25% vendor payments delayed: Tata Motors

Tata Motors, India's biggest commercial vehicles maker, said there could be some delays in payments to a quarter of its purchases from vendors.

The company's Managing Director Ravi Kant told reporters in Mumbai on Thursday that 75 per cent of the company's purchases from vendors were covered by a tripartite arrangement, called the bill marketing scheme, between vendors who had chosen to be covered by the scheme, Tata Motors and banks. As per the scheme, the bank paid the vendor and Tata Motors paid the bank, he said.

"For the remaining 25 per cent purchases, there could be some delays," Kant said, without giving details about the outstanding debt or when payments will be made.

In 2007-08, Tata Motors purchased raw materials and components worth Rs 18,592 crore (Rs 185.92 billion). Analysts said the amount had gone down substantially in this financial year due to the overall slowdown in the commercial vehicle industry leading to reduced offtake.

Kant said Tata Motors was in constant dialogue with the vendors and had seen improvement in sales in January. It was expected that February would be better than January, and first indications were that March would be still better, he said.

"As sales begin to climb, vendor purchases will also improve, and a positive cycle will once again get created. Our standard credit period for vendors is between 30 days and 60 days," he added.

The automobile industry, he said, had been passing through a difficult time, which became acute in October, with particularly severe impact on the commercial vehicles industry.

"The magnitude and pace of it was unexpected and, like others, we too were caught in it. We have been trying to cope with the situation, as best we can," he added.

The share prices of Tata Motors fell 2.77 per cent on the Bombay Stock Exchange on Thursday to close at Rs131.50.