Tata Motors Results : Jaguar Land Rover very profitable, Indian operations not so!

[GTO]

High Points

- All data for the most recently ended financial year (April 2010 - March 2011).

- The Tata Motors Group’s global wholesale volumes for FY 2010-11, including Jaguar Land Rover, stood at 1,080,994 units, representing a growth of 24.2% as compared to the previous year.

- Global sales of all commercial vehicles were at 512,731 units, while global sales of all passenger vehicles were at 568,263 units.

- The Tata Motors Group reported consolidated revenues of Rs.123,133 crores, posting a growth of 33.1% over Rs.92,519 crores in the previous year.

- Profit before Tax for the year was Rs.10,437 crores, compared to Rs.3,523 crores for the previous year.

- Profit (After Tax) for the year was Rs.9,274 crores, a significant increase from a profit of Rs. 2,571 crores in the previous year.

Tata Motors Standalone

- Tata Motors’ sales (including exports) of commercial and passenger vehicles for FY 2010-11 stood at 836,629 units, representing a growth of 25.2% as compared to the previous year. In the domestic market, the Company's commercial vehicles sales increased by 22.7% year-on-year to 458,828 units. The Company's market share in commercial vehicles was 61.8%. Passenger vehicles grew by 23.0% year-on-year in the domestic market to 319,712 units. Tata Motors’ gross revenue for the year ended March 31, 2011, was Rs.52,136 crores, posting a growth of 35.9% over Rs.38,364 crores in the previous year. Revenues (net of excise) of Rs.48,040 crores, represented a growth of 35% over Rs.35,593 crores in the previous year. Cost pressure, including commodity price increase, resulted in a reduction in the operating margins to 9.9%, and an Operating Profit (EBITDA) of Rs.4,771 crores in the year, posting a growth of 14.2% over Rs.4,178 crores in the previous year. The PBT for the year is Rs.2,197 crores as compared to Rs.2,830 crores in the previous year.

Jaguar - Land Rover Standalone

Jaguar Land Rover recorded strong profitability reporting net revenue of GB£9,906 million and a Profit after Tax of GB £1,043 million. Sales volumes improved to 243,621 as compared to 193,982 in the previous year, on the back of improved market conditions.

[kaks15]

I had this question in my mind for long so m putting it here (mods redirect if not apt) -

I have heard a lot many times that Tata should not be playing with a limited brand portfolio (Indica, Indigo) in the passenger car segment and should instead have a house of brands, eg there was a huge debate somewhere on internet that Manza should not have been an Indigo series rather a it should have been launched as a separate product brand.
Yet i see the strong results!

My question thus is in the context of Indian automobile market what brand strategy would be more apt; limited product brands and their extensions or unassociated house of brands (as in case of HUL)

[julupani]

That is truly a wonderful year for Tata Motors, financially at least.

Another feather in their cap is that after two third of a century Tata Motors becomes the largest Tata company by revenue, as Tata Steel's international reveues last FY were at 119000cr.

[pgsagar]

Very happy to see Tata Motors climbing up the ladder. Addition of brand Jaguar to their portfolio seems to have worked wonders for them. I heard Tata is unable to meet the demand for Jaguar cars. Where once Jaguar were not doing well to now when they are just flying off the showrooms.

As for Tata's own cars, though I never owned any of their cars but I kinda like them for their VFM offerings. The automotive press has never been generous to Tata Motors and they, even today, put every Tata car under microscope and look long and hard until they "find" panel gaps and "infra-dig" finish. But the same press is silent about Honda/Toyota recalls and German premiums' break-downs.

To hell with this press, I wish Tata Motors all the success.

[tifosikrishna]

I thought Nano's less than expected sales will affect the bottom line, but results seems to be too good to be true. Any information about Nano's impact on the profitability?

[dot]

Originally Posted by GTO

Passenger vehicles grew by 23.0% year-on-year in the domestic market to 319,712 units.

Thats such a good news for an Indian car manufacturer. While growth is lower than MUL (30.1%) but gap is decreasing, I understand. Tata Motors has build a solid platform in the car market, from here they should concentrate on making more variety and reliable cars backed with better service.

[siedo]

These result puts an end the questions raised in past about accepability of brand Jaguar under ownership of TATAs.

Tata motors great going..

[smartcat]

This is a very interesting article from The Telegraph (UK). Basically explains how Tata Motors managed to turn around JLR.
Jaguar Land Rover rewards Tata's faith and investment - Telegraph

After rejecting Lord Mandelson's condition-laden proposal, Tata set about securing £500m of commercial finance for JLR while at the same time pouring in £1bn of its own cash to prop up the company and to maintain investment in research and development. Since 2009, it has invested £1bn a year in R&D and plans to continue that spending for the next five years.

The new JLR chief executive Ralf Speth said yesterday that this investment will lead to "the most ambitious product development programme in the history of the brands". It has already helped to yield cutting-edge projects such as the Range Rover Evoque and CX-75 hybrid supercar.

But while the cash has come from India, the expertise has come from Britain. JLR has a workforce of 17,000 staff at three manufacturing plants and two R&D bases in Britain.
Tata, unlike other foreign owners, has committed JLR to the UK because it recognises the importance of British heritage to the brands and, despite recent comments, the quality of British engineers.

[fiat_tarun]

Just came across this -Link

Ratan Tata’s gambit to acquire Jaguar and Land Rover (JLR) has paid off. Almost on all parameters, JLR operations have scored over the company’s domestic operations. Starting with sales, the company’s domestic operations clocked sales of 241,000 units (95,000 passenger vehicles and 131,000 CVs and 15,000 exports) in the fourth quarter, a growth of 15 per cent y-o-y. JLR clocked sales of 64,083 units, a growth of 12 per cent.

JLR has significantly contributed to the company’s profitability. However, concern stems from the domestic numbers. On a standalone basis, the company’s operating margin has touched a low of 8.8 per cent in the fourth quarter, while for the full year the figure stands at 9.9 per cent. Analysts say this indicates the going will remain a challenge in the domestic market as sales could decelerate in FY12. On a consolidated basis, margins for the fourth quarter have come in at 13.5 per cent, and for the full year at 14.4 per cent.
In the first nine months of FY11, JLR operations clocked margins of 14.8 per cent, which has saved the day for the company. Clearly, the global operations have provided the much-needed kicker to profitability. While a global footprint has helped the company overcome pressures in the fourth quarter, analysts believe this does not bone well for the domestic market, which is expected to slow down further.

Nano is driving volumes for the company, as it has sold 100,000 units in FY11, but the margins are relatively thin. Indica sales have remained flat at 99,515 units, claim analysts. Says Deepak Jain, assistant vice-president (auto) at Sharekhan: “The results on an annual basis are good, but for this quarter the standalone margins have come in at 8.8 per cent, lowest in two years. We expect volume growth from JLR to continue in FY12, driven by strong demand from China.”

Profit after tax for the fourth quarter stood at Rs 2,637 crore, below the expectations of analysts. While the actual figure meets with the expectations of the Street, a boost has come from exceptional items like forex gain of Rs 177 crore. If this is adjusted, then the PAT stands at Rs 2,460 crore, which is below the consensus estimates. Also with the tax rate for the fourth quarter coming at a much lower level has pushed up the profits, claim analysts.

The company has brought down its debt/equity ratio to 0.6 per cent levels. The company’s gross debt stands at Rs 32,000 crore and net debt stands at Rs 22,000 crore. The company intends to reduce this even further as cash flows improve.

[aslambhai]

A total profit of 9000 crores!! Great going!!

But (this is a shocking but), JLR contributed > 1b pounds (1043m to be precise) to this profit. With an pound-INR exchange rate of ~75, that amounts to INR 7800 crores. Which mean, if we exclude JLR operations, TATA Motors would have made a profit of just ~ INR 1400crores!! We would see similar effect on revenues!!

This not only makes JLR acquisition a masterstroke from Mr. Ratan Tata (take a bow sir), but also puts into question the growth and revenue/profit potential of the original TATA motors. Its no hidden fact that Indica is not doing very well. Nano hasn't met the expected response but is catching up fast (atleast not yet, due to various well-documented reasons). Other products in the portfolio (including Aria) look dated and don't feel like they belong to this decade.

In a way, I agree with kaks15. TATA motors need to launch a slew of products. With multiple products targeting multiple market segments ( la Maruti Suzuki)

Correct me if I am wrong, but Dolphin project is the only one I see from them. Sadly, that won't be enough. The kind of investment JLR is putting in, TATA needs to replicate that. (on a funny note: may be all the money is being used up by JLR, and TATA doesn't have any spare )

[C300]

Great news indeed. Buying JLR proved to be a masterstroke from TATA.

Above all, the argument against Indian ownership of European brands should be put to rest now. Similar hurdles were faced by Mr Laxmi Mittal when he launched an audacious bid to acquire Arcelor back in 2006. Now the results speak for themselves.

Seeing JLR back in the game, wonder whats Ford thinking now .

[julupani]

@aslam

Actual India revenues are still higher, its a sort of 60:40 split in revenues, but a 20:80 split in terms of profit. But the point is Indian car market is not a high margin market. And also Jaguar and Land Rover actually cater to high end markets, the base product as of now of Jaguar is the XF. Thus almost all of JLR products are high margin products, allowing it to generate higher profits from smaller volumes and revenues.

But it s true, Tata PCBU India is as of now the weakest link in the whole Tata Motors operation. CVBU is doing very well indeed and seem to be future ready with the Prima group of vehicles. CVBU's only issue is to revamp and modernise it's standard range of trucks in line with development of the CV sector in India. But the PCBU segment only has the Indica/Indigo CS models heavy sales to bank on. Manza is doing decently. The Sumo range has pretty much been forgotten. The performance of the new Safari remains to be seen. And Aria seems to be in a soul searching phase, having not yet found its niche in the market.

JLR on the other hand is going all cylinder's firing. New exciting products like the Evoque, CX-75 etc. Lots of established highly rated products, Range Rover, Freelander, XF, XJ etc etc.

[RS_DEL]

[] From a financial perspective the investment by TML in the JLR combine stands vindicated without question.

[] Sadly though as of today, the engineering skill and knowledge benefit that should have accrued to TML is not evident. I use the term "as of today" because as outsiders we do not know the developments going on within the company.

[] JLR will be the undisputed jewel in the crown IF TML can leverage the intellectual wealth acquired in this combine(JLR) to bring products to market in the volume segment without the historical record of QC shortcomings in the production process.

[viper_711]

With JLR out of the red and contributing positively to TML bottomline - We will now see more sharing of technology and platforms between the two. The news announcement that JLR plans to put up an engine plant in India seems to be a step in the direction.

[rrsteer]

I want this company to do well as it is kind of a flag bearer for the Indian auto industry. And the financial numbers reported are great.

But statistics and numbers are like a girls skirt, they hide more than they reveal. As important as JLR has become to TM, its Indian operation doesn't look too great.

While the CVBU is so far doing good and with Prima it has a good lineup, the 61% market share is going to fall. The competition is really going to swell in this segment in the next 3-5 year period.

PCBU is the weakest segment for Tata Motors. Indica has continuously lost market share. From almost a monthly avg of 11000 units it is now down to average of 7000 units. Manza though performing decently, its market share is also just a hit away as Toyota introduces the diesel Etios and the new dezire is launched. UV segment has been ignored by Tata for its undoing. It will be very hard for Tata to match Mahindra here.
While Nano has proved a great marketing tool for TM its ROI is debatable. With the wafer thin margins, Nano needs to clock 300,000 units a year.

IMO, Tata needs to introduce another automotive brand. Something like Lexus for toyota, which conveys a very different value proposition than the Tata brand.