India's Tata Motors sees JLR margins improving in second half

BENGALURU (Reuters) -India's Tata Motors said on Thursday it expects margins at its largest division Jaguar Land Rover (JLR) to improve further after the carmaker saw strong demand for its luxury cars.

The automaker raised JLR's full-year earnings before interest and taxes (EBIT) margin forecast to around 8% from 6%.

JLR's EBIT margin in the quarter ending Sept. 30 rose to 7.3% from 1%.

That pulled the company's overall EBIT margins up to 7.5%, from 2.4% earlier.

A pick-up in volumes and a continued strong mix will put JLR on track to achieve an EBIT margin of 10% by fiscal 2026, Tata Motors Chief Financial Officer PB Balaji said in a post-earnings media call.

Strong JLR sales are key to Tata's earnings as the British division accounts for two-thirds of its parent's revenue.

Tata's overall revenue jumped 32.1% to 1.05 trillion rupees, largely due to a 21% rise in retail sales of JLR models, including those through its China joint venture.

However, Tata Motors missed its quarterly profit estimates as higher expenses offset the strong JLR sales.

The automaker's consolidated quarterly net profit, its fourth in a row, was 37.64 billion rupees ($452.47 million), but lower than analysts' estimate of 43.52 billion rupees, as per LSEG data.

An annual shutdown at JLR plants also capped sales. That led to a sequential fall in JLR's quarterly cash flow to 300 million pounds from 451 million pounds in the June quarter.

Quarterly expenses were up 22% at 1.01 trillion rupees, led by a 20.7% rise in input costs.

Besides, revenue from Tata's Indian passenger vehicle business declined 3% as buyers opted to wait for a newer version of its top-selling Nexon sport utility vehicle (SUV) launched in September, Balaji added.

($1 = 83.1880 Indian rupees)

(Reporting by Nandan Mandayam and Sethuraman NR in Bengaluru; Editing by Varun H K, Savio D'Souza and Sohini Goswami)