The Hindu Business Line : High input costs impact Tata Motors full-year net

Margins under pressure: Mr Ravi Kant (left), Managing Director, Tata Motors Ltd, and Mr P.M. Telang, Executive Director (Commercial Vehicles), at a press conference in Mumbai on Wednesday. —

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Mumbai, May 28 Despite rising interest rates and higher input costs, Tata Motors posted a 6 per cent rise in net profit at Rs 2,029 crore for the financial year 2007-08. The revenues grew by 4.6 per cent to Rs 28,731 crore.

The consolidated net profit for the year stood at Rs 2,168 crore, a marginal decrease over Rs 2,170 crore in the previous year.

The consolidated revenue stood at Rs 35,651 crore, up by 10 per cent from Rs 32,361 crore in the previous year. The company did not separately disclose the fourth quarter results.

“The company’s margins were under pressure during the year due to rising interest rates, constraints in availability of vehicle financing from outside sources and unprecedented increase in input prices,” said Tata Motors CFO, Mr C. Ramakrishnan, while announcing the results.

Vehicle sales

The vehicle sales increased to 5,85,649 units, highest ever of the company, from 5,80,280 units in the previous year. The company maintained its leadership position in commercial vehicles and was among the top three players in the passenger vehicles, although it lost some market share.

In the domestic market, commercial vehicle sales increased by 4.8 per cent to 3,12,935 units and passenger vehicle sales at 2,18,055 units declined by 4.5 per cent.

The CFO attributed the decline in car sales to growing competition in the segment. “The passenger car industry saw a moderate growth. There were 16 new cars and 50 new variants launched last year,” he said.

“In commercial vehicles, there were weak demand drivers. Our volumes were impacted by the reduction of economic activity,” Mr Ramakrishnan said.

Historic year

Tata Motors considers last financial year as a historic year as the company unveiled world’s least expensive car Nano and it signed deal to acquire Jaguar and Land Rover.

Tata Motors divested 15 per cent stake each in the subsidiary companies HVAL (HV Axles Ltd) and HVTL (HV Transmissions Ltd) for funding the Rs 12,000-crore Jaguar-Land Rover deal.

Mr Ramakrishnan said that the company would divest stakes in a few other subsidiaries too. Apart from Nano, the company would launch New Indica, New Indigo and a new utility vehicle platform in the current fiscal, he said. Ace variants, Marco Polo buses and World Trucks are the commercial vehicle offerings to be launched this year. The company will launch 100 new products/variants in four years.

However, the company sees challenging times ahead. “This will be probably the most difficult year. The external factors such as unprecedented hike in fuel, tyre and steel prices are going to affect us. On sales side, the sudden contraction of vehicle financing is another challenge,” said Mr Ravi Kant, Managing Director, Tata Motors.

About the increasing running cost of automobiles due to fuel and tyre price hike and its impact on Nano’s sales prospect, he said, “Surely it will have an effect. We are looking at alleviating the impact of these factors.”

Tata Motors’ shares of face value Rs 10 closed at Rs 635.55 on the NSE today, up from yesterday’s close of Rs 631.40.