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Jaguar Helps Buoy Tata Motors Profit as India Unit Sinks

Jaguar F-Type R Coupe
Wuerth Gruppe employees clean a Jaguar F-Type R Coupe, produced by Jaguar Land Rover Plc of Tata Motors Ltd., during a media preview at the 12th Auto Expo 2014 in Noida, India. Photographer: Kuni Takahashi/Bloomberg

Tata Motors Ltd., India’s biggest automaker, posted profit that beat analyst estimates as sales at its Jaguar Land Rover unit jumped, even as executives predicted a slump for trucks and cars at home. The shares climbed.

Net income almost tripled to 48.1 billion rupees ($771 million) in the third quarter ended December, the Mumbai-based company said yesterday. That surpassed the 35.1 billion-rupee median of 38 analyst estimates compiled by Bloomberg. Net sales rose 39 percent to 635.4 billion rupees, exceeding the 611.1 billion-rupee median of estimates.

Earnings were bolstered as profit at Jaguar Land Rover more than doubled to 619 million pounds ($1 billion), spurred by demand for the F-Type convertible and Range Rover SUVs. The luxury unit is helping buoy the company, which is struggling to revive profitability of the Indian business that sells Tata-brand cars, buses and trucks.

“JLR continues its golden period in to yet another quarter, based on a higher contribution from new launches such as the Range Rover Sport, new Range Rover and the Jaguar F-Type,” Kunal Dalal, an analyst at Dolat Capital Market Ltd. in Mumbai, wrote in a note yesterday. “The domestic business continued with its lackluster business, with an overall slowdown in both” trucks and cars, he wrote.

Tata Motors jumped 3 percent to 374.80 rupees as of 10:11 a.m. in Mumbai trading, poised for the biggest gain since Nov. 25. The stock has climbed 29 percent in the past 12 months, compared with a 4.7 percent advance for the benchmark S&P BSE Sensex Index.

Indian Business

Sales at Jaguar Land Rover, the automaker’s main profit contributor, climbed 19 percent to a record 425,006 units in 2013, bolstered by the F-Type convertible that began shipping in May, the unit said last month.

A turnaround at the local business may be harder to execute, following the death of the company’s managing director.

Karl Slym, who headed the company except for Jaguar Land Rover, fell to his death last month. He was 51. The late executive had led efforts to revive profitability at the Indian business as it lost market share to Maruti Suzuki India Ltd. and the local unit of Seoul-based Hyundai Motor Co.

Tata’s domestic passenger vehicle deliveries fell 37 percent in the nine months through December, the most among automakers that report monthly sales to the Society of Indian Automobile Manufacturers. The company’s truck sales dropped 25 percent in the same period.

‘Tough Few Quarters’

Demand for trucks and cars in India will stay depressed into the next fiscal year starting April 1, Chief Financial Officer C. Ramakrishnan said in Mumbai yesterday.

“We expect demand to remain stressed as it’s choppy times and tough to forecast,” said Ranjit Yadav, president of the passenger-vehicle business at Tata Motors. “We expect a tough few quarters ahead.”

The local business of Tata Motors reported profit of 12.5 billion rupees compared with a loss of 4.58 billion rupees a year earlier after transferring an overseas unit to a holding company. Tata Motors will transfer its South African, Thai and Indonesian units to the same holding company by March 31, Ramakrishnan said.

“The result highlights how incredibly profitable the Range Rover and Rover Sport business is,” Max Warburton, an analyst at Sanford C. Bernstein & Co., wrote in an e-mail. “Despite the ever-worsening performance of the domestic business, this remains one of the strongest auto-sector stories globally.” Warburton has an outperform rating on the stock.

‘Cautiously Optimistic’

Jaguar Land Rover is “cautiously optimistic” about growth continuing in the U.S. and overseas markets other than China, Chief Executive Officer Ralf Speth told reporters in Mumbai yesterday.

Tata Motors’ two new small cars to be introduced this year, the Bolt hatchback and the Zest, an entry-level sedan, could help revive the automaker’s flagging sales, according to Moody’s Investors Service.

Together with a new petrol engine, the styling and features offered by the Bolt and Zest make the company better placed to compete with peers such as Maruti Suzuki, Hyundai Motor and Mahindra & Mahindra, which have been eroding Tata Motors’ market share, Moody’s said Feb. 10.

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