Tata Motors posted its first quarterly loss in seven years with tighter credit,slow economic growth and foreign exchange loss severly denting its results for the quarter ending December 2008. The company suffered a net loss of Rs2.63 billion as compared with the profit of Rs4.99 billion a year ago according to a statement issued by the company.
According to analysts global vehicle demand this year is expected to fall 14 per cent to 55 million units. They add that any slowdown in the economy impacts the automobile industry ahead of others as cheap finance is not available and consumer sentiment is low.
Included in the third-quarter result is a foreign exchange loss of Rs27 billion on account of revaluation of borrowings in foreign currency as per the company. The 2008 December quarter had a foreign exchange gain of Rs275 million.
The last time the company reported a quarterly loss was in December 2001.
Meanwhile the Reserve Bank has cut the growth forecast for the economy to 7 per cent from 9 per cent over the last three years. The Reserve Bank also asked banks to boost credit and reduce rates to stimulate growth.
The recession in the U.S., Europe and Japan has had severe impact on the demand for luxury vehicles there.
Tata Motors which owns Jaguar Land Rover has been forced to cut 300 management positions and 150 salaried agency personnel at the plant in UK. Additionaly management will have to forgo bonuses in 2009.
Analysts say that a turnaround will not happen for some more time for the commercial vehicles segment. They say that in the tight credit environment nobody is willing to lend to the segment.
The sales of the company's trucks, Indica cars and Safari sport-utility vehicles declined sharply by 32 per cent with the company selling 98,760 vehicles during the quarter. Net sales plunged 35 per cent in the quarter to Rs47.14 billion. Analysts had estimated sales for Rs50.7 billion.
With the falling sales the company's debt rating has been downgrated by Moody's Investors Service for a second time in 6 months while S&P downgraded the rating in December to the lowest in four years. This will raise the borrowing costs for the company which is seeking to refinance its acquisition of luxury car maker from Ford Motor Co.
The company last month started collecting deposits from investors on 11 per cent interest for the first time in 13 years.
The company's shares fell 1.6 per cent to Rs149.75 at close of trading in Mumbai today. The company's stock fell 6.4 per cent in the year falling 78 per cent in 2008.