Tata Motors narrows Q4 loss on strong operational show by JLR, India biz

Company’s passenger vehicle business’ earnings before interest tax, depreciation and amortisation (Ebitda) were the highest in a decade
Tata Motors reported a strong operational performance for the quarter ended March 2021 (Q4) -- led by its UK subsidiary Jaguar Land Rover (JLR) and its India business -- and narrowed its consolidated loss, which was mainly on account of exceptional items.

The Tata group-owned global automobile manufacturer reported a net loss of Rs 7,605 crore against a net loss of Rs 9,894 crore in the corresponding quarter. Excluding the exceptional items, the firm's revenue, Ebitda (earnings before interest, taxes, depreciation, and amortisation), and profit before tax (PBT) were higher than Street estimates.

The loss was mainly on account of asset write-downs and restructuring costs of Rs 14,994 crore with respect to JLR's Re-imagine strategy. The net exceptional expenses were Rs 13,347 crore, after considering Rs 2,000 crore of write-backs in the India business.

The company’s passenger vehicle (PV) business’ Ebitda was the highest in a decade.

Though on a low base, the company's consolidated revenue from operations during the quarter rose by 41.8 per cent year-on-year to Rs 88,628 crore in Q4FY21. The sequential increase was 17.1 per cent.

According to a poll by Bloomberg, analysts had pegged revenue, Ebitda and PBT at Rs 87,518 crore, Rs 11,210 crore and Rs 4,538 crore, respectively. In comparison, Tata Motors reported Ebitda of Rs 12,745 crore and PBT of Rs 5,074 crore for Q4FY21.

“It was a quarter that saw a strong resilient all-round performance despite the pandemic,” PB Balaji, chief financial officer, Tata Motors, told reporters in a post-earnings call. He said demand for JLR continues to improve as more population gets vaccinated and normalcy returns to most of its key markets including the US, UK and Europe. JLR reported pre-tax profits of £534 million in Q4 and £662 million for the full year before exceptional charges.

Balaji flagged supply disruptions and commodity inflation as the key concerns. “The current quarter is likely to be adversely impacted by lockdowns, semiconductor shortage and steel inflation,” said Balaji. The performance in the current year is set to get better progressively as supply chain and Covid situation improves, he added.  

Led by a strong recovery in China where sales soared 127 per cent JLR retailed 123,483 vehicles in the three months to March, up 12.4 per cent year-on-year. Full year retails of 439,588 vehicles were still down 13.6 per cent, although sales in China increased 23.4 per cent year-on-year.

During the quarter JLR took an exceptional charge of £1.5 billion, including the £952 million of non-cash write-downs. The company, in February, had indicated of these exceptional charges to be taken in Q4.

It invested £2,343 million in FY21 and plans to spend similar amounts in FY22. The Project ‘Charge+’ delivered £2.5 billion in FY21 and lifetime of £6 billion, said Balaji.

“While we believe lower capex and government’s stimulus would support JLR, improving PV business and focusing on cost control would improve the company's standalone margin. Moreover, tight control on capex and R&D would lower its automotive debt to greater extent over the next 2-3 years,” said Mitul Shah, head of research at Reliance Securities.

In view of the ongoing revival of JLR’s global business and restructuring of domestic business coupled with attractive valuation, Reliance Securities maintains a positive view on the stock.

Meanwhile, the India business including joint operations reported a net profit at Rs 1,646 crore in Q4FY21 against loss of Rs 4,871.05 crore in the year-ago quarter, while revenue jumped 106 per cent year-on-year to Rs 20,046 crore during the quarter, driven by strong PV demand and recovery in commercial vehicle demand. The standalone entity, which took impairment for the PV business and onerous contract provision of Rs 2,000 crore reversed this quarter on the back of significant improvement in performance of the PV business. The PV business’ Ebitda margin at 4.9 per cent for Q4.

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