Tata Motors Ltd (TTM) 2013 Q1 法說會逐字稿

Ladies and gentlemen good day, and welcome to the Tata Motors Q1 FY13 earnings conference call hosted by Citi Investment Research. As a reminder, for the duration of this conference all participants lines will be in the listen only mode, and there will be an opportunity for you to ask questions at the end of today's presentation. (Operator Instructions).

I would now like to hand over the conference to Mr. Jamshed Dadabhoy from Citi Investment Research. Thank you, and over to you sir.

Thanks Shama. Hi, and good evening ladies and gentlemen. I am Jamshed Dadabhoy from Citigroup. We would like to welcome investors to Tata Motors 1Q FY13 results call.

This evening we have with us Mr. C Ramakrishnan, CFO of Tata Motors. Joining him are Mr. Vijay Somaiya, Head of Treasury and Investor Relations and the IR team.

I will request Mr. Ramakrishnan to give us a brief overview for the quarter and then we'll dive into q&a. In the interest of time we'll be limiting this to one question per participant. Okay, thank you and please go ahead sir.

Thank you Jamshed. Thank you for hosting the call. And thanks to everybody on the line for joining us on the first quarter results call for Tata Motors consolidated results.

As we announced a short while ago, you may already have the presentation, so I am not intending to go through the presentation, but just to cover some highlights.

Tata Motors consolidated net revenue for the quarter was INR43,000 crores, up 30% compared to INR33,000 crores in the same quarter last year.

Consolidated EBITDA margin came in at 14.4% compared to 13.4% a year ago.

Profit after tax was INR2,245 crores compared to INR2,000 in the same quarter last year.

The Tata Motors standalone performance was subdued. Net revenue was INR10,500 crores compared to INR11,600 crores in the same period last year, a drop in revenue of about 9%.

EBITDA was INR774 crores at 7.3% compared to 8.8% in the same quarter last year, a reduction in EBITDA of about 1.5 percentage points.

And profit after tax was INR205 crores compared to INR400 crores in the same period last year.

Jaguar Land Rover had a very good performance once again this quarter; GBP3.6b revenue compared to GBP2.7b in the same quarter last year, net revenue up 35%.

EBITDA margins came in at 14.5% compared to 13.4% in the same quarter last year. EBITDA was GBP527m compared to GBP362m.

If you recall, we had made the accounting adjustments for tax revision deferred tax asset credit last quarter, and therefore, the tax accounting provision in the quarter remained high, came in high. And therefore, profit after tax marginally GBP236m compared to GBP220m in the same quarter last year.

As far as the standalone Tata Motors business is concerned, lower volumes, lower net revenue and the profitability was further impacted by weak macroeconomic factors and the competitiveness in the passenger car industry market.

As far as Jaguar Land Rover is concerned, significant growth in markets like China and other emerging markets and growth aided by volume of the book contributed mainly to the very good performance of Jaguar Land Rover in the quarter.

Cash and bank balances at the consolidated level remained at about INR30,000 crores, slightly increased in fact quarter on quarter.

Capital expenditure in Jaguar Land Rover was about GBP400m plus for the quarter. And post capital expenditure and product development expenses, Jaguar Land Rover had net operating free cash flow generation of about GBP110m for the quarter.

Post April to June quarter, in August, Jaguar Land Rover also declared a maiden dividend of GBP150m to the parent. This will be accounted in the parent Tata Motors books in the current quarter Q2. It's a maiden dividend post our acquisition of Jaguar Land Rover. We are very pleased with it.

With this I'll stop and maybe hand over back to Jamshed to take us through the question and answer session.

Thank you very much. We will now begin the question and answer session. (Operator Instructions). All are requested to please limit their questions to one at a time so that all participants get a chance to ask questions. Time permitting, we will come back to you should you have more questions. (Operator Instructions).

We have the first question from the line of Binay Singh from Morgan Stanley. Please go ahead.

Good evening sir. Thanks for this opportunity. My question is there seems to be a huge difference between your profits and tax rate as per IFRS and Indian GAAP in JLR. Could you throw some light on the drivers for the difference and how should we look at your tax rate, sort of a sustainable tax rate, going ahead given China's share is going up?

In general, the tax rate in JLR will be driven in this quarter and also in the future quarters by the deferred tax accounting that we introduced in the last quarter. That is Q4 of last year.

Right.

As we recognize the deferred tax asset in the last quarter, from now between the two lines there is provision for current tax and provision for deferred tax in JLR. If you add up the two, JLR taxation, as far as the P&L portion is concerned, would be at the marginal rate in the UK.

In addition, to that JLR taxation would also be there for their overseas entity profits which I've explained from time to time in the past.

Right.

However, the tax outflow for JLR in the UK will not beat that because of the past tax credits.

Right.

Your second question was relating to?

What will be the effective tax rate then going ahead? Like, for example, as for IFRS, we're almost seeing a 29% tax rate in this quarter.

If you take the deferred tax line and the current tax provision both together, the tax rate in JLR would be in the region of 20% to 25%.

Okay, okay.

Which is almost a marginal rate in the UK, but that does not mean it will be the tax outflow. Cash outflow will not beat that.

Okay. And sir, second question is that even the net income reported as per IFRS and Indian GAAP on JLR has a huge difference. Could you throw some light as to what was the drive -- what were the drivers for that?

The main differences would be, apart from the -- what we had talked about in the earlier quarters, the main difference would be the exchange fluctuation accounting.

Okay, which is basically a ForEx gain sitting in the Indian GAAP.

Yes. For exchange accounting, if you do it as a consolidation on the base of Indian GAAP for JLR, you will have a different amortization under the new accounting standards introduced last year in India which is not available under IFRS.

Right, so in a way then we would have a ForEx gain in their GAAP, put in their GAAP?

Yes.

Right. Great, thanks a lot. I'll leave it to further questions. Thank you.

Thank you. We have the next question from the line of Kapil Singh from Nomura. Please go ahead.

Yes, good evening sir. On -- moving onto standalone results, I just wanted to check there has been a good improvement in raw material cost sequentially. If you could just throw some light on what have been the drivers for that, and how do you see that going forward.

I think on the cost side, we expect the component and the raw material cost to remain benign or subdued in the current -- at least in the near future, in the coming quarters.

In addition, as you know, we do have ongoing aggressive cost reduction plans in all of our products, including material cost reduction. So I would say a general subdued trend in terms of cost increases with less pressure on the costs and plus our own internal efforts have contributed to this.

Sir, we have seen around 300 bps decline in raw material costs to sales, so if you can just help us understand that as well on a sequential basis.

Primarily driven by what I said, but since you are taking overall percentages, it also can be contributed to the model mix. So it's a function of subdued levels in terms of component pricing, component prices and we also took a price increase on April 1. If you take a factor of the price increases with the steady on the cost side, our own cost reduction efforts and model mix, this ratio change can happen.

Okay. Sir, by model mix you mean the LCV's proportion going up as well?

Partly, and maybe even within that piece, passenger cars and commercial vehicles.

Okay. And sir, also on the MHCV side, especially on the goods MHCVs we've seen a decline in volumes, steep decline. So what is the outlook going forward and if you could just give us an idea of the inventory levels as well with the dealers and the Company?

As you know, in the quarter we have been correcting our production to demand on a couple of occasions including taking shutdown in our factories. So we have been maintaining a careful watch on the inventory levels.

We haven't seen any alarming trends on the inventory levels. They are reasonably under control. I would say for the Company around 30 days and similarly for the subsidiaries, for our dealers, it's not very different from the average we would like to see.

As far as the demand outlook for the MHCV is concerned, it has been a challenging quarter; several factors including the macroeconomic outlook and the subdued activity on the infrastructure side.

There have been some price increases also. Our own price increase and earlier in March contributed by the excise duty increases. I think the freight rates also have been somewhat weak; a variety of these factors.

I think going forward, I will say it will remain. We will see some headwinds in this segment as we have said in the last quarter also. We do see some headwinds. Possibly the monsoon recovery happens and infrastructure spending and the initiatives are triggered that we will see some revival going forward in the coming quarters. But we would remain somewhat subdued in our outlook.

Right. And sir, lastly, just a small question on JLR. We have seen a ForEx loss of GBP67m. If you could just help us understand what is the nature of this loss? Where is it coming from?

GBP67m (technical difficulty). The GBP67m that we are referring to is the mark to market valuation losses on some of the hedges we have taken. And this is for the period beyond the current quarter, or it includes the current quarter as well. Mark to market beyond the current quarter.

Okay. And for the current quarter we take in -- take it in the revenues itself?

That's right.

Thanks a lot sir. That's very helpful. Thank you.

Thank you. We have the next question from the line of [Pramod Kumar] from IDFC Securities. Please go ahead.

Yes, thanks a lot for the opportunity. Sir, just wanted to understand as to considering that China did so well for us this quarter in terms of 22% of volumes which would mean that even in terms of revenue and profits it would be a substantially higher share. So just wondering on margins, considering also given the fact that the capitalization rate has gone up on a sequential basis 120 bps, is it right to assume that the profitability in other markets ex of China are coming under pressure?

Profitability, I would say in other markets, I think I have mentioned it in the last annual call also, we do see some pressure on the margins for the profit. The variable marketing expenses in many of the markets are slowly catching up. We have seen a year and a half of all the variable marketing expenses remaining very, very low.

I am saying more from a general market perspective, not necessarily Jaguar Land Rover specific, but we do see that going up. I think there will some pressure on the margins. I would remain somewhat cautious about margin outlook.

Because actually, extra capitalization operating margins are generally down 130 bps sequentially. So I am just wondering is it like -- and you would also in the JLR call last quarter generally guided that margins for the year should be around the fourth quarter level of 14.9 as per IFRS. So would we still stand by that or you see some downward pressure to that margin assumption or margin guidance rather?

First of all, I don't think in the last call we talked about a number in terms of our guidance for the margins going forward. That's not something that we normally do. I think (multiple speakers).

In terms of a range, sorry, in terms of a range broadly remaining around the same levels that's what was discussed.

I think we talked more in terms of our expectations with our plans. We would definitely hope to maintain that. But I would think due to a combination of model mix, maybe geographical mix, again foreign exchange is an uncertainty that you and I can't be predicting at this point of time, I would remain cautiously optimistic on the margin side.

Okay. And finally on CapEx, if you can just share us to any changes to the number what we are guiding? Even from beyond FY13 perhaps even to -- for FY14 well it's going to be GBP2b or there could be upward revision to that?

It will be in that region. It will be difficult to put a precise number to that. It will be in the region of GBP2b. Depending on the sequencing or cascading of the programs, it may be 100 or whatever higher or lower. It's difficult to create beyond that.

But we do see opportunities from time to time, further opportunities which we think we are -- which is worthwhile to pursue either from the product point of view or new segment or market or either opportunities. We will pursue that even if it means a little investment.

Okay, and sir finally on the domestic (multiple speakers).

But at this point of time, my guidance would remain in the region of GBP2b.

GBP2b, and finally on the domestic passenger car franchise we've seen steady decline in our market share excluding our market share hit I think in that all time low almost. So just wondering what is the strategy there going forward in the next one year in terms of recovering that market share which is gone away, considering the fact that we have a predominantly diesel portfolio of which -- and diesel right now is in demand quite a bit for other players. So what exactly, or rather, by when would you see your market share starting to look up?

Unfortunately, I can't give you a timeline that by so and so month I expect it to be improving. I think I have shared with you from time to time the effort that we are putting in on the product refresh side, on the product side on the quality and the variety that we need to bring into the market place. And also in the various marketing efforts and dealer effectiveness and dealer expansion strategies I have shared from time to time.

Thank you (multiple speakers).

(Multiple speakers) in the coming quarters we expect to do much better than we have done in this current quarter.

Sir understood, and thanks a lot and best of luck.

Thank you. We have the next question from the line of [Gowan Jellaba] from Jefferies. Please go ahead.

Yes, hi sir. A quick question on Land Rover. If I see your model by sales, all models, I mean Range Rover we talked there last year it has obviously contributed, but almost all the other models have declined year on year. Now how much of this is because of cannibalization? How much of this is because of a new model introduction and is there any capacity constraint?

Gowan, I can't give you a one line answer for that. I think there have been different explanations for different listings. For example, Evoke and Freelander come from the same -- share the same facility in one location, so we have had to have some consciously pulling back of Freelander in order to accommodate the larger number of Evokes. That balancing act continues in the current year.

As far as Range Rover is concerned, it's a different set of circumstances. The new Range Rover is coming in towards the later part of this year. We need to run down on the current Range Rover. But your point is right that minus the Evoke, the other volumes have seen a drop, but different set of circumstances.

Okay. And for models that do not see issues like this like Defender, Discovery and the Range Rover Sport that -- I would have (multiple speakers).

Have also been somewhat subdued.

And that would be -- only be demand issues?

Yes, particularly in the market in which they do have large volumes. Some of the markets have been down, Western Europe, UK etc.

Okay. A quick question on the dividend from JLR. Is there any tax implication for that? I mean would they have to pay any tax either in any of the markets?

JLR doesn't have to pay any tax on the dividend distribution. There is no dividend distribution tax in the UK like we have in India. But in India, when we receive it, if we receive it as dividend, we will have to pay tax.

Okay. And lastly, can you just run us through any -- have you seen any kind of pricing issues for JLR in China? Have you seen any signs of discounting or are dealers coming to you and asking for any price cuts or so?

Not really price cuts or discounts in that sense. I am not sure that I can specifically talk on China. But I am not aware of any pricing pressure or discount pressure in China or other markets.

But what you do hear is less and less stories of premium being charged, or people willing to pay an additional premium for getting a vehicle out of turn etc. Those stories you hear less and less. But are not necessarily something that I would convey as an alarming story in terms of discounts or pricing pressures.

I mean I interpret that as you're saying that it hasn't hit your margins yet. It probably has hit dealer margins, but not yours.

Or maybe it is hitting some of the larger volume competition and maybe may will not be felt in our brands.

Okay. Thank you, sir. Thank you.

Thank you. We have the next question from the line of Mahantesh Sabarad from Fortune Equity. Please go ahead.

Thank you for taking my question. CR, how much of preference capital you still hold in Singapore subsidiary as Tata Motors standalone?

(Inaudible).

That's INR2,200 crores roughly that's the annual report number that I recall. And you are [moving] from (multiple speakers).

(Microphone inaccessible). I don't know whether you heard the answer.

[$2m] (microphone inaccessible).

The investment of Tata Motors in the Singapore subsidiary in preference capital is $250m that Tata gives you.

So you moved that $250m into -- from non-current to current. What was the purpose?

The tenure has been changed from non-current because as JLR is -- you see many of this preference capital was created as a means of funding from Tata Motors to JLR when JLR needed the money during 2008/2009.

As JLR's performance improved substantially and had much greater capability to repay this money which was additionally lent to them from time to time, naturally the character of the investment has become current because they were intended as temporary facilities for JLR and we are taking it back.

Will it mean that you can sell it to potential third party investors?

No, that's not the intent.

Okay. And very quickly, in terms of your margin performance on JLR, brings me back to what Gowan asked. Rover are -- Range Rover and other Land Rover products volumes have actually fallen and Evoke has actually in a way surged in volumes. So can we say that while Evoke is taking up the volumes it's also in a way substituting the margins in a like to like manner?

I am not sure I understood when you say like to like manner what you mean.

Are the margins similar across all your Land Rover products?

No, for any -- whether it is Jaguar, Land Rover or Tata Motors or any other manufacturer one can never say margins will be identical across different models. Margins of course will vary from model to model. Range Rover and Range Rover Sports will have good margins. Evoke will be lower. So margins will be different for different products.

Okay. And it's also a function of what you mentioned as variable marketing expenses, which you said that is catching up in various countries. So particularly in China, how is that catching up in terms of variable marketing spends that you have?

In our case, we haven't seen any significant increase in that. That's what I said. While we see headwinds in the market in terms of variable marketing expenses, we haven't seen any impact on our products so far. But I don't think Jaguar Land Rover can remain isolated from the marketplace for long. If the trend continues, we'll have to do that, we'll have to do that.

Fine, sir, I think that answers my question. Thank you very much.

Thank you. The next question is from the line of Srinivas Rao from Deutsche Bank. Please go ahead.

Yes, thanks. Two questions. Your retail volumes are kind of running ahead of your wholesale sell ins for this quarter. Is there a kind of a conscious decision to reduce the inventory levels? That's number one.

And secondly, your peers such as BMW and Daimler have commented that the European market has weakened more than what they had anticipated at the beginning of the year. Would your assessment be similar to that?

In our case, for your first question on retail versus wholesale and the inventories, I think the inventories have tended to remain somewhat steady. We haven't seen any particular trend or necessity to either cut it down or to increase it. I think they remain part of selling. I don't have any particular unusual trend or plus or minus that I have to convey at this point of time.

Okay.

As far as your second question is concerned was about?

European market.

European market, I will say they are tracking our budget and our expectations. Maybe our expectations are set lower in terms of how we expected the market to be. We were expecting the market to be down this year and so it has. But I wouldn't say they are down further compared to our expectations. I think they are in line with our expectations. Maybe the only explanation is maybe our expectations are a little more conservative.

Sure. And sir, finally just to clarify which someone asked in the beginning of the call, your tax rate in Jaguar Land Rover would be closer to this UK corporate tax which is about [20%] for the rest of the year. Is that correct?

If you take the total accounting.

Yes, total, yes.

Total accounting provision, yes.

Okay, so that -- it would be the case right? So it will be -- yes, yes okay.

That doesn't necessarily mean there is a tax outflow in cash.

No absolutely, absolutely. That's fair sir. Thank you.

Thank you. The next question is from the line of Jinesh Gandhi from Motilal Oswal. Please go ahead.

Hi sir. My question is on JLR. Can you give some outlook on the volume side as against last year's about INR320,000? Do we still maintain our further guidance of about INR370,000 to INR380,000 for this financial year?

Just to correct the so-called guidance, I think last quarter the question was asked about capacities and so on; what capacity can you do what is the potential you have. In the response to that I mentioned in the last quarter that is January to March we did about INR100,000 in the quarter January to March if you take the three months.

Right.

And if you project it we should be able to do -- in the fourth quarter we should be able to do INR370,000, INR380,000 and maybe even stretch beyond that. More in response to your capacity question.

Okay.

I don't see any need to revise that answer.

Understood. And sir, what would be your gross automotive consolidated debt?

The net automotive debt at consolidated level was INR10,000 crores.

INR10,000 crores, okay. And sir, coming to domestic market--

Sorry, your question was gross debt or net debt?

Gross. So nevertheless, so we have about INR28,000, INR29,000 crores of cash.

Yes.

Right. And sir, coming to domestic market, have you taken any price increases in current quarter, second quarter?

July, no. The price increase we took was in April.

Okay, nothing in July. And how are the discounts on the MHCV side, have they increased further vis-a-vis fourth quarter or they are still --.

Sorry?

The discounting on MHCV.

Yes, we have seen that discounting or pricing pressure in the marketplace.

Okay, so therefore, they increased in the second quarter or they are stable on 1Q level?

I would say slightly higher in the first quarter. Normally, one would see that in any year the pricing pressure and demand pressure is felt in the first quarter, stabilizes in the second, and then the third and fourth quarters tend to be very good from a market demand pull point of view. So I would expect in the second quarter the trend would be similar to the first quarter.

Okay, okay. And sir, last question on dividend which you receive from JLR. We will be paying normal tax 20% or it could be at lower rate?

It will be at the tax applicable for the dividends.

And that would be sir?

15%.

Okay sir, thanks and all the best.

Thank you. We have the next question from the line of Hitesh Goel from Kotak Equities. Please go ahead.

Thank you sir. Sir, my question I just wanted to clarify, the net consolidated motor debt you said is about INR10,000 crores right?

Yes.

And sir, it has increased by around INR2,000 crores on a q on q basis. Is that due to working capital requirement on the standalone operation or there has been an increase in the Tata Motor Finance as well?

No this is net automotive debt and therefore, does not include Tata Motor Finance. This is primarily working capital play.

Okay. So INR2,000 increase in the standalone operation business?

Yes.

Okay, sir. Thank you.

Thank you. The next question is from the line of Sanjay Doshi from Reliance Mutual Fund. Please go ahead.

Good evening sir. Thanks for the opportunity. So on the dividend that JLR has declared, I just wanted to understand does it mean that it has enough cash flow to fund itself and therefore, this extra has been given as dividends, or is it not one time?

No, the dividend which JLR Board will decide from time to time. It will of course be a function of their financial performance, profitability, their own outlook and of course, a question of the money they will need to invest back into the business.

Considering all this, JLR felt it appropriate to consider GBP150m dividend at this point of time. I think that reflects their confidence and their ability to be able to reinvest into the business, support the capital expenditure and other plans they have and be able to get there additional cash which can be paid as dividends.

Right sir. And so over a period of time, sir when we have enough from JLR coming by way, then should we assume that that will then be then a pass-through for the Tata Motor shareholders?

Tata Motors we already paid last year for example for March '12.

Yes.

The dividend decision by the Board was taking into account the consolidated profits.

Right, but when the cash comes in. Okay, sir.

You can't get it twice right as Tata Motor shareholder.

No, I see. Okay, sir. Okay, thank you very much.

Thank you. The next question is from the line of Chirag Shah from [Inam]. Please go ahead.

Thank you for the opportunity. Sir, just one question I have on a trend on the small commercial vehicles. If I look at the numbers, there is some visible slowdown in certain segments. Can you throw some more light over that?

In some segments in small commercial vehicles?

Yes. If you look at even up to 3.5 ton segment, or even up to say eight segment there is a slight slowdown which is visible and it is the higher tonnage segment which is actually driving volumes.

So up to 1 ton segment is we are getting under -- I understand that there is some slowdown which is visible and there is some shift that is happening for 2 and 3.5 ton segment. So the overall indication by that there is a slight slowdown which is visible.

I'm afraid I can't agree with that, but I need to check the numbers. I don't have that break up in terms of tonnage wise within small commercial vehicles etc. You'll have to hold this for a different occasion.

Fair enough sir. And sir, just a follow up question on this dividend distribution. Can we -- from JLR, is it -- would it right be to assume that there is enough policy has been in place to look at paying Tata an annual dividend every year? Is there a policy in place now?

No you can't assume that. Dividend, some JLR will be a decision of JLR Board as I said earlier. I don't how to elaborate it further. It's something that JLR Board will consider from time to time. It will consider based on their profitability their cash generation, liquidity, as well as their need to invest back into the business and the outlook.

Considering all this, if there is a surplus, they may consider a dividend from time to time, but I can't say that is a policy come what may this is what will happen. It will incorrect to assume that.

Fair enough. And sir one request if you can -- in the presentation if you can also include the breakup between Jaguar and Land Rover volumes. You used to share it earlier, but it somehow has been discontinued.

Chirag it is there in the business review on the website.

No I am looking at breakup between Jaguar and Land Rover. It's not there in terms of geographic mix or -- you know that breakup you used to share earlier.

All the details are there Chirag. Can you have a look again?

It is not in the PowerPoint presentation that I made, but it is there in the website at the additional data available.

Fair enough, fair enough. Thank you very much sir.

Thank you. The next question is from the line of [Raghu Hariharan] from [Evander] Securities. Please go ahead.

My questions have been answered. Thank you.

Thank you. Next question is from the line of Sonal Gupta from UBS. Please go ahead.

Hi, good evening sir. Sir, just a couple of questions. One was -- this is regarding the CapEx that you announced last quarter that JLR will have an annual CapEx of GBP2b versus GBP1.5b earlier. So could you just elaborate on what -- will it be possible to elaborate on what new projects you are additionally pursuing versus the previous one or that is really leading to this uptick?

It will be difficult to outline and account for the increase from GBP1.5b to GBP2b. But in general, I would say as you step back, that we made the capital expenditure plan -- or when we made the plans which are -- where we thought that we will be spending about GBP1.5b annually going forward, that plan was put together maybe a couple of years ago.

Since then, the volume outlook for JLR has been much, much stronger. I think our own product programs and intent for covering some other segments also has become more aggressive with the combination of volume necessitating [increasing] capacity, augmenting our capacity and the surplus of the Evoke and the potential we see now. The China opportunity also has become much more of a reality and a slightly larger program than we thought once.

We have added the engine initiative, engine manufacturing, engine development initiative with two factories, one in the UK one in India. A combination of all this, the improved volume performance and our outlook, further expansion of our product plans and further geographical expansion, these have contributed to the increase.

But I won't be able to say this contributed so much, this contributed so much from one point pressure to, but I think overall our plans have become more aggressive.

Okay, sir. Thanks. And sir, just the other question on raw material cost side for JLR. Are we seeing any -- I mean when do we see -- I understand the contracts are more on an annual basis. So do you expect some benefits to flow through given that $1m term to commodity prices have been weakening. So for JLR do you see some benefit on that front really?

I would remain somewhat sanguine about the benefits, apart from saying I don't expect a pressure or concern on that front. I wouldn't be too quick to see some immense benefit coming out of that, but I think they will remain under control.

Right sir. And just another question was on -- I mean there is a plan to launch a smaller Jag in 2014 FY15 sort of timeframe. So would you need to expand more capacity in the UK to -- once you -- closer to the launch?

Yes, in capacity we will also continue to invest in capacity for the UK, which is part of the increase that we talked about in our capital spending programs.

Yes, we would like to have new projects come in as we occupy newer segments and that you have there higher volume growth through new segments and new products. We will have to correspondingly invest in capacity.

But do you see any need for greenfield investments or do you -- because -- currently I understand you can go up to 450,000 units per annum for JLR potentially. So do you need any more greenfield investments?

No, I think we can manage in our three existing locations. As you rightly said in the existing locations, we have the potential to go somewhere around 450,000 to 500,000.

By that time in the next two or three years if the China joint venture approval is received and we invest in China, some of the production for China market for example will also happen out of China. So I don't see -- we don't have any plans for a greenfield car manufacturing in the UK.

Okay, great. Thank you so much.

Thank you. That was your last question from the participants. I would now like to hand the floor back to Mr. Jamshed Dadabhoy for closing comments. Over to you sir.

All right, thank you everyone for your participation. Have a good evening. Thank you Mr. Ramakrishnan. Thank you Mr. Somaiya. Thanks [Namreta]. Have a good evening everyone. Bye-bye.

Thank you very much Jamshed. And thanks for everybody for joining us. Thank you. Bye.

On behalf of Citi Investment Research that concludes this conference call. Thank you for joining us. You may now disconnect your lines. Thank you.