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Tata Finance: Marginal improvement

Sep 4, 2002

Tata Finance has reduced its operating losses in the June quarter of FY03, on the back of a sharp decline in interest cost. The company's income from operations registered a strong rise of 27% for the first quarter supported by over three fold rise in hire purchase income (67% of total income).

(Rs m) 1QFY02 1QFY03 Change
Income from Operations 708 895 26.5%
Other Income 54 49 -9.2%
Interest & depreciation 1,112 879 -20.9%
Net interest income (404) 16 -
Other Expenses 737 162 -78.0%
Operating Profit (1,141) (146) -
Operating Profit Margin (%) -161.2% -16.3%
Provisions and Contingencies - - -
Profit before Tax (1,087) (97) -
Extraordinary items (3,139) - -
Tax (38) 0 -
Profit after Tax/(Loss) (4,188) (98) -
Net Profit Margin (%) -591.8% -10.9%
No. of Shares (m) 45.5 266.5
Diluted Earnings per share* -62.9 -1.5
*(annualised)

Lower depreciation and interest cost helped Tata Finance in reporting net interest income of Rs 16 m in the first quarter, as against Rs 404 m loss in the comparable quarter of the previous period. Also a steep decline in operating cost reduced its operating loss to Rs 146 m during the quarter from over Rs 1 bn in June quarter of FY02. The company's ongoing restructuring exercise could bring down its operating costs further in the coming quarter.

Tata Finance has initiated a restructuring exercise to revive its business. It has signed a deal with American Express (Amex) for selling its entire 65% stake in Tata Finance Amex. Amex will now control 100% of the venture. Tata Finance is also looking at reducing its stake in Tata Home Finance. As per the market reports, Abbey National Plc, which holds 30% stake in the home finance subsidiary, is interested in hiking its stake in the venture.

The company's stock price has witnessed a sharp decline over the last three months, due to fiasco of its subsidiary, Niskalp Invesments. The Tata group had accused Mr. Dilip Pendse (former MD) of cheating and criminal breach of trust, causing over Rs 4.2 bn loss to Tata Finance. The entire issue is likely to affect the company's business volumes, which are already under pressure with the entry of banks.

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