The Indian company that owns Jaguar Land Rover is rethinking a $600 million (£368 million) overseas fund-raising plan due to falling markets.
Tata Motors said it is also reviewing its expansion plans.
The company, set to roll out the world’s cheapest car, the Nano, in early 2009, saw net profit dip in the September quarter, although gains from sales of investments helped beat forecasts.
“We are rethinking the overseas fund raising plan. These are turbulent and unprecedented times,” Tata Motors’ finance chief C. Ramakrishnan said.
He added the company had until June to repay the $3?billion bridging loan to buy Jaguar and Land Rover from Ford this year.
The company’s plans to raise $850 million in two rights issues this month, to repay some of the loan, were hit by a stock market slump.
The company’s founders paid for more than double their entitlement of 15 billion rupees ($303 million) in the issues, raising their stake to 42 per cent from 33, Mr Ramakrishnan said. “We will look at prioritising expansion and cutting back on expansion plans,’” he added.
Tata cited falling markets in August when it scrapped a plan to raise $686?million through a convertible rights offering. Tata Motors shares rose 9.1 per cent to 171.8 rupees on Friday in a Mumbai market that rose 8.2 per cent. The shares have fallen 76 per cent in 2008, sharper than a 52 per cent fall in the broader market.
The Nano, priced at $2,000, was scheduled to hit the streets in October but delayed after the company said it would move production from a plant in West Bengal to Gujarat due to protests by farmers against acquisition of land.
Tata Motors sold 135,037 vehicles in the quarter, down 1.1 per cent from a year earlier. Jaguar and Land Rover sales also fell, 11.2 per cent in the quarter to 61,420 units, the company said.
“Production will be moderated in line with demand. We will not be adding inventory,” managing director Ravi Kant said. Mr Kant was referring to cuts in production at JLR’s Castle Bromwich, Lode Lane and Halewood, Merseyside, plants.
Lower sales, higher cost of raw materials and a foreign exchange loss of 2.85?billion rupees in the quarter were countered by one-time gains of 3.59 billion, primarily on some of its holding in group firm Tata Steel, that helped profit come in ahead of expectations.
Tata Motors said net profit fell to 3.47?billion rupees ($70.2 million) in its fiscal second-quarter ended September 30, from 5.27 billion rupees a year earlier. Net sales rose to 70.29 billion rupees from 65.95 billion.
Analysts in a Reuters poll had estimated net profit at 3.3 billion rupees on net sales of 70 billion rupees. Tata Motors said operating margins, a key measure of profitability, fell to 8.1 per cent.