Losses from its passenger-car business have pulled down Tata Engineering's net profit to Rs 71.20 crore from Rs 97.46 crore last year.

Net sales, however, shot up from Rs 6,542.91 crore to Rs 8,791.79 crore during the period. Export turnover rose 20 per cent from Rs 506 crore to Rs 609 crore.

The company's board, which met in Mumbai on Monday, has recommended a cut in dividend to Rs 2.50 a share (25 per cent), against Rs 3 a share (30 per cent) in the previous fiscal.

At the Bombay Stock Exchange, the Tata Engineering scrip closed at Rs 122.90 after opening at Rs 119.90. The scrip touched an intra-day high and low of Rs 127.40 and Rs 119.90, respectively.

Tata Engineering's other income, which includes a profit of Rs 127.19 crore from sale of investments, shot up to Rs 171.23 crore from Rs 51.04 crore last year. The automobile major, which hived off its three sub-assemblies - gear box, axle and machine tools - into wholly owned subsidiaries, has notched up a profit of Rs 134.34 crore from the sale of the divisions. During 1998-99, Tata Engineering had recorded an extra-ordinary profit of Rs 102.38 crore from the transfer of the construction equipment division.

Profit before tax and extraordinary items stood at a negative (-) Rs 59.14 crore, against a profit of Rs 4.78 crore last year. Profit before taxation fell from Rs 107.16 crore to Rs 75.20 crore during the period.

Company officials said that the drop in profit has largely been due to the losses in the passenger car business. The rise in cost due to fitment of Cummins engines to the commercial vehicles also contributed to the dip in profits. "The company's major investments in the Indica facility has adversely impacted its profitability, as is the case in any new fully integrated car activity during the ramp-up period.

We are confident that the passenger car business will breal-even by the end of the current financial year," said a Tata Engineering official. During the year, the company repaid Rs 450 crore of its borrowings, which has brought down its average cost of funds to less than 11 per cent. However, the volume surge raised the interest liability from Rs 309.57 crore to Rs 404.74 crore during the period. Provision for depreciation was also higher at Rs 342.61 crore, up from Rs 281.31 crore last year.

Aided by the buoyancy in the automobile sector, Tata Engineering sold 1,99,365 vehicles during the year, against 1,28,867 vehicles the previous fiscal. "The commercial vehicles division recorded higher sales commensurate with an improvement of demand for medium and heavy commercial vehicles. The marketshare too improved to 67 percent, driven by the implementation of marketing initiatives and the launch of Euro I Cummins powere vehicles," the company said in a statement.