Tata Motors had accounting, PLI save the day in Q3, leaving investors unimpressed
Subscribe to enjoy similar stories. Tata Motors Ltd’s shares nosedived to a new 52-week low of ₹683.20 apiece on Thursday, following muted December quarter (Q3FY25) results accompanied by adverse management commentary, especially with regards to its Jaguar Land Rover (JLR) business. The management has lowered JLR revenue guidance by 3% for FY25, while remaining optimistic of improving JLR wholesale sales further in the March quarter (Q4FY25) led by seasonality even as demand is particularly slow in China.
JLR has not revised its free cash flow guidance lower despite having achieved £131 million so far in FY25 as against the target of £1.3 billion for the full year. It has also retained its Ebit margin guidance of greater than or equal to 8.5% for FY25, implying it has to clock a margin of 10% in Q4, which is a tall ask given current market dynamics. Ebit is short for earnings before interest and taxes.
In the Q3 earnings call, the management said it expects variable marketing expenses or discounts of JLR to rise further for a couple of quarters even as warranty costs stabilize. In such a scenario, it might have to again rely on lower depreciation and amortization (D&A) expenses to achieve its margin guidance. Incidentally, a 28% year-on-year fall in D&A expenses was instrumental in driving the 20 basis point (bps) expansion in JLR Ebit margin to 8.9% in Q3.
This is when JLR’s Ebitda margin shrank to 14% from 16% a year ago. Ebitda stands for earnings before interest, taxes, depreciation, and amortization. Note that JLR capitalizes expenses on product development and engineering.
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