Tata Motors may face rough patch ahead

With Jaquar Land Rover at its helm, Tata Motors’ consolidated financial performance for the September ’12 quarter was impressive as it registered a 20% rise in revenues year-on-year and an equally impressive growth at the operational level.

The company’s consolidated earnings before interest, tax and depreciation margins were almost flat at 12.5% for the quarter supported by softening of raw material prices. The consolidated raw material costs as a percentage of sales went up by almost 200 basis points to 59% in the last one year.

Cost pressures, however, were visible on the employee cost front which increased to 9.3% as a percentage of sales against 7.9% a year ago on account of wage settlements entered into by the company with JLR employees. On the domestic front, however, Tata Motors continues to bleed at the operational level, despite a healthy growth in sales volume year-on-year.