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Slump in car, truck sales drag Telco into the red

NetScribes / Mahesh Shetty

Commercial vehicle leader Tata Engineering has just posted one of the worst results in its corporate existence. Sharp drops in both car and truck volumes combined with rising costs saw the company post a net loss of Rs 5 billion on total sales of Rs 80.95 billion for the year ended 31 March 2001.

This is a lot worse than analyst estimates, which had pegged the loss at Rs 3-4 billion on sales of a little over Rs 75 billion. Last year, the company posted a net profit of Rs 712 million on total sales of Rs 87.89 billion.

"I think the scrip did reflect a lot of what the company was going through, but we definitely didn't expect numbers like this," said an analyst at a leading brokerage in Bombay. "It paints a terribly depressing picture of a market that just doesn't show signs of improving. Telco has to do something pretty dramatic if it wants to get out of this loop," he added.

And the passenger car division is where they believe the action needs to come from. Most of this year's loss, analysts believe, came from the company's car project, which is expected to take at least another couple of years before it breaks even.

Breakeven for the company's ambitious Indica project is 90,000 vehicles, while the company fell just short of half that number in the last financial year. "Telco needs to do something really out of the box with the Indica if it wants to stay in the car game and, more importantly, pull up the company's fortunes as a whole," said a senior sales manager at an auto MNC in the South.

Telco has attributed the vast slide to a loss of volumes and rising costs, especially expenses on emission compliance, which they haven't been able to pass on to buyers.

Another cause for concern is Telco's truck business. The company is now seeing some of its worst days ever in the CV market. "We really don't know how much more we can take. Trucks just don't seem to be picking up, whatever we do," said a senior manager in the company's ailing CV division.

Telco is now facing a slowdown even in its LCV (light commercial vehicles) business, till very recently its fastest growing segment along with its hot selling utility, the Sumo. LCV sales in April have fallen 50 per cent over sales in the same month last year while Sumo sales fell more than 25 per cent over the same month last year.

On the Bombay Stock Exchange on Thursday just before the results were announced, the scrip closed at Rs 71.25, down marginally from its previous close of Rs 73.20.

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