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“Tata Motors : A Positive Turnaround in Earnings”
The Remarkable Turnaround of JLR: From Tata’s “Biggest Mistake” to a “Biggest Victory“
On June 2, 2008, Ratan Tata made a bold move by acquiring the UK-based luxury car brands Jaguar and Land Rover (JLR) for a hefty USD2.3 billion, despite the economic downturn and criticism from industry experts.
Many questioned this decision, dubbing it Tata’s “biggest mistake” due to the global recession and declining demand for luxury cars.
Tata Motors was burdened by INR 21,900 crore in debt and a staggering INR2,500 crore loss in FY09, marking its first loss in seven years. Both Tata Motors and JLR faced considerable difficulties.
Fast forward fifteen years, and the narrative has shifted dramatically.
Tata Motors has become India’s third-largest carmaker, boasting a 13.4% market share in the passenger vehicle segment. Meanwhile, JLR has emerged as a significant contributor to Tata Motors’ consolidated revenues and profits.
Analysts have been particularly impressed by Tata Motors’ margin performance, which has consistently exceeded consensus expectations.
JLR’s Revival: From the “Biggest Mistake” to a Money-Maker
In the second quarter of FY24, JLR accounted for two-thirds of Tata Motors’ consolidated revenues and profits, making it a driving force in the company’s financial success. The most significant transformation has been JLR’s impressive recovery in profitability and, more crucially, free cash flows.
JLR is guiding toward generating over 2 billion pounds sterling in free cash flow for FY24 and reducing its net debt to less than 1 billion sterling by March.
The company has raised its operating margin target to approximately 8%, up from the previous 6%. This move underscores JLR’s confidence in its future prospects.
- Market Cap ₹ 2,39,313 Cr.
- Current Price ₹ 653
- High / Low ₹ 678 / 375
- Book Value₹ 161
- Face Value₹ 2.00
- Dividend Yield 0.31 %
- Return over 1year48.3 %
- Stock P/E 14.9
- Industry PE 28.2
- PEG Ratio -0.75
Growth Parameters
- Sales growth 33.0 %
- Profit growth 269 %
- Profit Var 3Yrs 31.2 %
- Sales growth 3Years 9.84 %
- OPM12.7 %
- ROCE 5.95 %
- ROE 5.62 %
Debt Profile
- Debt ₹ 1,27,864 Cr.
- Debt to equity 2.38
- Free Cash Flow ₹ 16,443 Cr.
- Int Coverage2.86
- Cash Equivalents₹ 40,554 Cr.
Tata Motors is optimistic about sustaining its growth momentum and achieving double-digit EBITDA margins in the commercial vehicle business. This optimism is based on a better product mix, successful execution of demand-pull strategies, and digital offerings.
Tata Motors also aspires to maintain robust margins in its passenger vehicle (PV), electric vehicle (EV), and commercial vehicle (CV) businesses.
Moreover, with the launch of new-generation products and increased deliveries in the passenger vehicle segment, the company expects to drive profitable growth in the latter half of the year.
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