Losses throw Tata into a 'challenging situation'

INDIA'S largest auto maker, Tata Motors Ltd, said yesterday that its net profit in the July-September quarter fell 34.1 percent from a year earlier to 3.47 billion rupees (US$70.1 million) due to slowing vehicle sales and foreign currency losses.

Revenues rose 6.1 percent from the year-earlier quarter to 70.78 billion rupees.

"The situation continues to be challenging," managing director Ravi Kant said. "We think going forward something should improve. But by when and how much it's difficult to say in the current context of uncertainty in the marketplace."

The rupee has slid precipitously against the dollar, damaging earnings at many of India's blue-chip companies.

Before taxes and a 2.85-billion rupee foreign exchange loss, quarterly profits rose 8.9 percent over last year to 6.43 billion rupees, the company said. Tight consumer finance, which the company has been able to partly mitigate through its in-house financing arm, and high commodity prices also hurt earnings, officials said.

Vehicle sales for the quarter declined 1.1 percent from a year earlier to 135,037.

The company turned to capital markets to refinance a US$3 billion bridge loan for its June acquisition of Jaguar and Land Rover from Ford Motor Co just as the financial crisis hit, causing further pain.

In an effort to repay part of that loan, which is due in June 2009, Tata offered its Indian shareholders the option of buying 42 billion rupees worth of additional stock between September 29 and October 20.

But the company's stock got swept up in the punishing sell-off of Indian equities, and traded at a lower price on the Bombay Stock Exchange than the rights offering for much of the offer period.

Tata chief financial officer C. Ramakrishnan said the parent Tata Group and the underwriter of that deal, JM Financial, picked up about 80 percent of the offering. Plans to raise an additional US$600 million on international equity markets would be reconsidered, he said.

Kant said the company would focus on cost reductions and continue to push domestic sales.