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Home > Business > Business Headline > Report

Telco in talks for Rs 1 lakh car

BS Corporate Bureau in Mumbai | May 28, 2003 13:08 IST

Tata Engineering may look at 'unconventional' ways to make Chairman Ratan Tate's dream of offering Indians a passenger car for Rs 1 lakh (Rs 100,000) into reality.

The firm's executive director (passenger cars business unit), V Sumantran, said the company was in 'friendly talks' with two-wheeler manufacturers as part of its due diligence.

"A number of auto companies have in the past have not been able to achieve such a feat, but not because of lack of effort. We feel that one has to look at unconventional ways of producing such a vehicle at a cost of around Rs 1 lakh," Sumantran said.

Asked if the firm was looking to collaborate with two-wheeler manufacturers for jointly working on the project, Sumantran said, "As an auto company, we held friendly talks with some two-wheeler manufacturers, but there is nothing concrete at this point."

Tata Group Chairman Ratan Tata had a few months ago said that it was his greatest dream to produce a passenger car for India and other developing nations at a cost of Rs 1 lakh.

Telco back in black after 2 years

Tata Engineering reported a net profit of Rs 300.11 crore (Rs 3.001 billion) during 2002-03, after posting losses of Rs 53.73 crore (Rs 537.3 million) and Rs 500 crore (Rs 5 billion), respectively, during the two preceding financial years.

Its sales (net of excise) touched Rs 9,093.22 crore (Rs 90.932 billion) in 2002-03, against Rs 7,502.66 crore (Rs 75.026 billion) in 2001-02, while the net revenue climbed 21 per cent.

The company's board of directors has proposed a 40 per cent dividend after a gap of two years.

It had also given its approval for raising funds, company executives said. They, however, declined to reveal how much money the company was planning to raise, the means of raising the funds, or where they would be deployed.

Analysts expect the company to raise cheaper funds overseas to retire high-cost local debt.

Telco's net profit declined to Rs 137.57 crore (Rs 1.375 billion) in the last quarter of 2002-03 from Rs 161.68 crore (Rs 1.616 billion) during the corresponding quarter of 2001-02.

This was largely because the company made provisions of Rs 79.24 crore (Rs 792.4 million) towards deferred tax during the quarter, whereas it had received a deferred tax credit of Rs 55.48 crore (Rs 554.8 million) in the same quarter of the previous financial year.

During 2002-03, Telco reduced costs by Rs 343 crore (Rs 3.43 billion), taking its total cost cut to Rs 947 crore (Rs 9.47 billion) over a three-year period.

While 65 per cent of this reduction has been achieved from savings on raw material costs, 25 per cent has come from savings on interest charges, while the rest was saved on variable costs. Further, its total debt has come down to below Rs 1,500 crore (Rs 15 billion).

Outsources special vehicles manufacturing

Tata Engineering has outsourced the manufacturing activities of its range of specialised, fully built vehicles that are produced at Dharwar facility in Karnataka.

The company will, however, design the products and market them under its own brand. This is the first of its kind of development in the country's auto sector.

Ravi Kant, executive director (commercial vehicles business unit), said, "At our Dharwar facility, certain outside parties are now making the fully-built vehicles such as ambulances, tippers. They do the manufacturing under our supervision, while we set the quality standards. We also design the vehicles and sell them under the our brand name."

"Under this model, while we did not have to incur any capital expenditure. It will contribute to our top and bottom lines," he added.

During the previous financial year, the company's sales of special vehicles produced at Dharwar increased to around 6,000 units from around 2,000 units during 2001-02. The facility is its fourth manufacturing facility.

It was planned by the company during the boom in commercial-vehicles market during the mid-1990s.

However, as the market dipped in subsequent years, the company froze investments at the facility. The company's other manufacturing plants are at Pune, Jamshedpur and Lucknow.

The Pune facility makes both passenger and commercial vehicles. The other two manufacture only commercial vehicles.

Meanwhile, the company is planning aggressive measures to gain market share in the passenger vehicles segment of commercial vehicles market. It currently has a 66 per cent share in the domestic passenger vehicles segment.

Ravi Kant said the company is planning a slew of launches during the current fiscal across various segments.

"The company is also planning to launch integral buses for the first time in the country. So far, it has been offering buses built on truck chassis."

Ravi Kant expects the commercial-vehicles market to grow by 7-8 per cent this fiscal.

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