Business

Tata Motors' profit drops by 96%

15 Feb 2017 | By Supriya

Tata Motors has reported a 96% drop in earnings for the third quarter ending December 2016.

Net profits have dropped to Rs. 111.57 crore compared to Rs. 2,952 crore posted a year earlier.

The worse than expected drop has been attributed to subdued earnings at Tata's UK subsidiary Jaguar Land Rover (JLR) as well as contracting demand in its domestic business.

In context: Tata Motors' profits on a downward spiral

15 Feb 2017Tata Motors' profit drops by 96%

Stumps analysts' predictions

According to data by Thompson Reuters, analysts were expecting a drop of 25-35 per cent and anticipated Tata Motors to post profits of Rs. 2,200 crore. However the unexpected wipe out of profits has seen shares fall by 3.7 per cent.
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What's driving the downward spiral at Tata Motors?

Key reasonsWhat's driving the downward spiral at Tata Motors?

Demonetization of banknotes on 8 November dealt a huge blow to Tata Motors' business.

Sale of commercial vehicles, often in cash, took a hit given the cash crunch and sales of trucks and buses declined by 9%; sales of light commercial vehicles flat lined.

Tata Motors' UK-based subsidiary, JLR which contributes to bulk of Tata Motors' profits, saw its profit slump by 62%.

JLR in a fragile state

According to a report by Mumbai-based IDFC Securities, JLR's performance has been adversely impacted by Brexit vote and President Trump's 'promised protectionist policies' given that US accounts for 25% of JLR's sales.

Promise of better timesWhat does the future hold?

Tata Motors' CFO C. Ramakrishnan expects the company to fare much better in the fourth quarter given that new launches of vehicles are being scheduled.

Separately, former MD and CEO of Airbus, Guenter Butschek is now responsible for turning around Tata Motors' fortunes considering that its sales in the domestic passenger car segment and market share have halved in two years.

Guenter Butschek's vision

"What is it that we need to be a high performance organization - being lean, it's about being agile and it's about having clearly addressed and delegated accountability."