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Tata Motors Ltd (updated - 28 July 2009)
Tata Motors’ profitability has seen a smart turnaround with the operating profit margin (OPM) in the June 2009 quarter up 430 basis points year-on-year at 11.4 per cent. This has resulted in its EBITDA (earnings before interest, tax and depreciation) soaring by 48 per cent to Rs 728 crore.

The jump in margin has been driven primarily by a steep fall in raw material costs by nearly 500 basis points to around 67 per cent of sales from just over 72 per cent of sales in the June 2008 quarter. In fact, the operating margins have improved sharply even sequentially and is also the result of better sales of high-margin medium and heavy commercial vehicles (M&HCVs).

The improvement in margins is creditable given that the top line showed a fall of 7 per cent to Rs 6,405 crore, given lower volumes sold during the quarter. The management had indicated after the annual results for 2008-09 that demand for M&HCVs would continue to be weak. Industry watchers point out that prices of some raw materials have been moving up. If margins were to be sustained at levels of 11 per cent, sales of bigger trucks, which command better margins, needed to pick up towards the second half of the year.

With the home market expected to recover over the next six months on the back of several government programmes and stimulus packages and the management indicating that exports should also pick up in the coming months, Tata Motors should be able to clock better volumes in the rest of the year.

The Tata Motors stock has gained 150 per cent since March this year compared with a rise of 65 per cent for the Sensex. While concerns about the high debt on the balance sheet and Jaguar and Land Rover (JLR) business remain, the stock is now likely to be viewed more favourably.
source - BS

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Tata Motors Ltd
The Nano launch may have prompted a 6 per cent upmove in the Tata Motors stock in Monday’s opening session of trade, but it’s unlikely the sentiment will sustain. The car may well find itself a new niche in the passenger car market and go on to become a hit. But that’s some time away and it will be a couple of years before the Nano contributes meaningfully to the company’s revenues.

In the meanwhile, Tata Motors continues to stare at a weak demand for both commercial vehicles (CV) as also cars. While CV volumes were lower by 51 per cent y-o-y in January 2009 compared with a fall of 46 per cent y-o-y in the December 2008 quarter, to revert to the mean could take a while given that the downtrun in the economy persists.

Moreover, Tata Motors is not in great shape -the company posted a loss of Rs 260 crore (including Rs 220 crore of forex losses) in the December 2008 quarter with operating margins down to just 2 per cent.

While a drop in margins was expected with sales volumes slipping 32 per cent, the extent of the erosion was surprising indicating that the full impact of falling steel prices hadn’t been felt yet --- raw material costs were up 150 basis points sequentially. While lower input costs and higher volumes should help expand margins from here on, for them to move back to 8 per cent could take another couple of quarters. Initiatives to bring down costs, targetted at savings of Rs 1,000 crore over the next three years, too are longer term measures; in the near term the bottom line could remain under pressure.

The bigger worry is the Jaguar and Land Rover (JLR) business - volumes fell 35 per cent yo-y in the December quarter. The strain on the company’s balance sheet isn’t lost on investors; the debt-equity ratio of close to 1.5: 1, is not low. Also, by mid-2009, Tata Motors needs to raise around $2 billion to repay the rest of the $3 billion bridge loan that it took to acquire JLR.
source - BS

Tata Motors Ltd
The first bit of good news at India’s biggest auto maker, Tata Motors, is that it has managed to re-finance the $3 billion that it had signed on to buy the Jaguar and Land Rover (JLR) business. Even if it was forced to sell its equity cheap for a song in a rights issue last September, the company has succeeded in finding lenders for another $2 billion, though the money may not have come cheap.
The other piece of good news is that the Indian economy seems
to be on the mend and the management says things seem to be looking better with each month; apart from the heavy trucks for which there seem to be few takers even now, there are certainly more buyers now for the smaller trucks, like the Ace, than there were six months back.
In fact, the company’s March 2008 sales numbers reflect the improvement — sales were down just under 23 per cent, compared with a fall of about 34 per cent in the December 2008 quarter.

However, raw material costs continue to hurt badly, resulting in some very weak operating profit numbers. Nevertheless, the company may have seen off the worst in the home market, even if takes a while to get back the momentum. However, the story with JLR isn’t as encouraging ---the management says there’s been some pick-up in demand, though it’s still a bit of a mixed picture, with some markets such as China and Russia looking up but others such as the Middle East in a slump.

In fact, Tata Motors’ exports have slipped sharply because of poor demand in markets such as South Africa. The stock has almost doubled since the start of the year to the current levels of Rs 337 and has outperformed the benchmark indices by awide mark. However, while the picture is not as bleak as it was in January, it’s not yet rosy, given that demand is yet to move up to pre -2008-09 levels, the high 1:1 net debt to equity ratio for the standalone company and a possible equity dilution somewhere along the way.
source - BS

Tata Motors Ltd (updated - 01 Sept 2009)
Aggressive cost cutting measures have been initiated at Jaguar and Land Rover (JLR), including lowering the headcount, imposing a wage freeze and sourcing components from markets that offer cheaper alternatives.These measures have left the business in better shape at the end of the June 2009 quarter than it was in the March 2009 quarter but despite this JLR has posted a loss of 64 million pounds, in the June 2009 quarter, on revenues of 1.12 billion pounds.

The losses in the March 2009 quarter, however, were more than twice this amount so there is some material improvement thanks to lower spends on marketing, overheads and raw material costs. With demand in the key US and European markets yet to pick up, vehicle volumes were lower during the quarter — dealer volumes saw a sharp drop of 52 per cent year-on-year while retail volumes were lower by 35 per cent yearon-year, as the company adjusted production with demand.

However, what’s encouraging is that, sequentially, wholesale volumes were up 10 per cent and retail volumes stayed flat. Moreover, inventories are not unusually high. The other bit of good news is that JLR has managed to access bank finance to the tune of 100 million pounds and should manage another 340 million pounds soon. With the rationalisation measures bringing in cost savings, analysts expect JLR to break even in 2010-11 and losses could be curtailed to around 200 million this year compared with a loss of 307 million pounds in 2008-09.

With a consolidated debt of just under Rs 21,000 crore, Tata Motors’ balance sheet remains highly leveraged but the company plans to sell stakes in subsidiaries and in group companies -in the last quarter for instance, sales of Tata Steel shares fetched it Rs 320 crore. With demand for commercial vehicles looking up in the home market, sales for Tata Motors in the current year are expected to come in close to Rs 71,000 crore. However, with the JLR business still weak, it may post marginal losses.
source - BS

Tata Motors Ltd (updated - 09 Oct 2009)
The Tata Motors stock was up 5 per cent on Thursday with the Street relieved that the auto major has closed out a £175 million (Rs 1,300 crore) line of credit from State Bank of India.

The funds will be used to run the Jaguar and Land Rover (JLR) business in the UK, which posted a loss of £64 million in the June 2009 quarter on revenues of £1.1 billion. It could be a while before JLR business turns around. But serious cost-cutting measures, including trimming the workforce, imposing a wage freeze and sourcing components from markets that offer cheaper alternatives, ensured that losses for the June 2009 quarter were about half the amount posted in the March 2009 quarter.

What helped was mainly lower expenses on marketing overheads and raw material costs but analysts were expecting the raw-materials bill to be even smaller given the sharp drop in prices of steel and aluminium.

Also, with demand in the key US and European markets still sluggish, sales were subdued with dealer volumes falling 52 per cent year-on-year while retail volumes were lower by 35 per cent year-on-year. On a sequential basis though, the numbers were more reassuring.

In the meanwhile, the rationalisation measures initiated - including the closure of one of its plants in the Midlands - should help JLR break even in 2010-11 with losses being contained at £200 million this year compared with a loss of £307 million in 200809. With the recovery in the commercial vehicles (CV) sector in the home market gaining momentum, Tata Motors is expected to report revenues of Rs 7,700 crore for the September 2009 quarter, an increase of 9per cent year-on-year.

A smaller raw-materials bill is expected to result in a strong operating profit margin of 12 per cent (11.4 per cent in the June 2009 quarter) leading to a 65 per cent rise in the operating profit. The rise at the net profit level however would be modest at 27 per cent because of high interest costs. Tata Motor’s consolidated revenues for 2009-10 are expected to come in at around Rs 75,000 crore while the losses are expected to be lower at just under Rs 1,000 crore compared with Rs 2,276 crore in 2008-09. The stock has had a strong run gaining nearly 30 per cent since August, compared with a move of 6 per cent for the Sensex. But at Rs 587, all near-term upsides appear to be priced in.
source - BS

Tata Motors Ltd (updated - 28 Oct 2009)
India’s biggest auto company Tata Motors is now on a much firmer ground in its home market and seems to have regained pricing power. Tata Motors took a couple of price increases and as a result has managed to earn better per unit realisation on its vehicles. This has helped it post a strong operating profit margin (opm) in the September quarter.

While revenues were up 13.2 per cent driven by a 12 per cent growth in volumes, the opm increased 200 basis points sequentially to 13.4 per cent. The better top line apart, the company has efficiently managed its inventories and raw materials purchases. In the September quarter, raw material costs, as a percentage of sales, came off by 120 basis points over the June 2009 quarter.

The company has been talking of cost-cutting initiatives and it has clearly delivered on this front. Not surprisingly, the stock closed up 1.6 per cent at Rs 548 on Tuesday in an otherwise weak market which lost 2.3 per cent. Of course, the stock has retreated from its 52-weak high of Rs 621 that it hit on September 22 this year.

While the company is now out of the trough as far as the home market is concerned, it is the consolidated balance sheet, which includes the financials of Jaguar and Land Rover (JLR), that makes the Street cautious. The JLR business, located in the UK, posted a loss of £64 million in the June 2009 quarter on revenues of £1.1 billion. It could be while before JLR starts making money, though losses for the June 2009 quarter were about half of what was reported in the March 2009 quarter.

What helped was mainly lower expenses on marketing overheads and raw material costs, but that could change now as prices of both steel and aluminium have started firming up. JLR’s dealer volumes in the June quarter dropped 52 per cent year-on-year implying that while the global economy may be on the mend, demand for expensive cars may take a while to revive. Nevertheless, a slew of costcutting measures is expected to help JLR break even possibly in 2010-11. Losses this year are expected to be restricted to £200 million, far lower than the £307 million posted in 2008-09.

Thus, Tata Motors is expected to post consolidated losses of around Rs 1,000 crore in the current year on estimated revenues of Rs 75,000 crore, less than half the loss of Rs 2,276 crore reported in 2008-09. Unless JLR posts some good numbers for the September quarter, the stock may consolidate around current levels.
source - BS

Tata Motors Ltd (updated - 01 Dec 2009)
The markets have given athumbs-up to the improvement in consolidated numbers of Tata Motors for the September 2009 quarter. Its shares closed 5 per cent higher at Rs 661 yesterday as compared to its Friday’s closing.

Tata Motors’ subsidiary Jaguar Land Rover (JLR), reported an operating profit of 41 million pounds (Rs 315 crore, based on a euro-rupee exchange rate of 76.83) on higher volumes and better realisations signalling a turnaround at the UK-based company’s financial performance.

Net profits for the consolidated entity came in at Rs 22 crore as against loss of Rs 329 crore in the June 2009 quarter and Rs 942 crore in the September 2008 quarter. The company would have reported a loss of Rs 148 crore, if one were to adjust for the one-offs such as profit from sale of investments and forex loss.

Compared with the June 2009 quarter, wholesale volumes (sales to dealers) at JLR were up 23 per cent to 44,000 units for the quarter primarily driven by the rise in Land Rover sales that were up by a third. Land Rover contributes 2/3rds to volumes while Jaguar accounts for the rest.

While UK, China and Russia recorded growth, other key markets of the US and Europe (excluding Russia) recorded a fall in sales. Although retail sales for JLR were more or less flat as compared with the June 2009 quarter, the company expects sales to stabilise with the improvement in market conditions and show a jump in the March 2010 quarter when it launches the new Jaguar XJ model.

On the debt front, the recent GDR issue and payment of bridge finance has helped the company bring down its consolidated debt. The company plans to reduce its net debt levels further in the automotive business, which currently stands at Rs 23,000 crore, by divestments and further equity funding.

While product development and engineering expenses continue to be a drag on JLR, (about 75-100 million pounds a quarter), future profitability hinges on the ability of the company to scale up sales volumes and execute aslew of measures which include rationalisation of its UKbased manufacturing facilities, R&D centres, productivity improvements and lowcost sourcing arrangements.

The hardening of commodity prices, however, could spoil the show for the company in the coming quarters.
While there has been a turnaround in performance, Tata Motor’s stock has run up 17 per cent over the last one month and is trading at a premium to the sumof-the-parts analysts’ estimates that pegs the fair value at Rs 465-550.
Tata Motor’s future profitability hinges on its ability to scale up JLR volumes and execute a slew of cost-reduction measures
source - BS