India's Tata Motors swings into third quarter profit

India's top vehicle company Tata Motors said, its domestic operations swung to a third-quarter profit from a loss a year earlier as demand for cars rose, aided by new launches.

The company, which makes cars and trucks, reported a net profit of four billion rupees (86 million dollars) for the three months to December, compared with a net loss of 2.63 billion rupees a year earlier.

The earnings did not include data for British luxury icons Jaguar and Land Rover, which Tata Motors bought from ailing Ford Motor Co for 2.3 billion dollars in March 2008.

The performance was slightly below market expectations. Analysts had expected a profit of close to 4.3 billion rupees.

Revenues jumped nearly 90 percent to 89.29 billion rupees for the quarter, a company statement said.

"Introduction of new products and strong sustained growth in the existing portfolio, along with government stimulus has driven domestic demand revival," the company said in a statement.

India's large automakers have seen a revival in sales in recent months on improved consumer demand, government stimulus packages and fresh launches.

Tata Motors sold 165,413 vehicles including overseas sales in the quarter, a jump of 67.5 percent from the same period a year earlier.

The company's shares fell 2.92 percent or 20.9 rupees to 694.35 on the Mumbai stock exchange, ahead of the release of its earnings.

The company, which introduced the world's cheapest car, the Tata Nano, on the roads in July last year, said it sold 17,357 Nano cars up to December, with plans to ramp up further.

The jelly-bean shaped Nano is being produced at present from existing plants after the company was forced out of its planned factory in eastern India over a land dispute in 2008.

Nano cars are expected to roll out from a new plant in western Gujarat state early this year, media reports said.

Tata Motors says it faced the challenges of rising input costs and a possible hike in interest rates.

"The withdrawal of government stimulus, rising input costs and an increase in interest rates are concerns going ahead," the company's chief financial officer C. Ramakrishnan told reporters.

On Friday, India's central bank announced a marginal tightening in monetary policy, by raising the cash reserve ratio for commercial banks by 75 basis points to curb inflationary pressures.

Rising raw material costs pushed Tata Motors' operating profit down to 12.8 percent in the quarter, from 13.36 percent in the previous quarter ending September, the company said.

Analysts said the company may ride through these challenges by showing higher sales growth.

"The company has said that margins could be hit as inputs costs rise, but we expect volume growth to offset this, as domestic demand is strong," said Vaishali Jajoo, analyst with Mumbai-based Angel Broking.