UPDATE 2-Tata Motors profit soars; sees strong demand for JLR

Fri Feb 11, 2011 8:55am EST

* Q3 net 24.24 bln rupees vs 21.86 bln rupees street view

* JLR Q3 profit after tax 19.58 bln rupees

* Says optimistic on future demand of JLR

* Tata Motor shares close 3.8 pct higher (Adds fund manager, company comments)

By Prashant Mehra

MUMBAI, Feb 11 (Reuters) - India's Tata Motors (TAMO.BO) said on Friday surging sales at its luxury Jaguar and Land Rover (JLR) unit helped quadruple fourth-quarter profit and pledged to lift prices aggressively to offset rising raw material costs.

The company said it was looking for a partner in China to grow JLR sales there and was also exploring assembling the top-end marques in India to satisfy heavy local demand.

Tata Motors, part of India's salt-to-software Tata conglomerate whose range includes utility vehicles, cars and the ultra-cheap Nano, posted December-quarter net profit of 24.24 billion rupees ($530 million), compared with 6.5 billion a year earlier.

Its stock climbed more than 5 percent higher in late trade before closing up 3.8 percent.

"On the face of it, the numbers are very good and this is reflected in the stock price," said R.K. Gupta, managing director at Taurus Mutual Fund.

"Tata Motors is better placed because of the variety of its products. Growth continues to be there and the company will continue to do well despite the possible rate hikes," he said referring to rising interest rates in India. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> For StarMine comparative data:link.reuters.com/jac97r For a graphic on Nano: link.reuters.com/xyb97r ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

CAUTIOUS OPTIMISM

The Jaguar and Land Rover unit, which Tata bought from Ford Motor Co (F.N) in 2008 for $2.3 billion, was initially loss making.

But it has seen a turnaround in the last few quarters and posted profit of 19.58 billion rupees for the three months ended December.

"We are cautiously optimistic. Globally, there is a huge demand for premium products like Range Rover and even Jaguar. We are close to (2007) levels and hopefully will overtake," Ralph Speth, head of JLR, said, referring to the peak year before the global financial crisis struck.

Auto sales in India touched a record high in January, defying expectations of a slowdown, boosted by a burgeoning middle class, easier access to loans and wider choice of models. [ID:nSGE71805I]

But tough competition, rising interest rates and higher fuel prices are expected to impact demand this year with growth easing to 12-15 from 31 percent in 2010.

"We see particularly strong demand (in India) for Nano and small commercial vehicles where we have developed segments and the impact is being felt in improving sales," Chief Executive Carl-Peter Forster said.

BEATS FORECAST

Tata Motors' consolidated revenue for the three months ended December rose 22 percent from a year earlier to 316.85 billion rupees. A Reuters poll had forecast net profit of 21.86 billion rupees for the quarter on net sales of 298.6 billion.

The company said its consolidated operating margin rose to 15.2 percent from 11.8 percent a year ago. Net debt-to-equity ratio was 0.8 in the December quarter.

Last month, India's top car maker Maruti Suzuki (MRTI.BO) lagged market estimates, with quarterly profit down 18 percent, and later said January sales grew just 14.7 percent -- its slowest monthly rise since last March. [ID:nSGE70U00M]

Tata Motors shares, valued at about $13.4 billion, are down 12.4 percent this year after rising nearly 65 percent in 2010. Maruti Suzuki shares are down 16.6 percent so far in 2011, while the broader market .BSESN has lost 13.6 percent. ($1=45.7 rupees) (Writing by Devidutta Tripathy; additional reporting Arada Kultawanich in BANGKOK, Bharghavi Nagaraju in BANGALORE, Sumeet Chatterjee and Ami Shah in MUMBAI; editing by David Cowell)

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