Debt has weighed down Tata Motors (TML) and forced promoter Tata Sons to infuse fresh equity of Rs 6,500 crore, besides Rs 3,500 crore financing through external commercial borrowing, to meet repayments, refinancing and working capital requirements. The gross debt of the company -- which includes Indian automotive operation, Jaguar land Rover (JLR) and auto financing business -- has risen to Rs 1,17,571 crore in September 2019 from Rs 1,14,318 crore in June 2019.
The net debt of the automotive business went up to Rs 50,065 crore from Rs 46,515 crore. In March 2019, net debt stood at Rs 28,391 crore. The consolidated net automotive debt-equity ratio has widened to 0.96, compared to 0.43 a year back. The standalone net debt of TML's automotive business has spiked to Rs 23,685 crore, compared to Rs 21,718 crore in June and Rs 15,658 crore in March. Net debt to equity has increased to 1.17 as against 0.71 in March. The rise in ratio is one of the reasons why Tata Sons is infusing fresh equity in the company to contain it.
According to the debt maturity profile, JLR will have to make repayments to the tune of 650 million pounds, while TML India has Rs 3,401 crore.
The rise in debt is sharp at a time when the domestic auto market is going through a severe drop in sales and British subsidiary JLR is feeling the heat in China and European markets (except UK). However, JLR's performance improved in the second quarter. TML's y-o-y consolidated revenue dipped by Rs 6,549 crore to Rs 65,432 crore in the second quarter, but net loss reduced to Rs 187.7 crore from Rs 1,009.5 crore. The finance cost has increased by Rs 609 crore to Rs 1,835 crore due to higher borrowings.
Standalone revenue fell 43.7 per cent to Rs 10,000 crore, while it made a loss of Rs 1,282 crore, compared to profit of Rs 109 crore in September 2019. TML's volume sales in India dipped 44 per cent year-on-year (y-o-y) in July-September. Commercial vehicle sales fell 42 per cent; passenger vehicle 52 per cent and exports 33 per cent. The largest player in the passenger vehicle segment, Maruti Suzuki's sales dropped 30.2 per cent in the second quarter. Its net sales of Rs 16,120 crore is lower by 25.2 per cent, while net profit at Rs 1,358 crore is lower by 39.4 per cent.
The consolidated loss of TML reduced primarily because of JLR's better performance in China, where retail sales went up 24.3 per cent in July-September. JLR's revenue increased 8 per cent y-o-y to 6.1 billion pounds. Global retail sales of new Range Rover Evoque were up 54.6 per cent, Range Rover Sport up 17.5 per cent.
Tata Motors Finance (TMF), the auto financing subsidiary of TML is in trouble as gross NPA has risen to 4.9 per cent in the second quarter, compared to 3.5 per cent in the same period in 2018/19. The net NPA rose to 3.7 per cent from 2.4 per cent. The liquidity issue of the customers has been cited as the reason for rise in NPA. Profit before tax fell 36 per cent to Rs 35 crore. The return on equity fell to 7.2 per cent from 20 per cent. However, the average assets under management (AUM) increased to Rs 37,618 crore from Rs 32,374 crore. In line with the drop in sales, the new vehicle loan disbursal dropped by 40 per cent, while used vehicle financing fell by 17 per cent.