarters, aiding volume growth for JLR.

“We remain cautiously optimistic about the demand situation despite global uncertainties. We will remain vigilant on demand and our continued focus on profitable growth, improving semiconductor supplies and stable commodity prices will aid revenue growth, margin improvement and positive cash delivery in Q4FY23,” Tata Motors said in a press release.

Despite covid-19–led uncertainties in its largest market, China and uncertainties in semiconductor supplies, Tata Motors has kept its outlook unchanged for JLR. Its most profitable models accounted for 74% of its total sales during the quarter gone by. JLR has a total pending order book of 215,000 vehicles.

“Wholesales in China during the quarter were impacted by lockdowns leading to dealer closures followed by high rates of staff absence as covid-19 restrictions were relaxed. The situation is expected to recover in the fourth quarter with our dealers open and staff absence closer to normal levels in January,” the company said, and added, “Although there continues to be supply chain and other macro risks, our guidance for the full year remains unchanged.” It expects to ship out 80,000 units of JLR vehicles for the full fiscal year.

At home, the carmaker has garnered more than 20,000 bookings of its newest electric offering, the Tiago EV, and sold nearly 12,600 EVs in the quarter gone by.

Tata Motors’ PV margin rose to 6.9% in the December quarter, including a one-off gain of 80 basis points. Adjusting for this one-time gain, margins at 6.1% were higher than 5.4% in the previous quarter. Balaji said “directionally” the company is committed to improving margins across segments, on the back of softening commodity prices and an improved product mix. The company’s market share in the domestic PV market expanded by 200 basis points in the quarter to 14.1%.

Tata Motors’ CV business, in which it manufactures light, medium and heavy-duty trucks as well as buses, saw its best-ever margins in the recent past, with Ebitda improving by 580 basis points to 8.4%, led by sustained pricing improvement, cost actions and softening commodity prices.

“CV revenues at 16,900 crore was up 22.5% year-on-year despite wholesales being down 6%, reflecting improved mix and better market operating price,” the company said, and added, “The CV industry is poised for growth on the back of increased infrastructure activity, demand for last mile mobility and strong recovery in bus segment. Going forward, we expect a good replacement demand, especially in MHCVs in Q4FY23, as we also maintain a close watch on the evolving geopolitical situation, inflation and interest rate risks on both the supply and demand.”

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