JSW MG Motor FY-24 losses lowest in 5 years at Rs 586 crore, hits operating profit last fiscal

Aided by improved volumes and the cost control on raw materials, JSW MG Motor India posted its lowest loss in five years and achieved operating profit, according to the company’s annual filing with the Ministry of Corporate Affairs (MCA).

This improvement was primarily attributed to the company’s ability to lower raw material costs. Coupled with a higher average selling price, this boosted revenues by 4.64% to Rs 7,990 crore in FY24, up from Rs 7,636 crore in FY23, as per the filings. 

Reviewing the annual performance, the directors' note stated: “Your Company continued its focus on operational excellence, relentless cost reduction measures, lean manufacturing practices, and improved supply chain management with tight control of working capital. These measures mitigated the impact on the margins and improved cash flows.”

Despite these improvements, the cumulative losses over the past five years still amount to approximately Rs 3,000 crore.

The company’s sales volume grew by 6.97%, reaching 56,847 units in FY24 compared to 53,141 units in FY23. This growth translated to an average realization of ₹14.05 lakh per vehicle, approximately ₹4 lakh higher than the average realization per car in India. 

During FY24, the company sold 28,636 units of the Hector, 10,630 units of the Astor, 5,002 units of the ZS EV, 2,447 units of the Gloster, and 10,132 units of the Comet. The company expanded its EV portfolio by introducing two new EV models in 2024.

Reducing raw material costs significantly boosted the company’s gross profit margin, a key metric reflecting the impact of pricing and raw material costs on profitability. JSW MG Motor’s gross profit margin increased to 20.73% in FY24, as the raw material cost as a percentage of sales dropped to 79.27%, from 85.23% the previous year. This improvement translated into a gross profit of ₹2.91 lakh per vehicle in FY24, up from ₹2.12 lakh per vehicle in FY23. The substantial improvement in gross profit enabled the company to achieve an operating profit margin of 2.08%, resulting in an operating profit of ₹29,292 per vehicle, a significant turnaround from the loss of ₹65,926 per vehicle in FY23.

Some of the leading carmakers in India operate at 10-13% on the operating profit level and have an operating profit of Rs 58,000-263,000 per vehicle.

Looking ahead, the company has announced plans to invest Rs 5,000 crore to enhance its production capacity and introduce a new vehicle, including electric vehicles, every three to six months, starting September 2024. 

This expansion includes a second manufacturing plant in Gujarat near its existing facility in Halol. Production capacity is expected to increase from the current levels to over one lakh units per year to over three lakh units per year. 

During the financial year under review, the company entered into a Share Purchase and Share Subscription Agreement on November 30, 2023 (later amended on March 28, 2024) with SAIC Motor HK Investment Limited (SAIC HK), JSW Ventures Singapore PTE. Limited (JSW Ventures), and JSW International Tradecorp Pte. Limited (JITPL). This agreement marked a significant change in the company's shareholding structure.

By March 31, 2024, JSW Ventures emerged as a key shareholder, holding approximately 38.28% of the company's equity shares through a mix of primary infusion and secondary acquisition. Category A Benefit Trust also acquired around 2.65%, while the MG India Employee Benefit Trust secured about 5.47% through primary infusion.

Subsequently, by April 8, 2024, the company issued additional equity shares to Indoedge India Fund-LVF Scheme and Category B Benefit Trust, further reshaping the ownership structure. As a result:

• SAIC HK and its affiliate, SAIC Motor International, collectively held a controlling 49% stake in the company.

• JSW Ventures slightly adjusted its position to 35%.

• Indoedge India Fund-LVF Scheme emerged as a notable shareholder with an 8% stake.

• Category A Benefit Trust reduced its holding to 2.42%, while Category B Benefit Trust held a modest 0.58%.

• The MG India Employee Benefit Trust retained 5% of the company's equity.

This series of transactions redefined the ownership structure and underscored the strategic partnerships aimed at steering the company's growth and long-term objectives.

After the transactions, SAIC continues to be the largest stakeholder in the company, followed by  JSW Ventures with a stake of 38%. This means that both parties must mutually agree on strategic, financial, and operational decisions.

The director’s note stated that CRISIL Market Intelligence & Analytics expects the macroeconomic scenario to support industry growth, with GDP projected to grow healthy between Fiscal year 2024 and Fiscal year 2029. India’s GDP growth is expected to outperform other significant geographies

Continued support from the government in terms of policies and continued expenditure and investments are expected to provide support.

“India's favorable demographics are an added advantage, and they are also expected to help propel the passenger vehicle industry forward. During the year under review, on the backdrop of strong initiatives on increasing share of business and new business development efforts in earlier years, your company has a strong order book from customers in domestic markets,” added the note.