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| Edited By: Shishir Asthana |Source: DNA |Updated: Mar 18, 2018, 03:07 AM IST
Tata Motors’s results have spooked the market. The stock plummeted 6.5% on Friday to Rs1,086.40 at close.
On a standalone basis, Tata Motors posted net sales of Rs14,600 crore compared with Rs12,229 crore in the corresponding year-ago quarter. Adjusted net profit during the period was Rs62.75 crore compared with Rs49.74 crore.
Analysts have downgraded the stock on possibility of higher capital expenditure and lower margins.
Going forward, the company will improve and modify its domestic passenger vehicle sales and distribution network. It is setting up 100 utility vehicle specific dealerships as it believes the domestic product range is too broad. It is also setting up a separate network for Nano, which is still operating below breakeven levels.
Further, the company will focus on pushing volumes on the old Indica and Indigo platforms where margins are good. What’s more, it is setting up a new plant at Dharwad in Karnataka for LCVs with a capacity of 150,000 vehicles per annum.
Subsidy Jaguar Land Rover, on the other hand, posted a profit of Rs2,376 crore compared with Rs2,075 crore a year ago. The company’s operating margins, though, dropped one percentage point to 15.8%.
Tata Motors management is looking at stronger growth from BRIC countries and North America, which were earlier ignored. China is also expected to contribute 40,000 units in FY12 compared with 27,500 in FY11. The company is extremely bullish on its new launch, Evogue, which has seen 10,000 bookings and 150,000 enquiries.
Though the company’s international margins have fallen, it is taking necessary steps to increase volumes and boost profitability.
Those looking to invest in Tata Motors for the long term will do well to go through Tata Motors DVR (differential voting rights), which is trading at Rs610 a share, a 40% discount to the Tata Motors share. The DVRs also offer a higher dividend payout. The discount in international markets between DVR and normal equity shares is 15-20%. For Tata Motors, this gap is expected to narrow going forward.
