"Though the margins are in line, certain fixed costs, higher depreciation and interest cost might have eaten into the bottomline which came in lower than the anticipated level of around Rs 2,350 crore," he told CNBC-TV18.
Below is the edited transcript of the interview on CNBC-TV18
Q: What is your reaction to the Tata Motors results, especially the bottomline?
A: The bottomline is lower than the anticipated level of around Rs 2350 crore. Though the margins are in line, certain fixed costs, higher depreciation and interest cost might have eaten into the bottomline.
Q: What is your view on the standalone business?
A: The operating profit margin of Jaguar Land Rover (JLR) is around 16.5 percent which is more or less in line with expectations and slightly higher than what the street was anticipating. The standalone earnings are a bigger loss than anticipated and the losses are in excess of Rs 600 crore.
Q: The stock is down about 5 percent. It seems like the street is focusing more on the losses that the standalone business has reported vis-à-vis the good earnings that JLR has posted. How do you approach the stock despite JLR earnings being good? Would you be worried about the standalone business?
A: We were anticipating the margins to be around 2.5 percent. However, losses are significantly higher, obviously that is a worry. However, in terms of cost rationalisation that they are taking care of, I hope that this would be a bottoming out quarter in terms of losses for the company.
The other income is expected because last year also they got a dividend income so this might be a JLR giving a dividend income to Tata Motors. We still have a buy rating on the stock with a target price of Rs 360.
Q: The standalone business margins, despite JLR actually coming in better than expectations in terms of margins at 16.5 percent, have just broken even with a margin of around 1 percent. Would you assume that the worries on the standalone business might impact the outlook on JLR going forward?
A: The earnings for the year FY14 would take a hit in case the margins don't improve significantly. In terms of that, FY14 and might see downgrade and too. So, on that score maybe the target prices would come down slowly, but I would still feel that the buy rating on the stock would remain.
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