Tata Motors has revised JLR EBIT margin guidance upwards to 8%

Tata Motors, the country's largest automobile company by revenues expects a strong second half of the year and has revised its EBIT guidance for Jaguar Land Rover higher by 200 basis points to 8 percent for FY-24.

During the current financial year, Tata Motors expects a free cash flow of 2 billion pounds and net debt will be reduced by one billion pounds during the year.

Reviewing the Q2 FY-24 earnings, P B Balaji, the Group CFO of Tata Motor said in the first half of FY-24, JLR has posted its highest revenue at 13.8 billion pounds, and cash flow which is the highest ever in its history.

“The profitability was higher on a year-on-year basis, due to improved volumes, better product mix and pricing. The breakeven volume remained the same at 300,000. Strong performance and our continued confidence in the way JLR is coming back we are increasing margin guidance of 6 percent a year is now being revised to around 8 percent a year, and we continue to expect greater than 2 billion pound free cash flows for the year and our net debt will reduce lower than a billion pounds, as we end the year, in JLR,” said Balaji.

JLR had an order book position of 1,58,000 units, 70 percent of that was from Range Rover, Range Rover sport and the Defender.

Balaji said in the long term the company is on track for a net zero debt target for next year and it is on course for a 10% EBIT margin for FY-26 for JLR.

"We are confident of staying on track for those numbers. So, as volumes pick up, as the mix continues to be strong, and our focus on driving down breakeven and driving up the volumes, all this we believe will put us on the right track for the delivery of the numbers,” he assured.

The CFO stated that all the elements of the strategies that the company has been working on, have all played out exactly the way Tata Motors wanted.

On a consolidated basis (Tata Motors plus JLR) the revenue for H1 crossed Rs 2 lakh crore for the first time with a strong cash flow and double-digit EBITDA of 14%.

The net automotive debt came down to Rs 38,700 crore and the deleveraging plan is on track, said the company.

On the way ahead, Balaji said, there are multiple views on how the global demand will evolve and one is not sure which way it is going to move.

“In our portfolio we seem to be comfortable both in JLR as well as in India. For the next year, our job is to ensure the portfolio is sufficiently refreshed, competitive, and we are executing well. As the numbers start picking up, it also gives us enough manoeuvring space for delivering those plans. So, JLR is in a good space and it will continue to strengthen and we are moving away from managing the challenges of the supply chain into more seizing the future for JLR,” added Balaji.

In India while the passenger vehicle market continues to scale new peaks, there are fears of high base catching up and the growth rates to fall across segments amid high inflationery environment and hardened interest rates.

The company on its part believes that on the domestic market front, the basic underlying GDP drivers of the economy are intact. From the passenger vehicle business perspective the company doesn't see any dramatic shift and the substantial investment on infrastructure will continue to create demand for heavy commercial vehicles.

“The investment led growth continues in the country. Nothing shows us that things should dramatically slow down, if it were to play we will be ready for the challenge. The demand situation continues to remain strong, and there is no need for us to make any panic moves; we will be ready to change course if needed,” assured Balaji.