India's top automaker Tata Motors Wednesday reported a 23 percent dive in net profit for April-June as higher sales for its British luxury marques failed to offset weak domestic demand.
The auto giant reported consolidated net profit of 17.32 billion rupees ($283 million) for the three months to June compared to 22.44 billion rupees a year earlier, a larger drop than expected.
Total revenues of Tata Motors, part of the giant steel-to-software Tata Group now controlled by new chairman Cyrus Mistry, rose eight percent to 443 billion rupees during the quarter.
But demand for Jaguar and Land Rover vehicles was strong, with a 13 percent rise in revenues to 4.09 billion pounds ($6.26 billion) for the quarter and a 29 percent jump in net profit to 304 million pounds ($465 million).
JLR said it sold 94,719 cars in the first financial quarter, a 10.4 percent rise from a year earlier.
"Our consolidated earnings were powered by a very good performance by Jaguar-Land Rover," said C. Ramakrishnan, chief financial officer of Tata Motors.
He said JLR's operating profit rose due to an increase in volumes, new launches and a favourable foreign exchange rate.
Tata Motors, which also makes the ultra low-cost Nano car, bought Jaguar and Land Rover from Ford Motor in 2008 for $2.3 billion as part of plans to expand its reach beyond Asia.
The deal vaulted it from a commercial vehicle and small-car maker into a global player with luxury brands.
JLR chief executive Ralf Speth said the firm aims to sell 100,000 cars in China this year.
"China is still growing and we hope to achieve an ambitious target of 100,000 cars this year," Speth told reporters in India's financial centre Mumbai.
JLR reported a 37 percent rise in sales in the Asia-Pacific region, a 13 percent increase in Britain and an 11 percent rise in China, from a year earlier.
"We see JLR as a key driver for Tata Motor's fortunes for the next 10-15 years," said Sonam Udasi, head of research with IDBI Capital.
"Perversely, Tata Motor's non-India exposure encourages us to be buoyant about the stock," he added.
JLR contributes the bulk of Tata Motors earnings.
Tata Motors plans to invest nearly three billion pounds ($4.64 billion) in JLR, on new products, manpower and infrastructure in the year to March 2014.
But in India, overall demand for new cars is slowing rapidly, with sales in June marking a record eight straight months of decline for the country's once red-hot car market.
High borrowing costs, worries over a sharp slowdown in the economy and costly fuel prices have kept buyers out of showrooms.
Tata Motors said its India business was "impacted severely by weak macro-economic conditions", as its sales for the quarter fell 19 percent from a year earlier to 154,352 vehicles.
India's auto sector will continue to face a bleak outlook as financial companies are "becoming stingy" in offering auto loans, added Mahantesh Sabarad, auto analyst with Fortune Equity Brokers.
The reduction in car financing is due to monetary tightening by the central bank to defend the rupee which hit record low against the dollar on Tuesday.