NEW DELHI (Dow Jones)--Tata Motors Ltd. (TTM) plunged to a consolidated net loss for its fiscal first quarter from a year-earlier profit as a liquidity squeeze worldwide braked demand for its Jaguar and Land Rover luxury cars.

India's biggest auto maker by sales Monday posted a net loss of INR3.29 billion ($67 million) in the three months ended June 30, compared with a net profit of INR7.20 billion a year earlier. Consolidated net sales rose 13% to INR162.90 billion from INR144.14 billion.

Tata Motors's losses mirror the current state of the broader automotive industry where demand remains weak, especially in the key markets of U.S. and Europe, because of a credit crunch. A slowing Indian economy has also hit sales of the company's trucks, buses and cars.

"Continued adverse global automotive market conditions have resulted in an overall reduction in Jaguar-Land Rover volumes during the quarter," Tata Motors said.

Vehicle dispatches to dealers for Jaguar-Land Rover fell about 52% in the quarter to 35,900 vehicles, but, "the business took steps to offset losses in retail and adjusted stocks in line with retail sales," the company said.

Ashvin Chotai, managing director at London-based consulting firm Intelligence Automotive Asia, said JLR will continue to be a drain on Tata Motors for a while.

"Operationally and financially, I would say the worst is over for JLR and Tata, but it will be a long road to recovery and profitability," Chotai said.

Jaguar-Land Rover, which Tata Motors acquired for $2.3 billion from Ford Motor Co. in June last year, is cutting costs to lift profitability, Tata Motors said, adding the U.K. unit has secured more funding from commercial banks.

Tata Motors said earlier this month it is no longer seeking the U.K. government's financial support for Jaguar-Land Rover after securing guarantees and loans from private-sector banks.

Bulk of the loans have been arranged and the remaining will be secured in a few weeks, C. Ramakrishnan, Tata's chief financial officer, told reporters in Mumbai Monday.

Vice Chairman Ravi Kant said funds have been arranged from four banks, including Standard Chartered PLC. and Bank of Baroda, and talks are on with two-three more lenders.

The maker of the Nano - the world's cheapest car - had earlier said it expects to receive a GBP340 million long-term loan from the European Investment Bank.

The woes at Tata Motors are similar to those at Tata Steel Ltd. (500470.BY) which posted a consolidated net loss during the April-June period, mainly because of lower demand from Europe and the U.S. at its Anglo-Dutch unit Corus.

The auto maker also blamed the loss on higher borrowing to support investment and new product development, which increased depreciation and interest costs.

Depreciation and amortization costs more than doubled to INR8.44 billion in the first quarter from INR3.59 billion a year earlier. Interest costs surged 80% to INR5.84 billion.

Ramakrishnan said Tata Motors had a consolidated gross borrowings of INR338.5 billion as of end-June.

The consolidated results include those of other units such as Tata Technologies Ltd., Telco Construction Equipment Co. and Tata Daewoo Commercial Vehicle Co.

Quarterly income from sources other than the main business of vehicle manufacturing rose 28% to INR3.21 billion. That included a net profit of INR3.19 billion from the sale of long-term investments, the company said, without elaborating.

Tata Motors had an unrealized foreign-exchange gain of INR3.34 billion in the April-June period, compared with a net foreign-exchange loss of INR3.95 billion a year earlier.

Rajiv Dube, president for Tata's passenger car business, said the company received 40 orders for Jaguar-Land Rover vehicles since they went on sale in India late-June from a single showroom in Mumbai. Dealerships will be opened in six more cities by March, he said.

Vice Chairman Kant said "the U.S. market (for Jaguar-Land Rover vehicles) has stopped declining but still continues to be challenging."

"The Russian market continues to be a big challenge, whereas the Chinese market has shot up beyond anybody's expectations," he said. "The Middle East market is seeing some signs of revival," he added.

 
-By Santanu Choudhury and Anirban Chowdhury, Dow Jones Newswires; +91-11-4356-3305; santanu.choudhury@dowjones.com

(Raghavendra Upadhyaya contributed to this story)

 
(END) Dow Jones Newswires

August 31, 2009 10:05 ET (14:05 GMT)

Copyright (c) 2009 Dow Jones & Company, Inc.

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