Tata Motors Ltd (TTM) 2014 Q2 法說會逐字稿

Ladies and gentlemen, good day and welcome to Tata Motors Q2 FY14 earnings conference call hosted by Macquarie Capital Securities. (Operator Instructions) Please note that this conference is being recorded. I now hand the conference over to Mr. Amit Mishra from Macquarie Capital Securities. Thank you and over to you, Mr. Mishra.

Thank you, Mohsin. Good evening, everyone. Welcome to the post results conference call of Tata Motors. To discuss results today, we have with us Mr. C Ramakrishnan, CFO of Tata Motors, and the Investor Relations team. I would now request Mr. Ramakrishnan to begin with his initial remarks and then we can begin the question and answers. Over to you, sir.

Thank you. Good evening to everybody on the call. Thanks for joining us for the second quarter results announcement of Tata Motors.

At the consolidated level, Tata Motors consolidated net revenue was up at INR56,882 crores from INR43,000 crores in the same quarter last year. EBITDA margin consolidated came in at 16.3%, up from 13.5% in the previous year quarter. Profit after tax was INR3,500 crores, up from INR2,000 crores in the same quarter last year. At the Tata Motors Standalone India operations, the environment continues to be very challenging for the business from an external market point of view and macroeconomic scenario reflecting in the lower net revenue in this quarter at INR8,800 crores, down from INR12,000 crores last year. EBITDA margin was 2% compared to 5.9% in the same period last year. Profit after tax was INR804 crores negative loss compared to INR867 crores profit in the same quarter last year, but last year profit also included dividend income that we received from Jaguar Land Rover.

Coming to Jaguar Land Rover, JLR had one more quarter of outstanding performance. Net revenue came in at GBP4.6 billion, up from GBP3.2 billion same period last year. EBITDA margin stood at 17.8%, up by 3 percentage points from 14.8% in the same quarter last year. And profit after tax was GBP507 million, up from GBP300 million last year. In the India business, as I mentioned earlier; slowdown in the economic activity, low level of transport freight and, infrastructure activity, a tight financing environment, and diesel price increases impacted the overall demand and resulted in deferment of new vehicle purchases.

It particularly impacts our commercial vehicle industry and therefore, volume for the industry as well as Tata Motors were down significantly in this quarter compared to the same period last year. In this environment, we continue to sustain strong market share at 56%, 57%. Similarly, in domestic passenger vehicle industry there was a decline quarter-on-quarter compared to the first quarter of this year by further 2.6%. In both the segments, competitive intensity in a depressed market has led to higher marketing costs for all manufacturers.

From the Company point of view, we have introduced several new service offerings for our commercial vehicle customers, particularly the light and intermediate customers with 3 year and 3 lakh kilometer warranty services and heavy trucks with a 4-year warranty, 24/7 Tata Alert service, attractive AMC rates, and other service offerings to the customers. In the passenger vehicle business as well, we launched a focused service improvement for our car customers with several distinctive service offerings and the three broad brand promises; responsiveness, reliability, and best value service; which is being implemented across all our nationwide service network.

Exports in this quarter grew 19.1% quarter-on-quarter and we also launched our products in two new markets, Australia and Malaysia, in this period. As I mentioned earlier, in CV we continued to sustain our strong position in the marketplace at 56.7% in the half year and in passenger vehicle for the half year, our market share stood at 6.1%.

Jaguar Land Rover wholesale volumes were at 101,900 vehicles, up 31.6% and retail volumes was 102,600 vehicles, up 21.1%. EBITDA came in at GBP823 million with an EBITDA margin of 17.8% reflecting higher wholesale volumes, richer product mix supported by launch of the new Range Rover Sport, volumes of new Range Rover and Jaguar F-TYPE, and a richer geographic mix. And we also had about GBP89 million (sic - see slide 6, GBP79 million) of local incentives both in UK and overseas market accounted as income in this quarter. Free cash flow in Jaguar Land Rover for Q2 was GBP430 million and for the half year GBP89 million, both of which are after capital expenditure and product development spends of GBP657 million in this quarter and GBP1.2 billion for the half year.

Strong balance sheet in Jaguar Land Rover with cash and financial deposits at GBP2.7 billion and further strong liquidity supported by undrawn long-term committed credit facilities aggregating GBP1.3 billion. We have received rating upgrades from Moody's following a similar upgrade from Standard & Poor's in Q1. We showcased the Jaguar C-X17 Sports Crossover concept at the Frankfurt Auto show, which is a lightweight aluminum architecture for future Jaguar products; starting with a new smaller sedan in 2015. From a regional point of view in sales in this quarter; North America represented 16% of our global sales, UK 18.2%, Asia Pacific 4.8%, Europe 17.2%, China region up at 26%, and other overseas locations 17.8%.

Looking forward from an India business point of view in commercial vehicles, we expect the economy will continue to remain subdued throughout this financial year, which will keep our sales of the commercial vehicles under pressure. Competitive intensity will continue resulting in higher marketing costs. Couple of positives, the above average monsoon should hopefully lead to better rural consumption demand and some of the government approvals for projects that have been postponed or stalled have started coming in, which hopefully should generate further demand for our products. JNNURM Phase 2 announced should also drive some bus volume.

From a Company point of view in commercial vehicles, we will launch new products in Prima Range, Ultra trucks, and offer product refreshes in both small commercial vehicles and pickups. We will continue to expand the export potential for our vehicles. In passenger vehicles, we had mentioned earlier about the focus across four major pillars, all of which are continuing to be pursued very aggressively; an intense product focus, world class manufacturing practices, enriching the customer purchase experience, and providing consistent excellent quality of service. We'll launch the CNG emax versions of Nano, Indica, and Indigo, new products in the hatchback segment, new Compact Sedan, and refreshes on all the existing products. We will continue to avail opportunities in passenger vehicles also for export markets.

In our Jaguar Land Rover business, we hope to continue to build the sales momentum with the new Range Rover launched last year, Jaguar XF Sportbrake, and Jaguar F-TYPE. We'll complete the successful launch of the new Range Rover Sport and other new derivatives. We'll also be launching the world's first premium diesel SUV hybrids in Range Rover and Range Rover Sport. The business will continue to invest in more new products and new technologies for meeting consumer and market requirements and regulatory requirements and further build on manufacturing capabilities in UK and elsewhere. As we mentioned earlier, our product development and capital expenditure this year in Jaguar Land Rover is expected to be in the region of GBP2.75 billion and we expect to generate strong operating cash flows in order to support this investment.

With this brief overall comments, I'll stop my presentation and throw it open for addressing any of the questions you may have. Thank you.

(Operator Instructions) Binay Singh, Morgan Stanley.

Congratulations for a good set of numbers. My questions are on the Jaguar Land Rover side of the business. Firstly, on the currency bit. Could you shed some light as to what is the GBP, USD rate that you would have used during the quarter because we've seen a sharp appreciation in the GBP? And within that, could you throw some light that whatever the options the Company has, is it possible to raise prices or we will see sort of an adverse impact of that on margins in the coming quarter? Second question is again on gross margin side, a minor one though. If you look at raw material, you can see, expenditure has gone up in this quarter which reflects some bit of an adverse mix, could you show where that impact came from?

The questions are fairly detailed for addressing in this call, maybe we need to take it offline separately. But just an overall response to the extent I can. As far as ForEx is concerned, quarter-to-quarter between first quarter and second quarter, there is some marginal impact due to ForEx in the financials between April to June and July-September quarter, which impacts negatively the margins by about 0.8%. Otherwise compared to the same period last year, Q2 last year to Q2 this year, not a significant impact on the ForEx. I already mentioned in my opening presentation about an GBP80 million in this quarter, which we received as incentives, some bit in UK and elsewhere. As far as material consumption is concerned, it is difficult to comment on a quarter-to-quarter basis. It's just influenced by several factors including product mix and derivative mix et cetera as you rightly mentioned. But overall, we see material costs being very much under control and hopefully the richer product mix will help the overall margins favorably.

Okay. Sir, what is exactly actually the [rates] that you use as the average GBP, USD rates that you would have used in the quarter?

I would not be able to comment on this in this call.

Okay. Sir, I'll come back later. Thank you so much.

Nishit Jalan, Nomura Securities.

Sir, you mentioned that impact on JLR there was local incentives of GBP79 million. I just wanted to check what was this number in last quarter and how sustainable these local incentives will be going ahead? This is my first question. And my second question is you have mentioned in the PPT on JLR that our tax rate has come down to 24% due to change in UK rates. So should we expect a similar level of tax rate going ahead? What will be your guidance for the full year tax rate? Thank you.

On the first question, there is no tax incentive that was there in Q1 of this year. And in terms of sustainability, I expect this will be an annual feature depending on the time when it is settled, it will come in the respective quarter. However, as I said in Q1 there is no tax incentive element, but in a comparable period Q2 of last year if I recall right, I think it was about GBP35 million, GBP40 million Q2 to Q2. As far as the tax structure is concerned, as you're aware, we don't pay cash taxes in UK, only accumulated carryforwards that we have. Yes, including the deferred tax and the cash tax payment, the tax will continue to be at the marginal rate overall, including both deferred tax and cash tax.

Okay, sir. Thank you.

Jinesh Gandhi, Motilal Oswal Securities.

First pertains to your net automotive debt on consol and standalone basis and second question pertains to your assessment of impact of this reduction in quota in Shanghai?

On the first question, I think you talked about net automotive debt both at consol level and standalone level. The net automotive debt at consolidated level of about INR14,000 crores and Tata Motor standalone level was higher at INR19,000 crores, which actually means in JLR the net automotive debt is negative. In terms of net debt to equity ratio at consolidated level, it was 0.56:1 and at standalone level, it was 0.96:1. Your second question was relating to the quota system in Shanghai. Yes, it will have some impact on the localized demand, but overall our volumes in China continue to be strong. So it's a large market, it's a huge market with plenty of potential.

Okay, sir. Thanks and all the best. I'll come back in queue.

Pramod Kumar, IDFC Securities.

Sir, my first question is actually clarification on the local incentives. Is it right that it would have been adjusted against other expenditure in this quarter?

No, it is recorded under other income under the revenue line.

Under the revenue line. That would mean that our realization from a quarter-on-quarter basis would have seen a decline at JLR despite having China at 26% of volumes, which is the highest ever and also having the Range Rover Sport coming in. I know there is bit of currency impact, but it's entirely because of currency or is it like also got to do with variant to variant slippages, sir?

Can you just give me a moment. I stand corrected. Just one sec. My apologies and I stand corrected. The tax incentive has been accounted as other income and netted off against other expenses not in the revenue group. I have corrected. My apologies for it.

Yes, otherwise the realization drop would have been very, very and logically not possible as in --.

Thank you for asking that question. It gave me an opportunity to correct myself.

No. Fair enough sir, fair enough. And sir, my --.

In the process I forgot your second question.

No, I actually didn't start on the second one. But it pertains to the standalone business, sir. Given the kind of slump in the industry between in the last four days, all the three commercial vehicle players have reported their numbers and I think things are looking pretty much difficult given the fact that September quarter had a steeper decline at the industry level versus the June quarter. What's your reading actually in terms of when do you see a possible recovery in the commercial vehicle cycle? And given that fact, how would you look at the CapEx funding at the standalone business and also I'm bringing in the debt equity of 0.9 at this point of time? So is there a chance that you're okay with it going beyond one also to fund the CapEx?

It's a good question. As far as the macro environment is concerned, as I said in my opening remarks and opening presentation, we expect it will continue to remain quite challenging from a macro point of view at least for the next few quarters. I think it will be at least three, four quarters before we see some impact on our commercial vehicle industry. Even if the macro economic activity improves, I think it will take some time for existing trucking capacity utilization by the operators before there is any significant or perceived impact on new vehicle demand. So, I think we'll continue to see a challenging period for some time now. What we can do and what we are doing internally as a company is to strengthen our product line, ensure that the market is well supported in terms of anticipating the requirements and producing the right product for the market at the right time, strengthening our product portfolio, improving the reach and quality of support provided to the customers, purchase experience or service experience in our dealerships, and enrich the service offerings and deepen the connect that we have with the customers.

In parallel, the Company is also significantly and aggressively focusing on internal cost reduction measures. These are occasions when the focus is brought out very sharply whether it is material cost or operating cost or each line item of expenditure. We are significantly focusing on cost reduction and making the operations much more efficient, but these are more from a company point of view. But going back to your question in terms of macro environment, we see it challenging at least for the next few quarters. Marketing costs also will continue to remain high, I don't mean increase further, but I think it will continue to remain high with the type of intensity of competitive pressure and market incentives. In terms of capital expenditure, in this industry we definitely need to continue to invest for our future. We have every large product lineup between commercial vehicles and passenger vehicles across small commercial vehicles, light intermediate range, medium and heavy commercial vehicles, as well as in passenger cars and entry level hatchbacks and sedans and SUVs and UVs. So in terms of product refreshes, new technologies, new product offering, new segment products, the capital expenditure and product development focus will be quite intense in the coming years.

I have given guidance from time to time that on an average for supporting and enriching continuously this line-up of products, we would need to spend on an average about INR3,000 crores annually in investment for the future. Most of it or nearly all of it will be in product development and new technology and new product offerings related. We will not have actually significant increase in investment in capacity and manufacturing except for capability enhancements as we introduce new products. Your question I think also related to funding for the capital expenditure. We have sufficient borrowing capacity and borrowing line arrangements for being able to fund the capital expenditure to the extent it needs to be funded. Yes, the balance sheet leverage is somewhat higher than what we would have indicated as a preferred range earlier. I have gone on record saying we would prefer a range between 0.5 to 0.75 in terms of net debt to equity ratio. We're at 0.9 at this point of time. Hopefully the recovery and the improvement in cash generation from operations over time should set this right. We will also undertake whatever measures to strengthen this as early as possible.

And sir, just to clarify, we still haven't done a one-time restatement of our fixed assets as per IFRS before we shift to IFRS because once you do that, the debt equity will automatically come down as a percentage as in other ratio.

No, we have not done that.

Okay. That also provides some cushion in that sense.

There is time for that. We will see it at that time.

Thanks a lot, sir. And I'll come back in the queue and best of luck, sir. Thank you.

Sonal Gupta, UBS Securities.

Just coming back to this CapEx question on India, I mean is there a scope to cut CapEx, I mean INR3,000 crores and does this include your product development expense that you show as expensed in the P&L?

It does not include product development expenses expensed out in the P&L, but it does include product expenses that is capitalized. Whatever we invest for future product development, we capitalize and amortize over the commercial life of the products. But there are some expenses in product development like some minor modifications or support to ongoing products in terms of any design changes or value engineering efforts et cetera, which gets charged off in the P&L. This INR3,000 crores do not include that component, but any major project investment or new product development is included in that INR3,000 crores. That is as far as accounting is concerned.

As far as your first part of the question, which is about cutback in capital expenditure. Given that, as I said earlier, lot of this is going into new product development, product refreshes and launches, and annual refresh of our products. I think the near term, if you look at the next two, three quarters; for any automotive company to pullback on its product development related investment will be somewhat limited in nature or not at all because many of the products would be half way through or more than half way through. If you take a slightly longer term call over next three to five years would I cutback, it may also be a question of sequencing or postponing rather than cutback. Because in this business we have to continuously invest for our future, it is the backbone of our future, limited scope I would say.

No sir, because where I'm coming from is if you include the CapEx of INR3,000 crores plus product development plus interest costs, it's like INR5,000 crores and the only time you got close to that sort of a EBITDA number is in FY11 when you had I mean obviously the CV market doing extremely well plus your passenger vehicles business was of a much bigger scale. So I mean it's sort of difficult to forecast you getting back to cash breakeven even in a two to three year scenario unless you see the CV industry probably pulling back almost 100% or something. So I just want to understand from a medium-term standpoint, how do you see this? I understand that in the near term you can raise more capital in Singapore holding company et cetera, but longer term how do you see this getting to this [INR5,000 crore] sort of a number?

I think it has to be primarily trigged by operational improvement both in terms of topline and bottom line growth as well running a tighter operation, working capital improvements and generating cash from operations. That would be a primary driver for this. Secondly, in realty I think the balance sheet will continue to remain somewhat more leveraged than I would like it to be for some more time. I think it will be a correction over a period of time. In parallel, like the Singapore restructuring that you talked about, I think it will bring some relief on the standalone balance sheet and we need to look at some further restructuring options.

And just another question on the light commercial vehicles side, we've seen your numbers sort of clearly going down very significantly in the last few months in the quarter while your second largest player has not really seen that sort of an erosion, I mean they're still showing a growth in the light commercial vehicle space. So I just want to understand how is your market segment different, I mean what's really happening as to why your LCV sales are going down so much?

LCV I think is including a slightly largely definition including the light and the small commercial vehicles and the pickups, I think aggregating all of them together. Quarter-to-quarter we will see some movements in terms of market share performance and related performance. But overall if you take within that sub-segments; I think we are doing fairly strongly and at a steady state level in terms of market share in our small commercial vehicle range, the Ace and its family of vehicles, in pickup we have lost some market share in this quarter, and light commercial vehicles what we used to call traditional light commercial vehicles [4 to 7 tons] I think again it remains fairly steady and strong. So, each of these we'll have to have a specific approach.

Mr. Gupta, sorry to interrupt.

Sure. Thank you. I'll come back.

[Rodman Zuul], Bernstein.

My question is in the JLR accounts, we see currency positives in the most recent results of GBP73 million, I was just wondering if you could clarify the nature of that. And also my next question is in the next quarter given the rises in the pound value and also the decline in emerging market currencies, do you see a significant currency headwind in Q3 and Q4? Thank you.

Sir, it is a slightly longish question. You're talking about the currency impact in this quarter?

Yes, there was a positive GBP73 million.

Yes, there is a mark-to-market of our hedge book that we have.

Okay. That's the hedging. You mentioned there was a slight headwind in Q2, can you let me know where that was booked? Is that embedded elsewhere or is that part of this?

I think we are talking about two different things. If you take the revenue numbers in terms of our trade transactions in terms of export [EBITDA] over a period of time, the dollar-pound parity (inaudible) compared to last year, we have had some hit on the topline. GBP73 million that you're referring to is more in the hedging book mark-to-market valuation gains in this quarter. I lost track of your second question. Was there a second question or --?

Yes. It's the fact the pound has been quite strong at GBP1.6 to the dollar and you have major markets in Brazil and Russia where the currency has been quite poor. I'm just wondering if you see major headwinds going forward from these currencies.

Yes. In some of the markets the strong pound would definitely impact it and some of these markets for example, it will impact. Each of these are relatively small in terms of percentage of overall global sales of JLR. But yes, that currency on JLR business is always there. We have talked about it in the past. It's a business with maybe up to 20% sales in UK with almost all its production in UK. Therefore 80% is being sold outside UK so currency impact would definitely be there. We need to be very watchful and careful about it.

Do you hedge any other currency other than the dollar?

No, most of it is in dollars.

Most of it is in dollar. Thank you.

Amyn Pirani, Deutsche Bank.

Sir, my question was on your capacity at JLR, what would be your total capacity and if you could also break up the capacities in the different plants?

I think at the current level we're fairly full up on capacity in terms of some headroom to go a little beyond. Not sure immediately on this call I'll be able to share the plant wise capacities et cetera, but I think that information should be made available.

Okay, sir. Sir, and just another clarification. You mentioned that the incentives in UK have been deducted from the other expenses in the JLR accounts.

It is some part in UK, some part in other markets as well. Not all of it's UK.

Okay. But the accounting sequence is that it has been deducted from your other expense.

Yes and no. It is shown as other income, but in terms of final summary P&L disclosure, other income it is netted off against the group of other expenses in the presentation.

Okay. But your revenue line in the JLR does not include that, sir?

No, it does not.

Okay. But in your consolidated account, is it part of other operating income because your other operating income has really shot up in this quarter, the consol number?

Yes.

Okay, understood. Thank you.

Ambrish Mishra, JM Financial.

Congratulations on very good set of numbers, sir.

In JLR.

Yes. Sir, just wanted to get a sense on if you can share with us the regional, let's say how the demand outlook you think is panning out especially if you look at let's say China and UK particularly. And in terms of our Chinese network expansion, can you share some highlight as to where are we and how we plan to go forward let's say by the time our new manufacturing unit starts functioning from next year?

Well, I would not venture a guess on numbers outlook et cetera. But overall --.

Sir, it's not just number, maybe directionally if you can give some thoughts.

Yes, let me finish. But in terms of overall outlook, in a sense I think we are also benefited by successful launch of products. Evoque continues to remain strong in all its markets. The Range Rover that we launched last year has continued its momentum well into this year and continues to remain strong in terms of demand and order book et cetera. The Range Rover Sport is not fully launched, we are in the process and similarly on Jaguar lineup. So my comment is somewhat to be taken in the context of successive and successful launch of products in the last 12, 18 months. We do see strong momentum. We hope the strong momentum will continue. I don't mean to necessarily comment on the overall demand situation for the automobiles in those markets, but I'm talking more from a Jaguar Land Rover point of view. You have to factor in the product launches and successful introduction of new models. The second question was very specifically related to Chinese network. I think I have shared this before. We have about 130 strong dealer network in China. We'll definitely hope to increase it over a period of time. It may go up to 200 or so in the next year, two years.

Next one to two years you're saying.

Yes.

Okay. And sir, the second question was about the CapEx at JLR which you mentioned at about GBP2.75 billion. This guidance remains intact for next two years or it is only for let's say FY14?

The guidance we had given was specifically for FY14. Financial 2013-2014, we said it will be in the region of GBP2.75 billion. We are also looking constantly at new opportunities in the market place and as and when these plans are finalized, we'll give a fresh indication of what it is likely to be for the (inaudible). The GBP2.75 billion I had mentioned earlier, I think around Jan., February of this year [we'll give] any guidance in terms of the next financial year. GBP2.75 billion was specific for 2013-2014.

Okay. Thanks a lot, sir, and all the best.

(Operator Instructions) Chirag Shah, Axis Capital.

Sir, first a housekeeping question. If I look at RM to sales at the consolidated level, sequentially it has reduced. But if I look at standalone results as well as JLR IFRS, RM to sales has sequentially gone up. It's more to do with Indian GAAP versus IFRS accounting of JLR?

Sir, I'll pass the question at this point of time. I'll definitely communicate with you separately.

Yes. Second question is this GBP1.5 billion CapEx for this new Jaguar platform, how much of that would already be the capitalized by us? Is it possible to give some indications over there?

No, I don't think we'll be able to comment about product capitalization or product expenditure capitalization specifically. The GBP1.5 billion investment in the new platform was given as an indication for what we are doing on the Jaguar product lineup. I don't think I'll be able to split it in terms of this year how much, next year how much, and I do not think I will be able to get into details.

Okay. Fair point, sir. And sir, lastly on the tax rates. In UK, how one should look at the effective tax rate for the Company going ahead because it does keep on varying?.

In terms of guidance, see we also took deferred tax credit in one of the earlier years. which I think I've explained in some of the earlier calls. The deferred tax accounting and cash taxes, I think the overall effective tax rate both cash and non-can deferred taxes, I think will more or less may be slightly below the marginal tax rate.

Okay. Slightly below the marginal tax rate. Fair point.

Slightly below marginal tax.

Yes. This was helpful sir. Sir, last thing just a clarification on this GBP80 million local incentive that you have got. Can you just help us understand because this number if you look at versus last year has more than doubled? So how does this flow or what are the conditions you need for this kind of number and how one should look at this number going ahead?

This basically relates to incentives you get which is metriced into the overall volume numbers in different markets partly to do in UK and outside markets. So depending on the volume and the taxes we pay, this is likely to see some changes year-to-year. Last year it was GBP40 million and this year it's about GBP80 million, GBP79 million.

Yes. So the jump is significant from there so it's linked to volumes. Fair point.

Volumes as well as the realization because the taxes you pay in many places is a function of both volume as well as the average realization. As average realization improves, that also will trigger slightly better benefit.

Fair point. Thank you very much sir.

Mahantesh Sabarad, Fortune Equity Brokers.

CR, I had a question related to the same incentive. I would presume it is in the nature of a duty drawback incentive that the UK government is offering you. Am I right in my assumption?

No. As I said, partly it is in UK, a small part, and partly in other markets.

So if it is not in the nature of compensation as we understand as duty drawback, which is meant to be a compensation for import duties. So going forward if your import content within UK is going to fall because you're going to have localized engines or engines made in-house now, will this incentive start falling off as we go forward into the years?

No.

Okay. My second question then pertains to the balance sheet note seven, which talks of actuarial valuations on pensions and which has grown to about INR2,500 crores as far as the first half is concerned with a significant impact coming in this quarter INR1,500 crore. I would assume it is pertaining to JLR and in equivalent pound terms appears to be GBP200 million for the first half. Can you explain why this significant jump quarter-on-quarter as well as year-over-year?

Well, it's difficult to discuss in a brief way the actuarial valuation basis. It is influenced by a number of factors in terms of financial instruments; pricing, discount rates, interest rates, yield on security, and the asset portfolio that you have, and the other actuarial assumptions relating to life expectancy and so on. The net valuation difference that you see in this quarter, it is likely to see some changes quarter-to-quarter or year-to-year based on any of these actuarial valuation. It's a large fund so even a small movement tends to have this impact. As I said earlier, I think 2010 or 2011 we stopped the defined benefit scheme in Jaguar Land Rover for new recruitments so over a period of time this pension structure in JLR will change.

Because say GBP200 million out of GBP8,700 million in terms of percentage is a significant number and if that kind of provision --.

But you do actuarial valuation and use net present value over a period of time, you take into account the future period depending on the life expectancy of existing members and retired members who continue to be members of the fund.

But the major impact is due to the discount rate, right?

Discount rate and a whole host of other, inflation rate, increases.

And with let's say the paper being off the table and interest rate starts moving up and inflation moving up, how does it affect your --?

(inaudible) security pricing.

I'm saying the discount rate eventually going up, how does this affect the net liability directionally speaking?

You have to take two things into account. One is if the discount rates increase, the liability may come down. But the yield on new investment also may come down a bit so it's a --.

But you're a net a liability right?

Yes, that's right. If the discount rate moves up, it may have a slightly positive impact in which case the asset valuation, the net GAAP may still not be influenced so much because asset value also may come down.

Fair enough. Thank you very much, CR, for the clarifications.

Thank you. Ladies and gentlemen that was the last question, I would now like to hand the floor back to Mr. Amit Mishra over to you.

Thank you. On behalf of Macquarie, I would like to thank the management team of Tata Motors for giving us an opportunity to host the call today. Thank you very much, sir. And thank you all participants for being there on the call.

Thank you very much.

Thank you. On behalf of Macquarie Capital Securities, that concludes this conference. Thank you for joining us and you may now disconnect the lines.