tata motors: Robust Jaguar show helps Tata Motors beat the Street in Q4

Tata Motors on Friday reported a better-than-expected consolidated net profit for the fiscal fourth quarter, on the back of a robust operational performance at UK subsidiary Jaguar Land Rover Automotive and the India business.

The manufacturer of the Harrier and Nexon SUVs posted a net profit of ₹5,408 crore for the quarter ended March 31, compared with a loss of ₹1,033 crore a year earlier. A Bloomberg poll of analysts estimated the company to report a profit of ₹3,558 crore.

Net revenue of the Mumbai-based firm rose 35% year-on-year to a record ₹1,05,932 crore.

“It was a satisfying quarter with all cylinders of the automotive business firing in unison. We hope to replicate this performance in FY24,” chief financial officer PB Balaji told reporters in a post-earnings call on Friday.

A strong order book of 200,000 units at JLR and continuing good performance of the India business will help the firm replicate a sound operational performance in the quarters ahead, he stated.

JLR is on track to deliver a 6%-plus EBIT (earnings before interest and tax) margin, generate a free cash flow in excess of 2 billion and bring down the net debt to less than 1 billion in FY24, he said.

Tata Motors’ board recommended a final dividend of ₹2 per ordinary share and ₹2.10 per DVR share for the last fiscal year. If the shareholders approve the proposal at the August 8 AGM, they would be getting a dividend after a gap of seven years.

Pricing actions and a richer product mix led to improved average selling prices and bumped up the revenue. Easing inflation, better mix, pricing actions, and a favourable operating leverage resulted in strong improvements in margins and profits, the company said in a presentation.

Earnings margin before interest, tax, depreciation, and amortisation (Ebitda, or operating margin), for the consolidated entity rose 2.1 percentage points on year to 13.3%. At JLR, the Ebitda margin expanded 2 percentage points to 14.6%.

Tata Motors has outlined a capital expenditure of ₹38,000 crore for FY24. This includes ₹8,000 crore for the India business. It incurred a capex of ₹30,000 crore in FY23, said Balaji.

The higher profitability across the auto businesses helped the firm pare the net automotive debt to ₹43,700 crore as on March 31 from ₹57,500 crore three months earlier. The net debt at ₹6,200 crore for the India business was the lowest in 15 years, said Balaji.

Improved supplies, which came on the back of an easing of semiconductor shortage, helped JLR increase dispatches and expand the volumes 19% sequentially to an eight-quarter high of 95,000 units in the March 2023 quarter. It was higher than the company’s guidance of 80,000 units. The volume for FY23 rose 9.2% to around 320,000 units after declining in the previous three years. Most of JLR’s key markets, including the UK, Europe, the US and China saw wholesales increase sequentially as well as on-year.

“With the premium market being steady for the last two years, FY23 profitability in China was the highest in five years,” said Balaji. In addition to improved supplies and successful new launches, he attributed it to cost optimisation and a dealer net consolidation strategy adopted by it in the last couple of years.