P B Balaji, chief financial officer at Tata Motors, said the impairment at JLR would help the company reduce depreciation and amortisation costs by nearly 300 million pounds in a year and reduce the break-even point.
The overall performance continued to be impacted by challenging market conditions in China, Ralf Speth, head of Jaguar Land Rover, said in a statement on Thursday. Tata Motors' loss came at Rs 26,993 crore ($3.78 billion) for the three months ended December 31, compared with a profit of Rs 1,199 crore in the year-ago period.
The company took a non-cash charge of Rs 27,838 crore ($3.90 billion) to cover the impairment at JLR in the three months to December 31. The write-off has been attributed to slowing sales in China, technology disruptions linked to a shift towards eco-friendly hybrid and electric vehicles, and also the rising cost of debt.
Britain's largest auto manufacturer, which is owned by India's Tata Group, made a £3.4bn pre-tax loss in the last three months of 2018 as sales fell.
"Today, we are also announcing a non-cash exceptional charge to reduce the book value of our capitalised investments".
It follows downgrades for parent company Tata late a year ago.
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JLR's China retail sales nearly halved in the quarter as demand for cars from the Asian economic powerhouse shrank for the first time since the 1990s. At the same time, investment in new models, electrification and other technologies remains high.
"We are now taking clear and decisive actions in JLR to step up its competitiveness, reduce costs and improve cash flows and make the business fit for the future", chief financial officer PB Balaji told reporters. This is expected to result in a one-time exceptional redundancy cost of around 200 million pounds for the luxury unit of Tata Motors.
In the corresponding quarter previous year, the company posted a net profit of Rs 1,215 crore.
Retails in United Kingdom were up 18 percent as against an industry-wide drop of 3.8 percent.
"Fiscal year 2019 so far has been a challenging period for the industry".
Commenting on the results, N Chandrasekaran, Chairman Tata Motors said, "Domestic business continues the strong momentum and has delivered market share gains as well as profitable growth".
Tata Motors shares were down 15 per cent at Rs 155.40 as of 9:38 am.