JLR drives Tata Motors into red in Q1

Tata Motors (TATAMOTORS.BO : 634.85 -8.85) on Monday said it posted a consolidated net loss of Rs 328.78 crore for the first quarter ended June 30, 2009 after sales at its subsidiary Jaguar Land Rover (JLR) continued to plunge, shaving 52% off the previous quarter sales. But the company said it was close to sealing a deal with a consortium of banks for a fresh line of credit for the British marquee auto brand it acquired in June 2008.

Chief financial officer C Ramakrishnan said, "We are a few weeks away from closing the working capital requirements for JLR with commercial banks." The company has already tied up with a few banks, including Standard Chartered, Burdale Financial, GE Capital and Bank of Baroda. "We will be tying up with more banks during this quarter", he added.

Around 150 million pound was raised during the last quarter for JLR, of which 50 million pound was raised by Tatas and the remaining 100 million pound by banks.

Early this month, Tata Motors had said it expected a long-term loan of 340 million pounds from the European Investment Bank for JLR, without any guarantee from the UK government for which it was trying hard. Vice-chairman Ravi Kant said, "the UK government's guarantee is being replaced by the commercial bank's guarantee and in a short time, we will be concluding this."

Minus the JLR component, Tata Motors had last month declared a net profit growth of 58% for the first quarter at Rs 513.76 crore compared with Rs 326.11 crore a year ago.

Explaining the consolidated numbers, Ramakrishnan said the company increased borrowing to support new investments at the plant along with product development costs. These pushed up depreciation and interest charges, which offset its operating profit, resulting in a consolidated net loss. In the same quarter last year, the company had a consolidated net profit of Rs 719.69 crore.

He said the present set of numbers is not strictly comparable with last year's. "Hence, this financial year will see the full impact of the JLR performance." JLR's losses before tax for the first quarter stood at 62 million pounds (Rs 496 crore).

The stock markets had already factored in the losses and so Tata Motor shares went down only marginally on the Bombay Stock Exchange (^BSESN : 16632.01 -222.92) to close at Rs 489.6 on Monday.

The company as a whole is focusing on de-leveraging and bringing down costs. Ravi Kant said, "JLR is focused on aligning production with demand. The layoffs at JLR are a continued process and will keep on happening. Depending on the market, people will be divested for work and new resources will be brought in."

Tata Motors has a consolidated debt of Rs 34,000 crore on its books and its acquisition debt has been $850 million. Ramakrishnan said the Rs 455 crore the company raised last week by pledging its Tata Steel (TATASTL.BO : 544.9 +1.45) holdings will help pay off a part of the dollar loan taken for JLR. Tata Motors bought JLR for $2.3 billion from Ford Motors. It invested $1 billion into JLR since. The amount was raised through a $3-billion bridge loan. Of this, $1.16 billion has been repaid through a rights issue and divestment proceeds last year. Consolidated total income from operations stood at Rs 16,397 crore for the quarter compared to Rs 14,490.18 crore a year ago, a rise of 13%. The operating profits stood at Rs 595.93 crore, while the cash profit was Rs 333.48 crore.