The company, India’s largest truck and bus maker, said high inflation and high interest rates were a concern but it expects increased infrastructure investment to boost demand for commercial vehicles in the country.
It is also optimistic on volume growth at Jaguar and Land Rover — the British luxury brands it bought from Ford Motor Co in 2008 for $2.3 billion.
“We need to be watchful about commodity prices going forward,” Chief Financial Officer C. Ramakrishnan told reporters, adding that competitive intensity and pressures on costs continues to pose a challenge for investments.
Higher fuel costs and interest rates are expected to crimp demand for cars in India, the world’s second-fastest growing auto market after China, with growth pegged at 12 to 15 percent for this fiscal year.
Auto sales in India grew a record 30 percent in 2010 to 1.98 million units, but rising costs of steel, rubber and other raw materials have forced some Indian car makers, including Tata Motors and Maruti Suzuki, to raise prices in recent months.
The Jaguar and Land Rover unit initially was a loss-making unit, but it has turned around in the last few quarters and posted a profit of 1.04 billion pounds ($1.7 billion) for the fiscal year ended March.
Tata Motors, part of India’s salt-to-software Tata conglomerate, builds utility vehicles, cars and the ultra-cheap Nano. It posted full-year net profit of 92.74 billion rupees ($2.05 billion), compared with 25.71 billion rupees a year ago.
Consolidated revenue rose by a third to 1.22 trillion rupees. Analysts, on average, expected Tata Motors to post net profit of 90.62 billion rupees for fiscal 2011, according to Thomson Reuters I/B/E/S. The company did not provide quarterly numbers.
The company’s consolidated operating margin rose to 14.4 percent from 9.3 percent a year ago. Net automotive debt-to-equity ratio was 0.68 times as at March-end.
Its board also approved a five-for-one stock split.
Last month, India’s top car maker Maruti Suzuki posted a flat quarterly profit to 6.6 billion rupees ($149.1 million).
Tata Motors hopes to benefit from growing demand for luxury brands, particularly in emerging economies such China, where the company is considering opening a factory.
The British luxury carmaker has already shortlisted partners in the fast-growing Chinese market, JLR chief executive Ralph Speth told reporters. It plans to plough more than 5 billion pounds into developing new vehicles over the next five years.
“With good volume growth, we need to think of what our future engine strategy will be,” Tata Motors Chief Executive Carl-Peter Forster said, adding that India is on the list of options for a JLR engine plant.
Tata Motors shares, valued at about $14.8 billion, are down 13.3 percent this year after rising nearly 65 percent in 2010. Maruti Suzuki shares are down 15.5 percent so far in 2011, while the broader market has lost about 12 percent.
Shares in Tata Motors ended up 2.5 percent at 1,162.40 rupees ahead of the results, in a firm Mumbai market. ($1 = 0.616 British Pounds) ($1 = 45.325 Indian Rupees)
(Writing by Prashant Mehra; Editing by Matt Driskill and Aradhana Aravindan)