Financial Daily from THE HINDU group of publications
Friday, May 21, 2004
Financial Daily from THE HINDU group of publications Friday, May 21, 2004 |
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Corporate
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Performance Columns - Microscope Tata Motors: An exceptional fourth quarter performance Raghuvir Srinivasan
TATA Motors has continued its growth story with an exceptional performance in the fourth quarter. Turnover and earnings before tax and extraordinary items in the January-March 2004 period accounted for 31 and 35 per cent respectively of the turnover and earnings in entire fiscal 2003-04. Fourth quarter earnings before tax and extraordinary items has almost doubled to Rs 465 crore riding on the back of the highest operating margins posted by the company in the last nine quarters since it stemmed its losses for the first time in the quarter ended March 2002. Tata Motors has been improving its margins consistently and steadily in the last few quarters; operating margin in the quarter ended March 2004 was 12.78 per cent, higher than the 10.85 per cent posted in the same quarter last year. The performance is the result of an exceptionally favourable combination of factors ranging from the boom in the commercial vehicles and passenger cars industry to the company's own tight management of its financial resources. Tata Motors has been gradually bringing down its break-even levels through a constant attack on costs, including finance charges which, at Rs 34 crore in the fourth quarter, was almost half that in the same period last year. That the company pre-paid almost all of its high-cost debt last year substituting it with loans raised abroad at dirt-cheap rates certainly helped. On the business side, the EX range of commercial vehicles has been received very well in the market which has been very strong in the last one year. Though the company may have a thing or two to worry about on the utility vehicles side, the passenger car business has continued to do well, especially the Indigo, which has been a big contributor to the bottomline. Though it sold just 28,000 cars last year, fetching for itself the second place in its segment behind the Hyundai Accent, the Indigo is a high-margin product. The company is now set for an exciting phase ahead. Assuming that the prevailing good business sentiment continues with the backing of a good monsoon, Tata Motors appears set for a sharp scaling up of its performance. There is lot to look forward to from the company - entry into the high-end commercial vehicle segment with models from the Daewoo stable; upgrades of the Sumo and variants of the Indica; and a strong focus on exports are all expected in the near future. It may pay for investors to stay with the company in the months ahead.
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