Tata Motors Ltd (TTM) 2016 Q3 法說會逐字稿

Ladies and gentlemen, good day and welcome to the Tata Motors Q3 FY 2016 Earnings Conference Call hosted by Edelweiss Securities. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. (Operator Instructions) Please note that this conference is being recorded.

I'll now hand the conference over to Mr. Chirag Shah from Edelweiss Securities. Thank you and over to you.

Thank you, [Vedh]. Good evening, everyone, and thanks for joining the call today. We also thank the management of Tata Motors to give us the opportunity to host the call. Today Tata Motors is represented by Mr. C. Ramakrishnan, Group CFO for Tata Motors; Mr. Kenneth Gregor, CFO for Jaguar Land Rover; and Mr. Vijay Somaiya, who heads the Treasury and IR function at Tata Motors.

Along with them there are other members of IR team with us also.

I will hand over the call to Mr. C. R. for initial comments and then followed by Q&A. Over to you, sir.

Chirag, first of all thank you very much for hosting this and for the kick-off. Thank you very much. I'll just straightaway quickly run through the presentation and the key highlights and then we can leave adequate time for the Q&A later.

To start off on the Q3 2015-2016 consolidated results Tata Motors, JLR all put together, the net revenue came in at INR72,000 crores, marginally up from INR70,000 crores in Q3 of last year. EBITDA margin, consolidated basis, came in at 14.2%, down by about a percentage point from 15.4% in the same period last year. Profit after tax almost at the same level, INR3,500 crores, compared to INR3,581 crores in Q3 of last year. Similarly, for the nine-months period, net revenue came in at INR1,95,000 crores, almost stable at INR1,95,000 crores last year. EBITDA margin was 14.3%, down from 16.8% for the nine-months period last year considering the two, three very good quarters we had last year in Jaguar Land Rover.

Profit after tax came in at INR5,800 crores, down from INR12,000 crores in the same period last year. We will see some of the exceptional items that went into the current year nine-months period. Tata Motors India business, the net revenue for the quarter, October-December, came in at INR10,000 crores up from INR9,000 crores of last year same quarter. EBITDA margin continued its positive momentum in the last two, three quarters, came in at 5.7% which last year was negative at 8.2%. Profit after tax, however, came in at a negative of INR200 crores for the quarter compared to INR2,100 crores in the same quarter last year. For the nine-months period INR30,000 crores of revenue, up from INR26,000 crores last year nine months. EBITDA margin for the nine months at Tata Motors at 5.8%, reversing the trend of the nine months of last year, which was negative 4.3%. Profit after tax, again, was negative at about INR200 crores compared to negative INR3,500 crores in the same period nine months last year.

Coming to Jaguar Land Rover, these numbers are as reported by Jaguar Land Rover under IFRS. For the quarter, net revenue came in at GBP5.8 billion, almost same as around GBP5.9 billion in Q3 of last year. EBITDA margin came in at 14.4%, down from 18.6%, which was an exceptionally good quarter last year. Profit after tax came in at GBP440 million, down from GBP593 million in the same quarter last year. For the nine-months period, similarly, net revenue was about GBP16 billion almost -- GBP15.6 billion, marginally down from GBP16 billion of nine months of last year. EBITDA margin, 14.4% for the nine-months period, down from 19.4% of the three quarters last year. Profit after tax came in at GBP840 million down from GBP1.7 billion pounds in the nine months of last year.

Overall, the consolidated level, including Tata Motors and Jaguar Land Rover, the net automotive debt, excluding the financing business, net automotive debt equity as of December was 0.17. In the India business it was higher at 0.69 in Jaguar Land Rover. Considering the large cash and liquidity they have on the balance sheet, the net debt was negative, therefore the net debt to equity ratio came in at negative 0.12.

Highlights of the financial performance, India business reported a significant improvement in the operating margin to 5.7% in the quarter as I mentioned earlier, which after removing some of the provisions we had in the last year for Singur and certain other provisions still reflects an 860 basis points positive swing in the quarter to quarter, last year quarter to this quarter, a positive improvement. This has been triggered mainly by the strong growth that we have continued to see in medium and heavy commercial vehicles in India, year-on-year a growth of about 14.8%, ongoing cost reduction and other margin improvement initiatives.

Just a note, as I mentioned earlier, we have maintained positive EBITDA compared to a negative EBITDA in all the three quarters of last year. Jaguar Land Rover, as I mentioned earlier, margin for the quarter 14.4%, though down from Q3 of last year on a sequential basis it's up to GBP245 million from Q2 of this year.

Year over year the decrease broadly reflects the softer sales in China and model mix compared to last year's quarter and this year quarter. And in the last year Q3, you will also recall that we had a China tax rebate, this comes once in a year, which was received in Q3. But in the current year it was advance and received in Q1 itself. These two have been partially offset by higher wholesale volume for Jaguar Land Rover.

[As a result of flavor] of the India business, commercial vehicles, medium and heavy commercial vehicle industry continues to witness strong demand conditions both in terms of sustained replacement demand as well as initial signs of fleet expansion demand. And we have seen this volume growth driven across all the sub segments in medium and heavy commercial vehicle industry in this quarter.

For the Company, the medium and heavy sales -- medium and heavy truck sales in the quarter registered a growth of about nearly 15% year on year. Market share in medium and heavys for the quarter stood at 53.8%, which is a growth sequentially of about 240 basis points compared to Q2 of this year.

Coming to the light commercial vehicle segment, the overall LCV in the quarter continued to decline, but on the positive side, several segments of the LCV both in goods and passenger carrier started witnessing positive growth during the quarter.

In small commercial vehicles, though it declined during the quarter, towards the end of the quarter we have seen positive growth. Perhaps the small base effect also having an influence, but we have seen the signs changing in December and that seems to continue into January.

And in the small commercial vehicles we continue to maintain a market share, which is above 75%.

Overall in the industry the variable marketing expenses continue to remain high. Coming to our international business in commercial vehicles we saw a growth in the quarter of about 3.9% over the same period last year. It was somewhat affected by some of the uncertainties and political situation in Nepal.

Coming to the passenger vehicles the industry witnessed a growth of about 15% year on year, mainly influenced by the volume of the new launches in the quarter as well as in the recent past. In terms of Tata Motors, the passenger vehicle segment of the Company declined by 12.2%. I'd just like to clarify that this needs to be seen. Last year in the same period, we had pre-launch build up for the launch around that time.

We have showcased new products and in the Auto Expo recently with several exciting designs, technology content in the vehicles and driving performance. The new compact hatchback has received very positive reviews and a very strong response across the media, auto critics and auto enthusiasts. And the new hatchback will come with the Revotron petrol engine and the Revotorq diesel engine.

Turning to Jaguar Land Rover, some of the highlights I've already covered. Volume excluding China JV volume, wholesales and retails for the quarter came in at 137,000 units and 129,000 units respectively. The China JV wholesale and retail for the quarter ran about 12,800 units and 9,000 units respectively.

While the presentation is available to you for -- will be available to you on the website, so I will not repeat some of the revenue and EBITDA numbers which I have covered earlier. For the quarter the product investments and capital expenditure came in at GBP842 million. Free cash flow for the quarter after this capital expenditure and investments was GBP454 million, positive free cash flow.

On the balance sheet in Jaguar Land Rover cash deposits exceed about GBP3.4 billion. In addition, we have undrawn committed lines of credits of about GBP1.9 million, which together represents a liquidity of over GBP5 billion which will serve us well in the future.

Profit before tax of about GBP500 million for the quarter, after exceptional items, was down by about GBP186 million from Q3 of last year, but sequentially up about GBP656 million from Q2 of this year. Compared to last year this is mainly reflecting the lower EBITDA from the operations compared to Q3 of last year, which I repeat was an exceptionally good quarter, higher depreciation and amortization charge of about GBP100 million, and these two were offset partially by favorable overall revaluation of unrealized FX and commodity hedges and the debt revaluation, which for the quarter was about GBP100 million plus, China JV profits, which we accounted in the quarter of about GBP22 million and one exceptional item of GBP30 million representing the initial on-account recovery towards the Tianjin insurance claim, which we provided in the last quarter, if you recall about GBP240 million. We have started receiving the insurance claims and the GBP30 million has also been accounted with the credit in this quarter as an exceptional item, which is also reflecting in the PBT.

Many recent and upcoming product launches to drive future growth in Jaguar Land Rover. We continue to progress our investment in the UK engine plant. We announced an additional investment of GBP450 million. Slovakia plant, we have indicated the total initial investment of over GBP1 billion for the next few years, which will create a capacity of about 150,000 units per year.

We further progressed on the electrification across our product range with plug-in hybrid and battery electric vehicles. We also recently announced that we would be competing the FIA Formula E championship from August 2016.

Looking ahead in the commercial vehicle business in India, we continue to see the medium and heavy growth, and we expect to remain buoyant in the next financial year, triggered both by continuing replacement demand and a stronger fleet expansion demand. And we also expect after the lag effect the HCV segment will also enter good positive growth trajectory in FY 2017.

From the Company point of view, we continue to focus and build further on our wide and compelling product range with several new launches in Q4 and in the next financial year across our Prima and Ultra range, brand new Signa range of modern and advanced trucks and buses, as well as the refreshes and variants in small commercial vehicles and pick-ups. Collectively we believe this will provide a strong foundation for further growth in the business.

Exports in commercial vehicles will continue to be of a high focus. And as far as the defense is concerned, as I mentioned in the last quarter, we continue to have a very good pipeline of defense orders, both received and expected.

Passenger vehicle business, the product momentum will continue with exciting and upcoming new products. The comments and the welcome that we have received in some of our newer products and what we showcased in the Auto Expo have been extremely encouraging, and we expect this will provide a foundation for a good transformation and growth in the coming years.

I've mentioned earlier and as I have shared with many of you, the product line of the passenger vehicle business has been well defined till 2020. It's our intention that we will have at least two new vehicle launches planned every year. And similarly in passenger vehicles, we will continue to avail opportunity in the international markets.

In the Jaguar Land Rover business, the fundamental strategy continues to be focused on products, technology and in parallel, investing in manufacturing capacity to grow profitably in the coming years. This year we expect investment spending, capital expenditure and product development expenditures in the region of about GBP3.3 billion, lower compared to the initial indication we have given earlier of about GBP3.7 billion. We will continue to drive strong operating cash flow to fund the investment.

As I mentioned earlier, we have nearly GBP4 billion of cash on the balance sheet and further nearly GBP2 billion of undrawn lines of credit available. Given the higher level of investments, free cash flow could be negative in the near and medium term, but we expect that with the strong balance sheet and the liquidity of the balance sheet, we should be in a position to fund our investment plans quite comfortably.

We continue to build on recent successful product launches and we will focus on the upcoming launches on the Jaguar XE in the US, F-PACE in the spring of 2016 followed by the Evoque Convertible and other products yet to be announced. And these new products, we expect, will drive solid profitable volume growth for JLR going forward.

I'll stop here and me along with my colleagues will take any questions that you may have.

(Operator Instructions) Jinesh Gandhi, Motilal Oswal Securities.

My question pertains to first off on standalone numbers. We have seen our RM cost as a percentage of sales going up. I'm presuming that's a reflection of mix, but did we see any meaningful commodity price benefit in this quarter for us?

The commodity price continues to remain soft and we have seen that benefit coming in not only this quarter, over a period of last few quarters, in fact since last year. No significant upturn in this quarter in account of this and continues to remain soft. And therefore in comparison to last year and comparing to sequentially Q2, I can't mention any particular further benefit coming in. But overall, they have been soft and quite benign and favorable.

Okay. So based on current price we don't expect very meaningful benefits coming through?

I think a lot would depend on how the commodity prices shape up going forward. We expect the commodity prices will continue to remain soft for the near future.

Right.

So I don't see a significant further benefit on account of (inaudible) pricing. But as I mentioned in reference to the performance in the current quarter, we have undertaken some time ago a massive cost reduction and particularly on the material costs and other expenses, some of those benefits are flowing through and that momentum will continue into the future quarters and stepped up.

Okay. And, sir, the second question pertains to JLR. We have seen a significant Q-o-Q decline in realizations. That's just the XE impact or there is something beyond that? Have you seen an increase in discounts in any of the markets?

Not in terms of specific Q3. I think I have mentioned that the variable marketing expenses, rather than discounts, I would say the overall variable marketing expenses continue to see a push in the last, not so much specifically in this quarter, but as a trend from the lows one saw maybe a year ago or 18 months ago. Nothing exceptional in this quarter, primarily it's a region and market mix, a model mix play.

Okay. Thanks, sir. I'll come back in queue.

Amyn Pirani, Deutsche Bank.

Thanks for the opportunity. Sir, my first question is on the China JV profitability. Given that the capacity utilization is still quite low, it's quite impressive the kind of profit that you have been able to generate. So could you help us understand -- I mean, is there a significant difference in the profitability of the China operations versus UK?

One of the things that we had shared with you earlier was the -- from a pure cost point of view, there is a benefit of manufacture in China, both in terms of the pricing you get on the components as well as other manufacturing costs as well as the labor costs.

Apart from that, while there is a reduction in the price compared to UK price and the China price of the product that is going in, the profitability would continue to hopefully remain quite comfortable with the help of the cost factors involved and as well as the duty reduction that we experience.

And the royalty and the margins on the parts that you sent to the JV, that is not in this profit, right? That is in the other expense line, I guess.

That's right. It will be in the other income line, revenue line, not in the other expense line. I'm sorry, you're talking about the Jaguar Land Rover UK, right?

Jaguar Land Rover UK, yes.

Yes, so the margins on the components or the royalty would be in the revenue line, not in the expense line, just to clarify.

Okay. Sure. Okay. And, sir, just one thing, in this quarter JLR has had a very large benefit from working capital as well. And generally we see this kind of an improvement in the fourth quarter. So is it something that has come slightly earlier in the third quarter or can we expect similar improvement in 4Q as we experience every year?

It may be spread between the quarters. Overall, as volumes increase, there will be a benefit on account of working capital and the inventory play also comes in here. So it has continued to see some benefit in the fourth quarter, but I don't know whether I'll say it will be similar, larger, lesser, but we'll continue to see the benefit in the second half of the year in general compared to the first half.

First half, it will see a consumption in terms of working capital and second half the cash flow gets released from working capital. We go through the cycle almost every year. So between Q3 and Q4, we should see the working capital turning around compared to the first half.

Okay, sir. Thanks for the opportunity.

Jamshed Dadabhoy, Citigroup.

Two questions. First one on the variable marketing expenses. Could you give us some color in terms of what they are as a percent of your sales or how they have progressed over the past 18 months?

I don't know I can give one magic number in terms of percentage. It would obviously vary from market to market and also from product line to product line. In terms of trend, as I mentioned, they have -- compared to the very lows in the industry in general maybe 12 or 18 months ago we have seen some uptick in the last few quarters.

Is it expected to continue to even increase from here for the next, say, couple of years as your model mix ages?

Jamshed, I think I have talked about this before. I think we will see -- I'm not talking Jaguar Land Rover specifically, but I think we'll see generally if I take one year ago and maybe two, three years ahead, I think the trend line in terms of increasing it will continue. The intelligence would be how do we manage our material costs, operating efficiency and the synergy in terms of volume growth. We have several measures underway in JLR.

So we may take a large part of the -- as well as the fundamental product strategy and platform strategy in the sharing of components and designs that we are talking about across our product range. I think it will take a large part of the cost out of the backend of the system and we have reverse some part of it in the marketplace. Where it balances out, we will have to see as the time goes on, I am talking in general both about variable marketing as well as fixed marketing.

Sure. Second question, sir, on the income tax expenses in JLR. Has there been some tax write-backs, the tax provision to [sales as to] PBT looks fairly low?

There have been a -- that's right, it's a specific event of the quarter. We got a credit of about GBP62 million in the quarter. It's a deferred tax credit in advance of the tax rates in UK coming down. Our deferred tax accounting would take into account the relevant applicable tax rate, lower tax rate for the future. So that credit has come in the tax line.

GBP62 million, is it?

In the deferred tax, yes.

Okay. All right. Thank you.

Govind Chellappa, Jefferies.

Thanks for taking my question. First a follow-up to that China JV profitability. A back of the envelope calculation suggest that your profit per car in China right now, what is attributable to JLR, is almost same as what you make in the rest of the portfolio. Would that be a right reading?

Maybe you should send me the envelop across.

It looks like it almost caught up. I mean, the higher, lower doesn't matter, but it seems like it's almost caught up at such a low volume. So I'm surprised that it is as good as it is at 13,000 production.

I don't think I have done that back of the envelop the way you have put it. If it's good, let's hope it continues.

My second question was on the small commercial vehicles. It looks like, at least in the last couple of months, we've started seeing some growth in, especially in the ACE portfolio. What is your reading on that? Is it only because the base is low or are you seeing some genuine improvement in demand? And related to that, have all the payment that Tata Motors had to do to Tata Motors Finance because of the poor quality of that portfolio, is that all done?

Okay, the question is in two parts. In terms of the trend, I think it is early days. I would say it with a degree of caution. Yes, the trend seems to be reversing, but it is still very early days. We saw it towards the end of the quarter in December and seems to be continuing into January. And surely there is a base effect impact here. But even that the base effect is small, we have seen continuous negative in the previous periods one has not seen it in this. I think there is still a long way to go. Perhaps it's maybe even too soon to we will say that the worst is over. But the trend has begun. Let's hope it continues.

We do expect going by overall trends and behavior in the past with the M&HCV growth having sustained this strong for these many quarters, I think the lag effect on the small commercial vehicles will play itself out. And we do expect this momentum to continue and perhaps get stronger in the small commercial vehicles in the next year. We do hope and we expect that would happen. With the market share in the small commercial vehicles at over -- continuing to maintain at over 75%, I think it augurs well for the Company.

Coming to your question on the portfolio, in general, I think the small commercial vehicle industry portfolio across the industry, I'm talking not specifically with reference to Tata Motors Finance, but in general, across the lenders, the portfolio continues to be somewhat stressed. I think it will take some more time for the cash flow cycles to become more stabilized and the significant improvement to happen in the quality of the portfolio.

As far as our exposure to Tata Motors Finance is concerned, if you recall last year, we are not providing as it happens. Last year, we took an estimate of all the future provisions that would be required based on the forecast of what the portfolio performance would be over a period of time till the conclusion of the contract as the one-time provision we have created, as we predicted further deterioration over a period of about three or four quarters last year.

Currently it looks like the provision will be maintained that there may not be a topping up required. In the meantime, the efforts are on in Tata Motors Finance, the newer company. We also created strategically a separate subsidiary to manage this portfolio as well as new business opportunities in terms of second-hand vehicle financing. So this stress portfolio and the second-hand vehicle financing required a special degree of attention and focus and therefore separate teams have been formed.

We have added over the last two, three quarters about 600, 700 people in terms of field staff and different type of incentivization, different type of solutions for the customers. That is beginning to have its positive effect in the last few months. It has taken its time, over two quarters, to have any positive impact, but, yes, it has started proving to be more positive.

So the collection trends compared to maybe two quarters ago to today are definitely seeing an improvement. If it plays out, I would expect and if the positive trend continues, I would expect that the provisioning that we have made should be adequate. This is something we should watch over the period of next two, three quarters and see how it performs.

Coupled with the market improvement that we've seen in the primary demand for the new vehicles in small commercial vehicles which if I can take an indicator of better demand coming through, I think it augurs well for this portfolio as well.

Okay. And could we see some write-back of this provision? Is that a possibility at all?

That would be somewhat of a gutsy thing to say at this time. Let's see how it plays out.

Okay, sir. Thank you.

Kapil Singh, Nomura Securities.

Wanted to check were there any -- in the EBITDA line item, were there any revaluation of current assets liabilities if you could quantify that?

You're talking about the Jaguar Land Rover FX impact?

Yes.

You're only asking for revaluation of current assets and liabilities?

In the EBITDA line?

Yes, correct.

Sir, if you can give both like the other part of it as well?

I think what we have reported in ForEx in EBITDA, this is above EBITDA which is there. This is for ForEx and commodities is around GBP87 million.

I'm sorry, this is positive?

This is negative.

Could you just repeat the amount, I didn't catch it?

It is negative GBP87 million for the quarter ending December 31, 2015.

For the quarter.

This is for -- this is revaluation of current assets and liabilities and --

Realized edges.

Both combined?

Yes, yes.

And commodities.

And commodities.

Okay. And secondly I wanted to check where is JLR in the cost cycle. I mean, we've talked about this in the past that the contracts have slightly longer term for JLR. So, have we realized some commodity benefits for JLR or most of them are expected to come later?

My answer is not very different compared to what I said a couple of questions back on the commodity and cost situation in Tata Motors. I think we continue to see some benign trend over a period of time and we expect it will continue.

Okay. And so the variable marketing spends are mostly reflected in other expenditure or we net them out from the revenue line item?

Net them out from the revenue.

Because, if I look at numbers compared to last year then the other expenditures field which has seen a sharp increase compared to last year levels and raw materials sales has remained largely in the same range. So why has that happened?

Maybe offline I can send some clarification on this.

Sure, sir. And, sir, just lastly on the China JV, I mean it's been -- are there any one-offs here or should we expect profitability to rise in the same ratio when the volumes go up?

For the China JV, elsewhere I would not try to comment on the expectation on the future, but as far as the quarter is concerned there are no one-offs.

Okay. Great. And, sir, last question on the CapEx. You have talked about GBP3.3 billion, earlier expectation was closer to GBP3.7 billion. So, just some color on that please, why has that happened?

It's primarily a timing issue and part of it should come through in the next year. It's more a timing issue in terms of some of the inferences as well as the cash flows associated with that.

So next year the range would be closer to GBP4 billion?

We are in the process of finalizing our budgets and plans for the next year and we would have the formal approvals and clearances internally, including at the Board level. Maybe over the course of next 30, 45 days I'll be in a better position to answer that. Yes, it would see an increase compared to the GBP3.3 billion that we are likely to end up with in this year, and there will also be a flow-through effect of last year. So we will have a better indication, maybe I'll be able to share with you, maybe a month or two afterwards.

Thanks and all the best.

Thank you.

Yogesh Aggarwal, HSBC.

Just a couple of questions for me. Sir, firstly last year has been great for US for JLR, but there has been a little bit of moderation recently. So, one, can you please provide some outlook on US market for this year. And then secondly, just you talk about CapEx spend over the next few years. I just wanted to know if in a scenario that US slows down sharply, is there some part of the CapEx which is discretionary and you can pull it off or a large part is required to achieve their machine norms and the product launches?

Okay. I'll just briefly touch upon the answers and if required I may -- since we have Ken on the call today, I may ask him to supplement with a bit more color than I can provide. As far as that market trends are concerned, I think across US or UK or Europe we see a positive growth continuing. And as far as our performance is concerned with the newer product launches and the way they have been received in the market and particularly with the XE also going to the US, we do expect a strong growth momentum in many of these other markets, the three large markets that we have. But I am sure subsequently Ken can add some further color to this.

As far as the CapEx spend is concerned, as I mentioned this year we will end up with about GBP3.3 billion, off a little bit from the GBP3.7 billion which is mostly a timing issue -- timing factor which will come into the next year.

In terms of trend rather than amount I would think -- I think we have been indicating while the industry average or the segment average may be around between 10% to 12% of the turnover in terms of reinvestment in the product and capacity, we have been at about 16%, 17%. We expect that trend will continue for the next few years and may converge more towards the industry average beyond that.

As far as flexibility in cutting back capital expenditure is concerned, we are talking about programs which normally run over a two, three-year period or a four-year period. And when you plan on that time scale, the flexibility and ability to cut back in the near term, can I cut back now for next year's spend, I think the flexibility will be very limited, perhaps not completely zero, but it will be quite limited. But as you look into the future years there may be a better flexibility in terms of realigning or rescheduling or phase it out a little better in the future years, maybe two or three years down the line. But for the immediate period I think the flexibility will be somewhat limited.

Ken, on the US market or on the capital spend, is there anything further color you would like to provide? Please step in.

Thank you, C.R. I think on the CapEx you covered it exactly right. And on the US, the only extra color I'd add is clearly the US has had a great year in 2015. Economically this growth, the oil price which helps sales of cars and outsourced cars, so those are real positive drivers for us. There's clearly a bit of economic uncertainty across the world and in the US, lots of market gyrations et cetera. But the positive thing for us is we have a fresh line of products and recently introduced products that has optioned to the US market in 2016. So, for example, we launched the Jaguar XE in 2016 in the US, we will have a full year of the replacement XF and we will also benefit from the launch of the Jaguar F-PACE. So those new products in conjunction with the existing products help give us momentum. So we are optimistic about the possibilities for volume growth this year in the US.

Great. Thank you. Just if I may squeeze in just a quick question, if I look at the last six months just looking at the total volumes for JLR, the retail volumes are approximately lower by 20,000. So some of it could be the port issue in China, but are we looking at inventory building up or it's just a seasonality?

More than seasonal -- partly it is seasonality which happens during the first half of the year and then comes off. I responded to that in a different way for the working capital question as well, but more importantly it is also a function of launch and inventory building at the dealership in anticipation of the product launches which will go into the retail. As many of the products that Ken talked about as they go across the globe, in each market you will see an initial inventory buildup there is that factor also which plays out.

So when you have a crowded period of 12, 18 months in terms of a series of product launches, you will see some blips in inventory movement, particularly at the dealerships, stocking of the new vehicles for a global launch market after market. We do it sequentially, UK, Europe, China, US et cetera. So you will see that movement going up in different markets as the launch program cascades across the globe.

Got it, sir. Thank you so much.

Pramod Kumar, Goldman Sachs.

Sir, my first question pertains to your ForEx losses what you -- the ForEx related adjustments what you had at EBITDA of around GBP87 million negative. Can you help us with what was the corresponding number for Q2?

Just give us a minute, please. Sorry, not last year, you are talking about Q2?

Yes, Q2 sir. Yes.

It was GBP75 million.

Adverse or negative?

Adverse.

Okay. And, sir, directionally if one looks at the mix because, Range Rover, Range Rover Sport, I believe in January the dispatches are down for both the models. I just want to understand is it got to do with bit of a realignment of wholesale with the end demand for these models or was there any specific issues related to production? And related to that is, how do you see demand for these model lines going forward because they had a fair bit of a skew towards the China market and lot of the other emerging markets. And so how should one look at these two models which are in a way kind of aged as well? So that will be my next question.

All right. As a last question this is quite an elaborate one. Maybe I need to have access to Ken for responding to some of that.

Just so I was actually going to ask if you might just re-summarize the question.

Yes, I lost the trend, I was hoping you caught it fully.

Okay. Sorry. I'll just -- basically in January, we have seen some bit of a softness in Range Rover and Range Rover Sport dispatches at the wholesale level. So I just want to understand whether that's got to do with some production issues or is it adjustment of demand -- adjustment of supplies with the end demand. And in the continuation of that, given the global uncertainty on various fronts, how should one look at demand for the top end of the spectrum, like the Range Rover, Range Rover Sport generally for this year?

Okay. I got it now. I think in terms of wholesale volume, it's the case that wholesale volume ebbs and flows with production volume and we have a shutdown in December that can cause the number of units that we produce in January or ship in January to change. So I prefer to look at retail volume to look at what's actually happening in the markets. And in January, our overall retail volumes were up 24% year on year. And no, I'm not feeling that I am seeing necessarily any softening in any particular segments or for any particular product. So that's not the trend I see at the moment.

And your other, sorry, I've lost your other question. Just give me --

Generally how should one look at demand for Range Rover, Range Rover Sport given the increases?

I think we've got -- I think we are optimistic about demand for both of those product lines. We've got a loyal customer base and relatively fresh products in both cases. And whilst there will always be the ebb and flow due to specific markets and economic factors actually both Range Rover and Range Rover Sport have proven themselves in the past to be quite resilient. So we'll be cautiously optimistic that that will continue.

Okay. Can you please give me the liberty of one last question, just generally on discounting and in particular how is it trending up in China because last year was pretty tough for us, but therefore want to understand in the recent months with some bit of stabilization in volumes is discount in a way in China easing or is it directionally still tougher?

I wouldn't call it -- overall in China I think we have seen quarter-on-quarter improvements. I'm not talking about same quarter of last year, but sequentially quarter. I think that reflects in many ways, both in the volumes, in the mix within the product range as well as in the variable marketing expenses. We do see a positive trend quarter on quarter.

Excellent. Thanks a lot, everyone and best of luck. Thank you.

Thank you very much.

Thank you very much. Ladies and gentlemen, that was the last question. I'll now hand the conference over to the management of Tata Motors for closing remarks. Over to you.

Thank you very much everybody for joining in this call. And as I mentioned, the presentation will be available on our website and of course we'll continue to engage with you for any supplementary questions or clarifications that you may have from time to time as we have done in the past. Thank you for (technical difficulty) participating in this.

Thank you very much members of management.

And thanks to you, Chirag.

Yes, thanks a lot for the opportunity, sir. Thank you.

Ladies and gentlemen, on behalf of Edelweiss Securities that concludes today's conference call. Thank you for joining us and you may now disconnect your lines.