Reverse puts Tata Motors in top gear

Indian car maker puts losses behind it with 19bn rupee profit.

The Indian car maker Tata Motors is humming along nicely. The owner of brands including Jaguar and Range Rover reversed its losses yesterday, helping the shares reach a 19-year high. They closed 5 per cent higher at 1,006.7 rupees a share. The company reported net income of 19.9 billion rupees in the three months ending in June, compared with a loss of 3.3bn rupees in the same quarter last year.

The biggest driver, so to speak, of earnings was the Jaguar Land Rover (JLR) division, which contributed about 60 per cent of Tata Motors' topline results. JLR posted net income of £221 million in the last quarter compared with a loss of £64m in the same period last year. Tata Motors, a prominent presence on the streets of the UAE with its commercial buses, bought JLR in June 2008 for US$2.5bn. "The results were very good. It is obvious now that margins have improved. Volumes for JLR are picking up and, more broadly, their domestic operations appear to be doing well," said Vaishali Jajoo, a senior research analyst at Angel Securities based in Mumbai.

Ms Jajoo has a "buy" rating on the stock with a target of 1,214 rupees. "It is trading at an extremely attractive valuation." Tata Motors is part of the Tata Group and is now India's largest company in the car and commercial vehicle sector with more than 65 per cent of the market share. It has a market capitalisation of 557.5bn rupees and is dual-listed on the Bombay Stock Exchange and the New York Stock Exchange.

Fifty per cent of JLR's revenue comes from Europe. The quarterly results indicate private demand is withstanding the slowdown in Europe, which bodes well for Tata shares. "Favourable currency movement and restructuring efforts at JLR helped to improve the margins," said Ms Jajoo. Sales from JLR were so strong that Tata Motors is in need of considerably more engines than was initially expected and is now working with Ford to ease the shortage.