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Tata Motors skids on JLR worries

Mumbai, Jan. 24: Jaguar Land Rover (JLR), the Tata Motors subsidiary, took the Street by surprise when it warned that margins for the quarter ended December 2012 could be “slightly” lower than the previous two quarters.

The announcement, that came late on Wednesday, spooked investors and the Tata Motors stock tanked nearly 10 per cent in intra-day trade before closing at Rs 293.90, a loss of 6.26 per cent, on the NSE today.

JLR has been key to Tata Motors’ robust financial performance at a time the domestic market is confronted with the multiple challenges of economic slowdown, high interest rates and price hike.

In the statement, JLR said revenues for the December quarter were likely to be higher than the preceding two quarters because of increase in sales volumes but the earnings before interest, tax, depreciation and amortisation (EBITDA) could fall on account of exchange rate fluctuations and a higher mix of cheaper Evoque sports utility vehicle sales. EBITDA is the measure of a company’s operating profitability.

During the second quarter ended September 30, JLR reported an EBITDA margin of 14.8 per cent. After the warning, analysts are now lowering their estimate of consolidated EBITDA margins at Tata Motors.

In its note, JLR added that it would continue to follow a strategy of growing its strong and globally recognised brands and invest in developing products in new and existing segments.

“We continue to have a longer term capital spending target of 10-12 per cent of revenue, which we believe is in line with other premium competitors. But in the near and medium term, we expect our capital spending to be a greater percentage of the revenue to realise the present opportunities we see for growth,” JLR said.

In the current fiscal, the car maker expects to invest around 2 billion, expand its manufacturing footprint in China and explore production bases in other markets. The capital spend could increase to 2.75 billion in fiscal 2014, it said.

 
 
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