For second year in a row, Tata Motors retains group flagship crown

For the second year in a row, Tata Motorshas emerged as the flagship of the Tata Group in terms of sales and net profit, which stands at 1,65,000 crore and 13,500 crore, respectively. With plenty of help from Jaguar Land Rover (JLR), Tata Motors has been able to widen the gap between itself and Tata Steel, the flagship till fiscal 2010.

TCS’ top line is less than a third of Tata Motors, although its profit margins are fatter at 10,413 crore, and its market value more than three-and-a-half times that of Tata Motors. Industry experts said that Tata Motors has always been the group’s jewel that is closest to chairman Ratan Tata’s heart, and it’s only fitting that the automotive giant is towering above the others in the year that he is slated to step down.

Over the past three years, Tata Motors’ net profit (after minority interests) have surged over five-fold to 13,517 crore in fiscal 2012 from 2,571 crore in fiscal 2010. To maintain that blistering pace, JLR – which accounts for close to 90% of Tata Motors’ consolidated bottomline – has revised capital expenditure in the current fiscal year to £2 billion from an earlier plan of investing £1.5 billion. Much of this investment will go into a Chinese joint venture between JLR and Chery Automobile, and in a new engine plant in Wolverhampton in the West Midlands of England.

In contrast, Tata Group’s flagship till fiscal 2010, Tata Steel, has been plodding along – although sales were up 12% to 1,32,257 crore, net profit slumped to 5,390 crore from 8,983 crore. The European operations – courtesy of the acquisition of European steelmaker Corus, now rechristened Tata Steel Europe – were a drag on profit.

Margins of the world’s seventh-largest steelmaker were squeezed as a result of higher raw material prices and weak demand at a time when the Eurozone is in the throes of a debt-induced crisis. So will Tata Motors sustain its lead and break away further from the rest of the pack in the years to come? Rakesh Batra, national leader, automotive, Ernst & Young said: “With the global economic outlook being subdued, growth could be slower than what it was last year. But then again, what can help sustain the growth is the company’s focus on developing markets like India, South America and China.”

Mahantesh Sabarad, senior vice-president for equity research at Fortune Financials, said: “Tata Motors will grow upwards of 13-15% in revenue in the next 2-3 years. The launch of the F-type Jaguar products and new geographies will help JLR drive up volumes.”

(curtsey: economic times)

Rupesh Yatesh Dalal
Head Research Department

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