Tata Motors allays concerns on vendor payment issues

Tata Motors Ltd. clarified a newspaper report that it was facing troubles in making payments to its vendors and suppliers due to tight credit conditions and dwindling sales volumes. Three-quarters of dues to vendors have been paid immediately through an arrangement with banks, Ravi Kant, the company's Managing Director said. For the remaining 25%, there could have been some delays, said Kant, adding that the company was in constant dialogue with the vendors. "We have created a vendor council. All problems with vendors are being discussed and all mutual solutions are being worked out," he told reporters in Mumbai. But, Kant declined to detail the outstanding amount or when the payments will be made. Tata Motors' stock took a beating on Thursday after a business daily reported that the company owes more than Rs12bn in unpaid dues to its suppliers accumulated over the past few months. The company's stock fell to the lowest in more than two months.

Tata Motors has stopped making payments in the last few months and cut orders for parts amid plunging sales, the financial newspaper reported, citing an unidentified official at a New Delhi-based electrical-components supplier. "There could be some delay in payments (to vendors and suppliers). We are in a difficult situation, the whole industry is," Kant said. "There is a liquidity problem that is affecting everybody," he added. But, demand for new vehicles seems to be picking up after the announcement of the fiscal stimulus packages and the aggressive rate cuts effected by the Reserve Bank of India (RBI) to limit the damage on the Indian economy from the global recession. "The worst is over," Kant said. "We are on an upward path. How fast we will climb up is difficult to say," he said. The Tata Motors MD said that the Indian commercial vehicle market was witnessing some recovery after a rough patch between October and December.

"We have seen improvement in sales in January. It is expected that February will be better than January and first indications are that March will be even better. As sales begin to increase, vendor purchases will also improve and a positive cycle will once again get created. Our credit period for vendors is between 30 and 60 days," Kant said. "Whatever happened in the October to December quarter was the bottom of the cycle, and the company is cautiously optimistic about the future," he said. Tata Motors has collected Rs6.1bn through fixed deposits till date and the company has adequate working capital, he added. On the Feb. 05 article in The Economic Times, Kant said the story painted a wholly unrealistic picture and was sensationalizing the matter beyond all proportions. "We do not agree with it. Tata Motors is conducting its business properly, adequately, and in full partnership with all its vendors."