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(Reuters) - Tata Motors Ltd (TAMO.NS), India's biggest automaker by revenue, beat analyst estimates with its first quarterly profit gain in a year as buoyant sales at luxury unit Jaguar Land Rover Ltd TAMOJL.UL got a lift from new models.
Tata Motors, part of the $100 billion Tata conglomerate, has become dependent on its U.K. unit to prop up profits. At home, passenger and commercial vehicle sales have suffered from an environment of high interest rates and fuel prices in an economy growing at its slowest pace in a decade.
Sales of Tata's Nano, dubbed the world's cheapest car, are well below expectations and there has not been an all-new Tata-branded passenger vehicle since 2010.
JLR, on the other hand, has been riding on resilient demand for its Jaguar XF and XJ saloons and Range Rover sport-utility vehicles, especially in China.
Net profit surged 71 percent to 35.42 billion rupees ($566 million) in the fiscal second quarter ended September 30 from 20.75 billion rupees a year earlier, Tata said on Friday. Revenue rose 31 percent to 568.82 billion rupees.
The mean estimates of 10 analysts were profit of 25.49 billion rupees and revenue of 539.8 billion rupees, according to Thomson Reuters I/B/E/S.
Growth came "despite weak operating environment in the India business which was more than offset by increase in wholesale volumes and richer product and market mix at Jaguar Land Rover," Tata said in a statement.
Shares of Tata, worth $18.23 billion, closed up 1.1 percent before the results whereas the benchmark index .BSESN ended down 0.8 percent.
Tata and rivals such as Mahindra & Mahindra Ltd (MAHM.NS) and Maruti Suzuki India Ltd (MRTI.NS) have watched sales in India fall almost every month in the fiscal year started April 1, and the Society of Indian Automobile Manufacturers expects sales to end the year on a negative note.
"Continued slowdown in economic activity, low level of transport freight and infrastructure activity, frequent diesel price increases and tight financing environment, have impacted the industry during the quarter," Tata said in the statement.
Tata's domestic operations posted a net loss of 8.04 billion rupees in July-September compared with a year-earlier profit of 8.67 billion rupees. JLR, however, posted a 66 percent increase in net profit to 507 million pounds ($814 million).
"This year, it will be JLR that will drive Tata Motors," said KR Choksey analyst Neha Patel, who expects the domestic business to recover mildly next year as and when the economy begins to pick up.
JLR is building its first manufacturing plant outside the United Kingdom in China, which analysts widely expect to surpass the United States as the biggest premium car market by the end of the decade.
The unit, which Tata bought in 2008, expects to sell 100,000 cars in China this year compared with 77,000 cars last year.
JLR pitches its vehicles to a slightly lower, broader segment of the luxury market, helping it escape the brunt of a Chinese government crackdown on conspicuous spending that is affecting sales of rival marques such as Bentley and Lamborghini.
Launches this year of the Jaguar F-Type sports car and new Range Rover Sport SUV helped September-quarter wholesale sales of the iconic British brands rise 31.6 percent to 101,931 vehicles.
Analysts regard lackluster performance at Tata's India business as a concern, but most recommend the stock because they expect continued strong sales at JLR.
Of 51 Tata analysts tracked by Thomson Reuters, 43 have a positive recommendation on the stock which has risen 23 percent so far this year. The main index has risen 6.4 percent.
($1 = 62.59 rupees) ($1 = 0.6232 British pounds)
Editing by Christopher Cushing