Tata Motors Q1 Profit Falls by Half, CVs Display Continued Growth

Tata Motors recently unveiled its sales details for the first quarter of this fiscal year. As per the data revealed, the company’s consolidated net profit fell by more than half driven by several factors such as foreign exchange loss and higher costs.

Although net sales rose by 10 percent to INR 66,101.27 crore in Q1 2017, as compared to INR 60,093.79 crore during the same period the previous year, consolidated net profit declined from INR 5,254.23 crore in April-June quarter last year to INR 2,260.40 crore in Q1 this year.

As compared to the previous year, total costs stood at 18 percent to Rs.63,993.99 crore.

However, medium and heavy commercial vehicles (M&HCVs) showed decent growth in sales the first quarter of this year. Sales of M&HCVs rose by eight percent and light commercial vehicles rose by 14 percent. Overall sales of commercial and passenger vehicles for the quarter stood at 1,26,839 units, depicting a growth of eight percent.

This significant decline in overall sales can be attributed to forex loss, attributed to violatility in currency due to UK’s exit from the European Union. Tata Motors not only sources 40 percent of its components from UK, the company also gets a fourth of the sales volumes for Europe from its subsidiary in UK.

C. Ramakrishnan, Chief Financial Officer at Tata Motors, said in an earnings presentation, “We need to be careful...that is why we have a fairly robust hedge book so we are not subject to so much volatility.”