MUMBAI (Bloomberg) -- Tata Motors Ltd., India's largest truckmaker and the owner of Jaguar Land Rover, posted a full- year net income after the UK luxury unit had a pretax profit and sales gained amid economic growth.
Consolidated net income totaled 25.7 billion rupees ($543 million) in the year ended March, compared with a loss of 25.1 billion rupees a year earlier, Tata Motors said. That beat the 15.6 billion rupee average of 14 analyst estimates compiled by Bloomberg.
Jaguar Land Rover had a pre-tax profit of 32 million pounds ($46 million) in the year as the global economy began to recover from recession.
Jaguar Land Rover reduced expenses by firing 2,200 workers and increased sales by introducing new models.
Chairman Ratan Tata also hired Carl-Peter Forster, the former head of General Motor Co.'s European unit, as Tata Motors chief executive officer. Ralf Speth took over as the CEO of Jaguar Land Rover.
Europe a worry
“Europe is in doldrums and that is a big worry for Tata Motors since it is a big market for Jaguar Land Rover,” said Umesh Karne, a Mumbai-based analyst at BRICS Securities Ltd., who has an ‘underperform' rating on the stock. “Until Europe stabilizes, Jaguar Land Rover will be under pressure.”
Tata Motors had 1.91 billion rupees in employee separation costs at Jaguar Land Rover during the year and wrote off 1.05 billion rupees on prepayment of a bridge loan taken to buy the U.K.-based units.
Jaguar Land Rover, which Tata purchased from Ford for $2.5 billion in 2008, sold 193,982 vehicles last fiscal year compared with 167,348 in the 10 months ended March 2009, the company said.
Sales of Tata trucks, buses, Nano cars, and other sport-utility vehicles in the year gained 32 percent to 667,971 units as expansion in India, Asia's third-largest economy spurred demand.
“Overall economic recovery, a benign liquidity environment along with government stimulus has driven domestic demand revival this year,” Tata Motors said.
Tata Motor's earnings were inflated by a foreign exchange gain of 844.7 million rupees, it said. The company also benefited by selling a 20 percent stake in its construction equipment venture to partner Hitachi Construction Machinery Co. for 11.6 billion rupees.
India's economy may grow 8.5 percent this year and the nation is aiming to achieve an annual gross domestic product expansion of 10 percent in the “medium term,” Prime Minister Manmohan Singh said May 24.
VW, Toyota and Honda increase pressure
Economic growth and higher auto sales have brought in new competition for Tata in India.
Toyota Motor Corp., Volkswagen AG, and Honda Motor Co. were among carmakers that introduced 10 passenger vehicles at the Delhi Auto Show in January. Daimler AG, MAN AG and Navistar Inc. are also expanding their truck operations in India.