Tata Motors posts record $4 bil. loss on Jaguar woes

Tata Motors posts record $4 bil. loss on Jaguar woes

The auto major said its Q3 profit was impacted by an exceptional item of asset impairment in its British arm JLR of Rs 27,838 crore.

Shares in India's Tata Motors tanked nearly 30 per cent today after problems at its Jaguar Land Rover unit dragged the luxury carmaker to India's biggest quarterly loss. Resolution of China dealership issues is still ongoing and resulting volume reset could continue over next few months; Brexit is another overhang with no clarity yet.

JLR's China retail sales nearly halved in the December quarter as overall demand in the world's biggest auto market contracted previous year for the first time since the 1990s.

Tata Group Chairman N Chandrasekaran said the company's domestic business continues the strong momentum and has delivered market share gains as well as profitable growth.

JLR yesterday (7) announced a net loss of Rs 270 billion in the quarter ended in December owing to a £3bn write-down on JLR. Quarterly standalone revenue stood at Rs 16,208 crore, versus Rs 15,962 crore.

"Despite this, sales saw a dip in January due to lower demand for the F-PACE and the XF in China".

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For JLR, the diesel weakness comes as it struggles with slowing demand in China, where it has also suffered from competitors' pressure on its relationships with dealers. "The company intends to improve mix and dealer profitability by increasing sales of models with high profitability and terminating underperforming dealerships", noted Vivek Kumar of JM Financial Institutional Securities.

"Fiscal year 2019 so far has been a challenging period for the industry". UK's largest vehicle maker JLR, contributes to 72% of Tata Motors revenues.

"Tata Motors has bitten the bullet", Ajay Bodke, the Mumbai-based head of investment strategy at Prabhudas Lilladher Pvt Ltd said by phone.

Broking firm Motilal Oswal, on the other hand, downgraded the stock to "neutral". Despite the cost-reduction efforts, free cash flows are expected to remain negative over FY19-21, due to the large capex requirements of JLR.

"The group has a significant trade imbalance and production bias to the United Kingdom and could be significantly affected by trade barriers and various logistic issues", the credit rating agency said.

Tata Motors shares fell as much as 22.41 percent to Rs 141.90 per share on the BSE in the opening trade. But the stock recovered some what and was trading at Rs 150.95, still down more than 17 per cent in late trading.

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