Tata Motors profit zooms, but cost cloud looms
Tata Motors, the country’s biggest automobile company, is bracing up for a tougher time ahead despite posting a robust growth in sales and profit figures.
Concerns over interest rates and rising raw material and commodity prices could mean profit margins can be lower next year, company officials told a news conference on Friday after unveiling quarterly results.
The latest financial year has been a record one for Tata Motors, which reported a net profit of Rs 576.72 crore in the fourth quarter ended March, showing a 26 per cent jump over the same quarter of the previous year.
Total revenues for the quarter totalled Rs 8,267 crore, up 20 per cent from Rs 6,869.65 crore in the year-ago quarter.
Passenger car sales from the Tata Motors stable have reached a peak this year. The company sold 2,28,220 units in the domestic markets alone, a growth of 21 per cent compared to last year.
Consolidated total revenues for the company rose 36 per cent to Rs 36,987.82 crore in 2006-07, compared to Rs 27,263.73 crore in 2005-06.
“The consolidated Profit After Tax (PAT) for the year, after adjustment for share of minority interest and profit in associate companies was Rs.2,169.99 crores compared to Rs.1,728.09 crores, a growth of 26 per cent over the previous year,” Tata Motors said in a statement.
Basic Earnings Per Share (EPS) rose to Rs.56.43 for its consolidated operations as against Rs.45.86 for the previous year.
Exports have also increased significantly. Cars sold in other countries now contribute 18 per cent of the revenues of Tata Motors.
Standalone revenues for the financial year ended March, at Rs 27,535.24 crore, posted a growth of 33 per cent over Rs 20,653.49 crore in the previous year. Profit after tax was Rs 1,913.46 crore, an increase of 25 per cent over Rs. 1,528.88 crores last year.
With prices of components like steel and rubber on the rise, Tata Motors is not taking this easy despite the robust results.
Managing Director Ravi Kant said the company expects the commodity price cycle to stabilise in future and reflect on the profitability.
Experts differ on this aspect.
"The commodity cycle is a global cycle and has not peaked yet according to most estimates. There might be a temporary blip, but it should not help carmakers to the extent that they can actually see their products becoming cheaper," said V.K. Sharma of Anagram Securities, a company that tracks commodities globally.
This means cost of raw materials for cars is expected to be stay on the higher side in the coming years, putting pressure on the company's ability to maintain profit margins.
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