Published: Wed, February 15, 2017
Economy | By Melissa Porter

Tata Motors Q3 profit down by 96%. Here's why

During the quarter, commercial vehicle segments witnessed demand shrinkage due to demonetisation.

Net profit on a consolidated basis in the December ended quarter fell to Rs 112 crore from Rs 2,953 crore in the corresponding quarter in the previous financial year.

On standalone front, Tata Motors' net loss widened to Rs 1,045.94 crore, compared to net loss of Rs 107.89 crore in Q3FY16 and Rs 606.84 crore in Q2FY17.

"We have hit the road to recovery but unfortunately we had faced lot of headwinds in the third quarter", said Guenter Butschek, Chief Executive Officer & Managing Director, Tata Motors' during the post earnings media conference.

The fall in numbers is a result of lower offtake in domestic CV operations and lower profit from mainstay Jaguar Land Rover. "That is because the JLR margin seem to be settling in to the single digit space unlike (in) the past where a 14% was a given".

Indian carmaker Tata Motors's quarterly profits went downhill by 96 per cent, owing to Indian government's sudden decision to replace currency notes and its luxury Jaguar Land Rover unit's weak performance.

Shares of Tata fell as much 7.3%, before recouping some of the losses to close 3.7% lower at 486.8 rupees on Mumbai's BSE stock exchange.

Passenger vehicles grew by 25.4% y-o-y with auto segment posting a growth of 31.1% on the back of continued strong response of Tiago, Tata Motors' said.

The company received payback worth 85 million pounds (over Rs 710 crore) from Chinese insurance companies for the Janjin blasts in 2015 which led to a loss of over 240 million pounds of inventory, Ramakrishnan said. "JLR margins would definitely be better in the fourth quarter, hopefully on the back of the new launches that we have". "M&HCV segment witnessed major pressure with a fall of 9% on-year", Tata Motors said.

Vehicle makers in India were also hit in the third quarter by Prime Minister Narendra Modi's "demonetisation" move in November, when he declared notes of 500 rupees and 1,000 rupees illegal tender, taking about 86% of total currency out of circulation. The US accounts for about 25% of JLR sales.

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