Whalesbook
Tata Motors Passenger Vehicles Ltd. reported a net loss of ₹6,370 crore for the September quarter, a sharp reversal from a profit last year, marking its first results post-demerger. A major concern is the cut in Jaguar Land Rover's EBIT margin guidance to 0-2% from 5-7%, with free cash flow now projected negative up to £2.5 billion. Revenue also dropped 14% year-on-year, impacted by a cyberattack.
Tata Motors Passenger Vehicles Ltd. (TMPVL) has announced its first quarterly results following the demerger of its commercial vehicles business, reporting a significant net loss of ₹6,370 crore for the September quarter. This marks a stark contrast to the net profit of ₹3,056 crore recorded in the same period last year.
The most critical development is the drastic reduction in the EBIT margin guidance for Jaguar Land Rover (JLR), its luxury car division. The projected EBIT margin has been revised downwards to 0% to 2%, a steep fall from the earlier forecast of 5% to 7%. Consequently, JLR now anticipates negative free cash flow of up to £2.5 billion.
Operational disruptions from a cyberattack on JLR, which crippled production for a significant portion of the quarter, contributed to the financial strain, with an impact of ₹2,008 crore on the adjusted net loss. Excluding such exceptional items, TMPVL's net loss stood at ₹5,462 crore, compared to a profit of ₹4,777 crore last year. Total revenue declined by 14% year-on-year to ₹72,349 crore. The company also registered an EBITDA loss of ₹1,404 crore, a substantial drop from the ₹9,914 crore EBITDA gain in the previous year's quarter. Foreign exchange fluctuations led to a ₹361 crore forex loss, versus a gain last year. Free cash flow was a negative ₹8,300 crore due to reduced volumes. Standalone results showed a net loss of ₹237 crore against a profit of ₹15 crore last year.
Impact
This news is likely to have a significant negative impact on Tata Motors' stock price, given the substantial net loss and the severe downgrade in JLR's profitability and cash flow outlook. Investors will be concerned about the operational challenges and future profitability. The auto sector, especially the luxury segment, may also see sentiment affected.
Rating: 7/10
Difficult Terms:
EBIT margin: Earnings Before Interest and Taxes margin. It measures a company's profitability from its core business operations, excluding interest and taxes. A lower margin indicates lower profitability.
Free Cash Flow (FCF): The cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. Positive FCF indicates a company has enough cash to cover its expenses and invest in growth. Negative FCF means it's spending more cash than it's bringing in.
Demerger: A corporate action where a company splits into two or more separate entities. This allows different business segments to operate independently and potentially unlock shareholder value.
Net Loss: When a company's total expenses exceed its total revenues over a specific period, resulting in a negative profit.
Revenue: The total amount of income generated by the sale of goods or services related to the company's primary operations.
EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortisation. It is a measure of a company's operating performance, showing profitability before accounting for non-cash expenses and financing costs.
Forex loss/gain: A loss or gain incurred due to fluctuations in currency exchange rates when a company has transactions denominated in foreign currencies.
