X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
TELCO: Focuses on reducing costs - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Oct 9, 2000

    TELCO: Focuses on reducing costs

    Tata Engineering and Locomotive Company Ltd (TELCO) has initiated a major cost cutting exercise to cushion itself from its declining commercial vehicle (CV) volumes and a slowdown in the passenger car segment.

    The company has come out with a three pronged strategy for improving the overall revenues of the company. This includes cost reduction, qualitative improvement and new product development. Besides the company has appointed a consultant to help it carry out the above.

    On the cost cutting front the company is targetting a reduction in overall costs by 4%-5% per annum. Besides the company has introduced an employee separation scheme which has been offered to 3,000 employees currently. This should help the company's gross margins in over the next few years.

    In new product development, Telco together with its consultant Warwick Manufacturing Group will come out with a product introduction strategy. This stems from the fact that competition in the commercial vehicles segment too is increasing with the entry of foreign players like Volvo in the Indian market. This will help the company to come out with products which cater to the specific needs of the consumer.

    Though all these measures will help the company in reducing costs over a three year time frame, the worry currently is that commercial vehicle volumes are not showing signs of a pick up. In the passenger car segment, the company was earlier expecting to sell 90,000 vehicles, however now they are expecting a sale of 70,000 vehicles. Considering the fact that the company has sold only 21,580 vehicles in the first five months of the current year, this target of 70,000 vehicles seems unlikely to be met. Hence its car division will not be able to break even this year.

      April-August FY01 April-August FY00 % growth
    M& HCVs 19,174 22,446 -14.6%
    LCVs 14,710 12,978 13.3%
    Utility vehicles 12,271 11,589 5.9%
    Passenger cars 21,580 16,658 29.5%
    Total 67,735 63,671 6.4%

    FY2001 is a very tough year for Telco and we feel inspite of cost reductions, the company cannot report a turnaround in the current year. Volumes in medium and heavy commercial vehicles (MHCVs) have declined by 15% in the first five months of the current year. Besides the automobile sector as a whole is faced with higher diesel prices leading to higher transportation costs for companies.

    The slowdown in the passenger car segment has added to Telco's woes. The only positive which the market was looking forward to was the tie-up for the car project, however this also does not seem to be happening. They were earlier on the look out for a strategic partner. Now the company's stance is that they will enter into a model swapping arrangement with some international companies and this will help the company in increasing its export volumes.

    On the current price of Rs 81, Telco is trading at 28.9x FY2000 EPS of Rs 2.8. It is trading close to its 52 week low.

     

     

    Equitymaster requests your view! Post a comment on "TELCO: Focuses on reducing costs ". Click here!

      
     

    More Views on News

    Tata Motors Ltd: Another Disappointing Quarter, Management fails to Perform! (Quarterly Results Update - Detailed)

    Aug 14, 2017

    Tata Motors Ltd disappoints again for both India and JLR business. Management commentary indicates a slow year ahead.

    Tata Motors Ltd: Dismal Quarter, Long way to go! (Quarterly Results Update - Detailed)

    Feb 16, 2017

    Tata Motors Ltd has announced its financial results for the third quarter of the financial year 2016-17 (3QFY17).

    Maruti Suzuki Ltd: Bumpy First Quarter. GST dents Margins! (Quarterly Results Update - Detailed)

    Aug 2, 2017

    GST realted cost impacts Margins, Management expects good year ahead.

    Hero Motocorp Ltd: Riding on the Scooters Growth, Maintains Margins! (Quarterly Results Update - Detailed)

    Aug 1, 2017

    Good Recovery in the Scooters market, expects pick up in exports too.

    Bajaj Auto Limited: Recovery in Exports but Domestic Disappoints! (Quarterly Results Update - Detailed)

    Aug 1, 2017

    New Export Markets picking up, Management expects good recovery in domestic Three wheeler market.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    TATA MOTORS SHARE PRICE


    Aug 16, 2017 (Close)

    TRACK TATA MOTORS

    • Track your investment in TATA MOTORS with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks

    TATA MOTORS - FORD COMPARISON

    Compare Company With Charts

    COMPARE TATA MOTORS WITH

    MARKET STATS