Tata Motors has swung to one of the steepest quarterly losses since the December quarter of 2018-19. To ride out the turmoil caused by Covid-19 disruptions in its Indian as well as UK subsidiary Jaguar Land Rover Automotive, the firm said it would review its business to save Rs 15,000 crore for the consolidated entity in FY20-21.
The company, which is in the process of spinning off its domestic passenger vehicle business into a wholly-owned subsidiary, also said it was looking for a strategic partner and was in talks with automakers for the same. The company took a write-down of Rs 2,500 crore for the passenger vehicle business.
The Tata Group flagship reported a pre-tax loss of Rs 9,313 crore, as compared to profit before tax of Rs 1,265 crore in the year-ago quarter. Weak volumes on account the pandemic in a seasonally strong quarter and the impairment charge for the domestic passenger vehicle business led to the loss. While JLR reported a pre-tax loss of £501 million for the quarter, the India business reported pre-tax loss of Rs 4,786 crore. The company reported a net loss of Rs 9,863.75 crore, as compared to a profit of Rs 1,108 crore in the year-ago quarter. It had posted a net loss of Rs 26,993 crore in Q3 of FY19 after it was hit by asset impairment in its UK subsidiary. Revenue at JLR and India business fell 24 per cent and 48 per cent, respectively.
The company is embarking on an aggressive deleveraging exercise.
“We are calling out a set of strategic actions that we will be undertaking to significantly deleverage Tata Motors group,” P B Balaji, chief financial officer, Tata Motors group, said. This will include JLR turning cash positive from FY22 on a sustainable basis and the India passenger vehicle business turning cash positive from FY23.
As part of its plan to conserve cash, the company is cutting capital expenditure (capex) at JLR by 40 per cent to £2.5 billion in FY21. It has also increased the JLR cost reduction plan by £1.5 billion to £5 billion by Q4 of FY21. The India business capex for FY21 is being cut by two thirds to Rs 1,500 crore. The company is also looking at a cash improvement plan of Rs 6,000 crore, which includes cost savings of Rs 1,500 crore for FY21. The net debt of the automotive business at the consolidated level stood at Rs 42,000 crore excluding the lease liabilities. The company’s consolidated operating profit was at Rs 2,875 crore in the quarter.
On JLR, Balaji said China had seen an “encouraging recovery” both month-on-month and quarter-on-quarter. He said Europe and the US were also on the path of recovery even as rest of the world have yet to see any green shoots. A report said the firm expects to cut 1,100 temporary agency employees at JLR in the UK.