Tata Motors Ltd (TTM) 2016 Q4 法說會逐字稿

I would like to welcome all of you for Tata Motors' Analysts Presentation for the financial results for the quarter and the year ended March 31, 2016. From the management we have Mr. Guenter Butschek, CEO and Managing Director, Tata Motors; Mr. Ravindra Pisharody, Executive Director, Commercial Vehicles; Mr. C. Ramakrishnan, Group CFO, Tata Motors. From JLR we have Dr. Ralf Speth, CEO and MD of JLR; and also Mr. Ben Birgbauer, Treasure of JLR. May I request Mr. C. Ramakrishnan to start with the presentation, please?

Thank you, Vijay. Good evening and a welcome to all of you for this annual Analyst Meet following our declaration of results for the full-year March 2015/2016. I'll go through in the same sequence as we have done in the past. First, a glimpse of the consolidated financial results of Tata Motors including Jaguar Land Rover. This is the global consolidated results. Net revenue for the quarter came in higher at INR81,000 crores compared to INR68,000 crores in the same quarter of last year. For the quarter, EBITDA was about INR12,000 crores and EBITDA margin was about 15.4%, up from 13.6% in the same quarter last year. Profit after tax was about INR5,177 crores, up from INR1,700 crores in Q4 of last year. There is a reference to exceptional items here, which I'll cover in the later slides.

For the full year as I said, revenue up from INR263,000 crores to INR275,000 crores; EBITDA of INR40,000 crores; EBITDA margin was 14.6%, somewhat down from the previous year, year 2014-2015 was an exceptionally high performance year for JLR if you all recall. Profit after tax for the full was about INR11,000 crores compared to INR13,900 crores in the previous year. The consolidated performance has been driven in India business on the back of continued strong medium and heavy commercial vehicle growth along with the solid second half of Jaguar Land Rover, which drove the overall consolidated performance. Profit before tax for the quarter and for the full year include one-time reserves and charges that we have taken of about INR1,600 crores, about GBP166 million, including for the industry-wide recall in the US of potentially faulty airbags from one of the suppliers.

In addition, we have also taken some provision for doubtful debts and previously capitalized investments charge-off both in Tata Motors as well as in JLR. We have come back under the dividend lens. We skipped our dividend last year in view of the financial performance and the losses and the Board of Directors, I'm happy to share with you, have declared a dividend of 10% on the shares. A brief summary in terms of the financial performance. In the India business, as I mentioned earlier, we have seen significant improvement in operating margin to 8.1%, which is an improvement of 530 basis points year-on-year. This is broadly driven by strong medium and heavy commercial vehicle growth of 26.6% year-on-year and 28.7% quarter-on-quarter. We have started seeing good growth in light commercial vehicles, 11.8% year-on-year and 23% quarter-over-quarter.

Exports of CV grew 26.7% and we're also seeing the results of ongoing cost reduction and other margin improvement initiatives in Tata Motors standalone. In Jaguar Land Rover in terms of the highlights, EBITDA before one-time reserves and charges for the quarter was about 16.2%. The solid EBITDA margin was before one-time reserves and charges as I mentioned in Q4 in particular, but lower than the same period last year with higher total sales. This has been offset by less favorable market and model mix, foreign exchange movements in this quarter, and one-time reserves and charges of GBP166 million for the recall of the faulty airbags and certain provision for doubtful debts and capitalized investment charge-off we had to take in this particular quarter in JLR.

Consolidated financials in terms of balance sheet continues to remain strong. Net automotive debt equity at a consolidated level is negative at 0.01 representing net positive cash after netting off the debt in the balance sheet. Cash and bank balances globally including liquid investments as of March was about INR52,000 crores. CapEx and product development expenses for the Tata Motors Group was about INR36,000 crores for the year. Getting into a little more details in terms of the India business financials, first of all the P&L account. Net revenue for the quarter was about INR12,600 crores, up from INR10,800 crores in the same quarter last year. EBITDA was about INR1,000 crores, up from about INR300 crores in the previous year's quarter. EBITDA margin as I said earlier saw a jump from 2.8% to this quarter at 8.1%.

Profit before tax before exceptional items was about INR399 crores and after the charge-offs it was about INR370 crores. And profit after tax with certain tax reversals came in at INR465 crores. All of these numbers were significantly negative in the same quarter in the previous year. Likewise for the full year, turnover revenues of about INR42,000 crores, up from INR36,000 crores. EBITDA for the full year was about INR2,740 crores compared to the whole year negative EBITDA of about INR800 crores in the previous financial year. EBITDA margin likewise of 6.5% for the whole year reversing the sign which was negative 2.2% for the previous year. And similarly I'm not reading out the numbers, they are significant negative numbers in all the other line items in the previous year which have all turned positive now. Medium and heavy sales continued to remain strong and continues in the growth trajectory.

LCV segment started witnessing growth in the last couple of quarters, particularly the last quarter. Passenger vehicle segment for the Company witnessed subdued performance in the second half due to delay in some of the product launches, which we'll talk about later. EBITDA remained positive for all the quarters and full year on the back of this commercial vehicle performance. And as I said, Company is back on the dividend list. In terms of balance sheet; during the year as you're all aware, we've successfully completed the rights issue of shares. With the rights issue and also the operational performance significantly improving, the net debt to equity ratio as on March 2016 stood at 0.61:1 and CapEx and product development in Tata Motors India business was about INR3,000 crores.

Commercial vehicles: as I said couple of times before, medium and heavy commercial vehicle industry continues to be supported by infrastructure spending, improved profitability of operators, fleet replacement demand, and initial signs of fleet expansion demand coming in. For the Company, the M&HCV segment grew by about 26%, 27% year-on-year in Q4 and 24.3% year-on-year for the full year. We exited the financial year with domestic market share of about 52%. The LCV segment has started showing signs of growth from Q4 with a growth of about 11.8% year-on-year in the quarter. Variable marketing expenses however continued to remain high in the industry. For the Company, Q4 also witnessed many other important exciting events in this business. We received additional order for about 600 units plus of high mobility vehicles for Indian Army.

We successfully completed the huge following, the Season 3 of the T1 Prima truck racing championships. We got further contracts for 25 Starbuses, which are diesel series hybrid electric buses with full low floor configuration. We announced a strategic partnership with some partners for the Indian FICV program. Launched few new products in Nepal and launched the new SIGNA range of medium and heavy commercial vehicles across different segments. Passenger vehicles, however, while the industry witnessed a growth of about 2%, this was on the back of new launches from various OEMs. The growth was entirely more than driven by the new launches. However, for the Company in the domestic market, passenger vehicles actually de-grew significantly mainly due to the delay in the launch of the most awaited Tata Tiago hatchback.

While our exports in the passenger vehicles optically seems to grow significantly, I must caution this is on a small base. We have unveiled our future range of products in passenger vehicles at the Auto Expo recently; the Tata Tiago, new sporty compact sedan which is project code named as KITE 5, SUV HEXA in automatic and manual variants, and the compact SUV NEXON. These products are to follow in this financial year. Jaguar Land Rover financials; net revenue GBP6.6 billion, up from GBP5.8 billion in Q4 of last year. For the full year GBP22 billion revenues, almost the same as last year GBP21.8 billion. EBITDA margin for the last quarter in this financial year was 16.2% and you will recall we had some challenges in the first one or two quarters, therefore for the whole year the EBITDA margin was 14.9%; both of which look somewhat lower compared to a very exciting and high performance year we had in 2014-2015.

EBITDA as reported after the exceptional items however came in lower. These exceptional items include the product recall provision that we had to make in the current quarter, certain receivables provision we had to create, and certain product write-offs that we had to provide for; all aggregating to about [GBP166 million]. Profit after tax for the quarter in Jaguar Land Rover was about GBP472 million, up from GBP300 million in the same quarter last year and for the full year it was about GBP1.3 billion. In terms of balance sheet, the total product and development and CapEx spend in JLR was about GBP3.2 billion. Positive free cash flow for the year. After the spend of GBP3.2 billion, free cash flow positive was about GBP791 million after this CapEx spend. Cash and financial liquidity on the balance sheet was about GBP4.7 billion and in addition we have access to liquidity through committed lines of credit of about close to GBP2 billion.

With the balance sheet that I talked about just now, the net debt to equity ratio is negative reflecting a net positive cash after considering the debt. Other key highlights in Jaguar Land Rover. Volumes excluding China, China JV volumes both in wholesale and retail came around 140,000 numbers. China JV wholesale and retails were more or less similar at about 12,500 units for the quarter. Strong retail sales were witnessed across all regions including North America up 24%; UK up 23%, China was up 19%, and Europe up 55%, and other overseas markets up 15%. Strong free cash flow in the quarter about GBP1.4 billion after the CapEx spend of about GBP750 million.

I'd shared with you earlier about the provision we had to take in one of the earlier quarters in this financial year of about GBP240 million in terms of the cars destroyed or fully damaged by the fire in the Tianjin Port in China.

Out of this GBP240 million provision we created in one of the earlier quarters, we have started receiving insurance claims and other credits. In this quarter we received about GBP58 million credit, partly as insurance settlement and partly as cars available for sale. And we had a further recovery of insurance of about GBP33 million in the previous quarter. For your information, our share of profit from China JV for the quarter was almost GBP50 million. Some of the pictures of recent and upcoming product launches in JLR, which we expect will drive further growth; including the Evoque Convertible, F-PACE, XE, and the China JV product which is the XFL. Several technological and other initiatives in Jaguar Land Rover covering autonomous vehicles, connected cars, as well as InMotion; a business unit to develop innovative solutions aimed at overcoming future travel and transport requirements.

I'm quickly running through these slides. For your information, this will be available on access in our website at the end of this presentation. Likewise in JLR, significant focus on environmental initiatives including light-weighting, powertrain rightsizing, and electrification across our models. Other key subsidiaries. Tata Motor Finance, it's a consolidated position; net revenue of about INR3,000 crores, profit before tax INR300 crores compared to a loss in the previous year as we had to take some significant NPA provisions, profit after tax about INR267 crores again compared to a loss in the previous fiscal year. The change in the market particularly in commercial vehicles in terms of demand upturn and so on is also beginning to play on the NPA provision and recoveries.

Tata Technologies, our IT and engineering subsidiary. Net revenue about INR2,700 crores, up from INR2,600 crores in the previous year; profit before tax INR461 crores, profit after tax INR382 crores, both up from the previous year. Tata Daewoo commercial vehicles in Korea. Net revenue slightly lower at KRW880 billion, slightly lower in particularly many of their export markets, international markets were affected even though in the domestic market, they continued to perform very solidly including market share gains. Profit before tax about KRW55 billion and profit after tax at KRW46 billion. Just to caution, the previous year 2015 financial numbers in Korea included certain one-time credits we had taken for some provisions we had created in the previous years.

TML Drivelines, which is our axles and transmissions subsidiary in India; net revenue up from INR526 crores to INR545 crores, profit before tax INR80 crores, and profit after tax INR55 crores. All reflecting the growth in demand and the robust performance of medium and heavy commercial vehicle business. Going forward in commercial vehicles, we expect the M&HCV growth momentum to continue and the market will remain buoyant in FY17 supported by continued replacement demand and further supported by growth and fleet expansion demand. We expect the buses and the LCV segments including small commercial vehicles to witness positive growth momentum in the full-year FY17, which we saw more recently in the last quarter of the current financial year. We believe we have a wide and compelling product range with several new launches in FY17, which will provide a very good foundation for further growth.

We have listed out some of the new products that we expect to launch. We'll continue to focus on export. It will be of high focus with launching different products in various markets. Company has a good pipeline of Defense orders, both what we have received as well as in discussion and expected. In passenger vehicles, we expect the new product momentum to continue with existing, recently launched, and upcoming new products. Tata ZEST, BOLT, and Gen X Nano; the new compact Tata Tiago; the new sporty compact sedan, HEXA and NEXON. Some of these already launched and some of these to follow in this financial year. We expect these new generation models, including the ones to follow in later years, will drive future growth in volumes as well as help us gain market share.

As I shared with you before, we have our product plans finalized till 2020 and we expect we'll be in a position to launch two new vehicles every year going forward and we'll of course continue to avail opportunities as they arise for extending the international business. Jaguar Land Rover, the fundamental strategy continues to be the same. We will continue to invest in new products, technology, and manufacturing capacity and hope to grow profitably. For the running financial year 2016-2017, we expect the total investment spending, CapEx and product development to be GBP3.75 billion, GBP3.8 billion. We expect to drive strong operating cash flows. However, with the type of investment we are envisaging in the capital expenditure and product development, it's possible that free cash flow could be negative in the near future.

As I said earlier, with the balance sheet that we have in terms of liquidity of close to GBP5 billion plus access to further liquidity, we don't see it as a challenge in pursuing our vision and strategy. We will continue to build on recent successful product launches with the ramp up of general retail sales of the Jaguar F-PACE, XE in the US, XF long wheel base in China, and the Evoque Convertible in the coming months, and future new model launches which we'll announce as and when they are ready. We expect these new products to drive solid profitable volume growth in JLR going forward. Thank you very much for patiently listening to the presentation. Along with my senior colleagues, we'll be able to take your questions for the next 30 minutes or so. Thank you very much.

Can I request the participants to please introduce yourself before asking the question? Binay, can we start with you?

Binay from Morgan Stanley. First of all, congratulations to the team for a very strong set of earnings both on India as well as JLR side. Starting with the China joint venture, very impressive numbers, we've seen sequentially profits grow despite volumes being similar. Last quarter we estimate your net margin was around 8%. Things have gone higher and you're yet to enter the biggest segment, which is long wheel base Jaguar XF. So, how do you see the China profitability of this joint venture going ahead? And the second question is on Range Rover and Range Rover Sport sales. We saw a good year last year; April wasn't so good so how would you see sales trend in that segment? Thanks.

I just want to go back to China. China is coming back. You know that we had last year a lot of vehicle changes, the run out of vehicles but also the ramp up of the new plant in China is now coming back. The locally produced vehicles, that's the Range Rover Evoque and the Discovery Sport, have a high quality and we see really sales coming up. The question about the Range Rover, was it a question about the Range Rover in China or around the world?

Overall, like the retail sales for Range Rover?

Range Rover overall is a very special vehicle and so Range Rover itself will continue to be strong. By the way, Range Rover and the Range Rover long wheel base from the Range Rover Sport, we now also have an SVR version with 575 horsepower and by the way there was one probably (inaudible), you should just have a look it's sensational. So, we are really very optimistic that sales for these very special products with a very good product substance and by the way with a very good quality that these vehicles will continue to be very strong in the market.

So just to be clear, there is no runoff in the China joint venture. It's a very strong performance for this kind of volume so there is --?

No, there's no runoff in the China joint venture.

There's no runoff and because ramping up a plant takes time and we see that the production is now really in a good moment.

And also in Range Rover, you're not seeing any slowdown so in the sense nothing --?

No, not at all.

Thank you so much and congratulations again.

Kapil?

This is Kapil from Nomura. Congratulations and great set of numbers. I wanted to check first of all what has caused this turnaround, if you could split it up between commodity benefit that you got this quarter and any currency benefit that you got this quarter compared to third quarter? That would be my first question.

Could you repeat the question?

We've seen a strong turnaround in margins so just trying to understand the various factors which have turned around this quarter. If you could help us understand how much was the benefit from operating leverage, commodities, currencies; if you could quantify some of those, please?

I presume the question is both for JLR and Tata Motors?

JLR.

JLR, if you see in the last fiscal year and just going back about a year ago in 2014-2015, we saw some exceptionally good quarters with 17%, 18% EBITDA and even above. In this fiscal year, we have seen different quarters performing differently. The first quarter was good, the second quarter and third quarters were quite low in terms of the China issues that we had both in terms of market and in terms of production ramp-up. I think the volumes are beginning to come back quite positively in JLR. As I have shared with you before, the overall volume improvements and the performance of the new products as well as growth in many other markets, you just saw the slide in terms of the type of retail sales improvement that we have seen in other markets. The success of the new launches in the last two, three years as well as the volume growth that we have seen definitely contributes quite significantly to this performance. Then you want to highlight any of the exchange impact in this quarter, you're referring to this quarter or the fourth quarter?

For Fourth quarter for JLR?

So as you know, FX is always complicated but I'll try to make it as simple as possible. Basically we did have in the quarter good news operating exchange because fundamentally the key things are the pound actually weakened and also there was movement on the euro. And so fundamentally, we had good news operating exchange that was offset partially by hedges that we have in place. So net net, operating exchange net of hedges was good news for the business. But then because we did see the euro move significantly to about GBP1.26, we saw revaluation of our euro payables. After that revaluation of our euro payables, net net exchange was modestly negative at the EBITDA level for JLR in the quarter year-over-year.

I just want to highlight that volume effect at the end of the day, you have seen that all regions in principle overcompensated the weakness in China. So, it's very optimistic seeing that we can grow all around the world.

Could you repeat that currency benefit again especially sequentially third quarter and fourth quarter what has been the movement above EBITDA?

Sequentially, the answer is the same as it is for the quarter year-over-year. So, sequentially net net we had good news operating exchange primarily because of what happened with the pound offset partially by hedges in the period, but net net hedges or operating exchange net of hedges was good news and then we did have some revaluations of payables in the quarter. In the quarter actually sequentially, it was about neutral I'd say exchange. For the quarter year-over-year, it was negative including the effect of revaluation.

Okay. And secondly, I'll just go back to the China JV, very strong numbers there. Would it be possible to give us some color like what would be the EBITDA margin level at which we are operating or if you could share at least full-year numbers for that because that is going to become a significant part of the value for the Company going forward?

It is indeed a very significant element you have seen and as CR already mentioned that we are going to launch the XF long wheel base that will be by the way based on the very first aluminium body shop in China. So, we have now the XF launch and we are also continuing to ramp-up the Evoque and also the Discovery Sport. So, it becomes now really an interesting business.

No, I was talking about financial numbers.

Let's say that we'll be in a position to share the EBITDA numbers in the China JV. What will be relevant in this discussion is how does it affect the JLR business, which is why we have culled out our share of the profit in the JV for last quarter, which is about GBP50 million for the quarter representing our share. But at the JV level EBITDA et cetera, I'm not sure that we will be in a position to discuss.

So, your Chinese JV's profits is actually for a certain period?

No, this is profit after tax.

Profit after tax. What was the tax rate in China?

I'll send it to you separately. I don't recall it top of my head.

Okay. Thank you.

This is Amyn from Deutsche Bank. So, last year several times you had mentioned that the profitability in FY15 was a combination of a lot of things coming together and in FY16 you had a significant increase in variable marketing expenses in JLR specifically. As you look into next year, would you say that your variable marketing expenses have peaked or will FY17 also continue to be a difficult year from that point of view?

I don't think that it's a difficult year at all. I hope that it's not peaked and I hope that variable marketing, but also especially fixed marketing are going up because at the end of the day, we're going to sell more products and we have new vehicles which we are launching in the market. Therefore with new vehicles expanding the product portfolio, we also have to price the [EU's] fixed marketing.

Aditya.

This is Aditya from JP Morgan. Just a question regarding the industry. We've seen couple of issues related with diesel fuel both at Volkswagen and recently there was some issue around Fiat. So, what are your thoughts at the industry level and where does JLR stand on this? And secondly, just some concerns on US car sales peaking out so any thoughts which you could share on that geography? Thanks.

Let's start with the US question first. We are seeing and we have seen that we had a very successful year in the US. We are launching right at the moment XE, which was not in the market so far. So we are absolutely not only cautious optimistic, we are really optimistic that we will see another strong year in US. First thing, diesel. First of all, I can highlight in the US is kind of (inaudible) devices. Overall, diesel is quite important for the country's automotive industry. Why? Because whenever you think about and calculate the efficiency and the environmental impact of similar performing engines, then the diesel engine is still an advantage in comparison with the respective petrol engine. So whenever diesel engines will be banned all around the world, this will have a significant impact for all fleet requirements, legislative requirements all around the world.

This is Priya Ranjan from Systematix. This is related to domestic CV business. We have seen significant underperformance particularly in multi-axle vehicle while in tippers and tractor trailers we have been doing much, much better than what the numbers suggest. So, what are the corrective actions we are taking particularly in the multi-axle side? And also on the LCV side, do we see that the things are now turning around? We have lost Number 1 share to the Number 2 competitor Mahindra so how are we thinking in terms of market share in the LCV space?

So the first part of your question when you say see underperforming, you're referring to relative market share?

Yes, relative market share in multi-axle vehicles?

So, I think you need to understand the situation that the CV market is going through for the last four years. I think when the market started going into a big recession, that is the time when a lot of capacity came into the market. I think the Indian players have added capacity in the last [four] years and we saw the foreign players coming in also adding capacity. So, I think what we've seen is that in the last two years the market has started recovering. There is a lot of variable marketing spend and discounting particularly among some of the newer players where the market shares are still sub critical. So I think in tractor trailers and tippers relatively speaking, the role of the product is very, very important because it's fully built and there is a process of delivery on full mileage et cetera whereas in multi-axle trucks these markets are still largely (inaudible) and the customers go and build the body on top of that.

So, I think we need to look at these things slightly longer term that we are sitting on even in multi-axle we have market share in excess of 50% and when you're defending that type of market share, we've chosen to go with a more balanced approach in terms of fighting for market share versus profitability, but I think this is a continuing game. There are segments evolving like in 37 tonne, we have launched a product called 3723 which did not do well. One of our competitors got a bit of a head start there. But in the last six months from having less than 45% market share, we are almost up to 50%. So there are one or two products where we actually fell behind, but we are gaining and they form the backbone of our growth over the next two years. And otherwise I would say that it is not in steady state the market share distribution between competitors because now there are at least eight players, we need to see who are a longer period of time.

Talking about LCV, I think LCV has gone through again there was a period when the financing was relatively liberal and then the corrections took place. We started correcting much faster whereas some of our competition started correcting much later and that has a role to play in the market shares. There has been a shift from the smaller commercial vehicles towards pickups that obviously had some impact on the market share if you add SCV and pickups together. But as I said, the market is evolving in a way where a 12-month snapshot is not good enough, you have to see it over a longer period of time. And with the interactions particularly in the last six months, a product like Ace Mega which straddles between a small commercial vehicle and a pickup, our market share towards the end of the year is much higher than in the earlier part. So I think as a combination of products as well as the distribution which we have, we definitely believe that we will have the sort of market share we intend to keep in a growing market like India.

In certain regional markets and particularly in the heavy commercial side like Southern market and the Western market where we have consistently lost market share in last say two years, so any regional strategy while our competitors are taking our share in the East and North, but we are not taking their share in South and West?

As I said that when you are at 55% market share, the amount of effort you can make in terms of cost to gain market share. When you're defending 85% market share in East and North for instance, you need to (inaudible) about how much you give away in terms of protecting market share as compared to somebody coming in new. But I think overall if you look at 16 tonne and above, we are still at 56% market share for the year in a market where there are seven or eight players. And as I said, this is not the end of the story; we definitely believe we will at least be able to gain back to 60% and above.

And just one last question on passenger vehicle, any thought on the booking numbers for Tiago?

I think it's time to actually talk a little bit more about the figures on the Tiago. Tiago has ever since it got launched some approximately seven weeks ago great momentum in the market. I think we have all seen the test results of the Tiago and it's generally considered as the hatch segment item at this point of time. The momentum that it has created in the market has effectively exceeded our expectations in terms of volume and I come back to this statement in a minute. As we talk tonight, we have exceeded 20,000 orders. We have seen by the officially launched statistics a retail of 3.5% in the month of April, more to come at the end of this month as far as the figures are concerned.

And due to the fact that it has exceeded our expectations, it has also exceeded our production capacity; but not only because of the total number, in particular because of a different product structure as initially expected. The initial assumption for the setup of the capacity in Sanand for powertrain, for engine, as well as for the complete vehicle was actually 60% petrol and 40% diesel and we have expected a fair mix of volume over the Top 3 execution levels. What we see at this point of time, it varies a bit region by region 70% to 80% total share of petrol which exceeds our engine capacity.

And we have also seen in the last couple of weeks during the initial orders placed a very strong order book towards the top end model, the XF which also exceeds on a couple of components our capacity. If I take the total capacity framework, we see on most of the models a delivery period in the vicinity of six weeks; for the top end model, it can even go up to 12 weeks. But our customers are pretty patient so the ones who have actually placed their firm orders and making a down payment and most of them are really willing to wait for the product as we are currently ramping up the capacity by launching a second shift in Sanand to structurally and sustainably improve the output of capacity.

This is Yogesh from HSBC. Firstly in the UK market where you finance JLR cars, have you seen any impact on the financing business because of the slowdown?

No, not at all. And first of all, I don't think there's a slowdown in the UK. We are growing in the UK quite nicely. Now with the new F-PACE being launched, our growth potential is even higher so we don't see any slowdown. Also not concerning in terms of (inaudible) where you see in the overall industry a certain slowdown. Sorry, no.

Just to clarify. In Jaguar Land Rover, we are not in the financing business in UK just to clarify because that's what you've said in the beginning. We have a strategic partnership, which provides the retail financing for Jaguar Land Rover car in UK, Western Europe, and US. Unlike India where we have Tata Motor Finance, in Jaguar Land Rover we don't have our own financing business. Just to clarify.

Okay. So, I saw some provisions in the last year's annual report so maybe I'll crosscheck.

These are arrangements that we have with the financing partners, but we are not in the financing business. All manufacturers do have an arrangement with financing partners where you submit some other costs or provide some more attractive financing where you share the cost, but we are not in that business in JLR.

And sir, this last quarter there was GBP63 million loss above EBITDA because of the hedging losses I assume. Do we have the comparative number for this quarter?

Last quarter, you're talking about Q3, right?

So, I think what I'd say is in Q4 quarter-over-quarter the exchange was of a similar magnitude to that including all the effects of the operating exchange net of the hedges, net of revaluation of payables.

Thank you.

This is Pramod from Goldman Sachs. My first question pertains to the fourth quarter results. The ASPs on a sequential basis have done phenomenally well with a 5% jump. Just wanted to understand how much of this has got to do with the wholesale level product mix because I think most of us don't have access to the presentation as of now. How has the product mix on the wholesale side done especially from Range Rover and Range Rover Sport and also how should one look at FY17 in terms of product mix and geographical mix compared to 4Q levels? That will be my first question.

I think it's not something we can explain in a matter of few minutes. Jaguar Land Rover has a widely distributed market as well as product mix range.

Probably Range Rover, Range Rover Sport as a percentage of wholesales because quarterly on the retail side there was a bit of a slippage.

Maybe Ralf can answer that question.

Sorry, but I don't have it in a way that I can give you at the moment the exact figure in relation. Absolute figures we are growing, but I cannot give you whether it's related to the turnover difference. If you need these kind of figures, I have to (multiple speakers).

But directionally how should one look at FY17?

We'll put out these numbers in any case in our website and provide a more detailed analysis.

So, I was just wondering if it's got to do with the mix per se or there were some other factors which are driving the ASP increase, which are like kind of sustainable and maybe in FY17 how would you look at them?

Overall we can confirm the mix (inaudible) the Range Rover and Range Rover Sport are strong. And now comes also Jaguar, Jaguar with F-PACE, so we assume that we really can also provide good results in the future.

And second question pertains to the diesel because there has been at least the media (inaudible) that there's a shift away from diesel. How is our exposure of the JLR side to diesel as a fuel and especially how would you look at it in FY17 especially with the XE going live in US which is predominately a gasoline market and even F-PACE being a more globally spread out product in terms of even having a fairly large China piece. How should one look at your diesel exposure in FY17 versus FY16?

Overall you know that we have just launched our absolutely new engine family, the Ingenium family, in a new engine plant and this plant is a modular plant so that we can really produce diesel and petrol engines in the future depending the individual demand of the market. So, we are flexible from that side. We expect that in one of the other market like India, as we discussed for instance petrol is becoming stronger. Maybe a keynote statement of France today that the Mayor of Paris (inaudible) that he will look at banning diesel from 2020 onwards. So, we expect that there is a shift also in one of the other markets to petrol. From a production point of view, we are flexible.

But is there a percentage you can share on the exposure to diesel as a fuel if it's available right now?

I don't have it available right now.

Fair enough. Thanks a lot.

It is Akshat from Aviva. On the standalone business, if you could just give us an indication what is the capital expenditure we are planning for this year and how do we plan to fund it because JLR is quite self-sufficient in its funding. So on the standalone, if you could highlight?

On Tata Motors standalone, historically if you take the last three four years our annual spend has been between INR3,000 crores to INR3,500 crores. It will be slightly higher in the coming year, maybe around INR3,500 to INR4,000 crores in that order of magnitude. In terms of funding, I think it should be borrowing neutral in terms of funding in Tata Motors. That's what we expect.

Also one more question on the JLR side for the next three to six months, what is the amount of hedges we have and roughly around what rates?

Rates I definitely can't give you. I can give you an outline of our FX hedging policy in broad detail. Normally we hedge over a four-year to five-year term starting from next quarter onwards and we hedge in declining percentages. So if you take the next one or two or three or four quarters, the hedge book will be almost 60%, 70% above the exposure and it'll gradually start declining as we get into the year two, year three, year four; and year four hedges may not be more than 10%, 15% of the hedge at that time. That's broadly the strategy. And we tend to take a hedging policy which is at the net level in terms of our payables and receivables.

Sir, you get realizations in yuan, in rupees, in the Brazilian currency. So, what do you actually hedge, you hedge your receivables, you hedge your payables, you hedge your capital commitments?

Practically all of them. If you look at Jaguar Land Rover, about 80%, 90% of the costs are in our operations in UK. In UK the revenue is only about 20%, 23% in terms of product sales. So, it's business fundamentally which has huge cross currency exposure between the cost structure it has got and the revenue it earns. As far as the topline revenue is concerned, almost 60%, 70% of the exposure will be either dollars or dollar linked currencies or dollar dependent currencies.

So, basically your revenue is in dollars?

Good part of the revenue is in dollars. And if you take our cost structure apart from UK cost, I've shared with you before almost 40% of our material exposure will be in terms of imports from Europe which is in euros. So, we have a currency exposure on the revenue side in terms of dollars versus pounds and on the materials we have a currency exposure in terms of pound versus euro. (multiple speakers).

Sir, but every quarter you're incurring losses, why are you hedging? Every quarter volume here is loss, loss, loss, so why do you keep hedging, sir? Now you're cash flow positive, you can --. No, it's a fact. Most companies who are hedging are losing money and you have a good balance sheet you can bear a currency loss. Sir, what is it that makes accounting so complicated and you're hedging five years into the future who knows five years?

True. The five year beyond or four year beyond hedges will be 10%, 15% anyway. But it is important to hedge because we also want to fundamentally de-risk the business and bring better certainty in terms of net revenues and cash flows. Number two, what you're seeing in terms of the question and answers we have provided is one side of the coin, which is basically the result of the hedge book that we have. You must remember fundamentally when the pound weakens against the dollar, there is also a gain which comes in the topline. So, you need to take both together. So, what is being called out and answered separately is what is happening on one side of the equation which is the hedge position.

And one last question, if you could guide us for your tax rates on the standalone and for the consol operations for next year? Thanks.

In terms of tax rates in the India operation, it's not likely to be very significant because we do have carryforwards and R&D credits so we have sufficient set offs. So, the tax provision will be restricted to 15% to 17% which is the MAT tax that you will have to provide for each year at least for the foreseeable future. As far as JLR is concerned, which is the second biggest element, I think the tax rate if you take the current tax and the deferred tax will be almost equal at the marginal rate which is about between 20% to 25%.

(inaudible)

Slightly below 20%.

Sir, even in telco (inaudible ) you to pay taxes where there will be profit, but I think you'll have so much of carryforward depreciation?

Carryforward depreciation, we'll have carryforward R&D credits that we get because they are amounts we spend on R&D and product development, we also have carryforward losses --.

If you say we'll pay MAT this year, I'll be very happy.

That's what I said.

Anyway we're expecting a good profit.

Last two questions.

This is Sonal Gupta from UBS. So first question on the F-PACE, if you could just highlight what sort of order book you have and what's the ramp up plan on the F-PACE?

I only can ask you to be very very fast because the order book is growing very interestingly. It's a very good product. It's aluminum 80% and it has unbelievable (inaudible) driveabilities like a sports car and it has all the latest technology also in electrical, electronic, architecture, and infotainment. So, it's really a convincing vehicle and I hope you also like it from (inaudible) point of view.

My second question is on electrification clearly is a big theme on the auto side and I just wanted to understand if there are any numbers that you can give in terms of what proportion of your fleets or sales should be hybrids and electric plug-in hybrids potentially by FY20 or 2020 if you have any such numbers?

You're totally right. If you want to achieve the fleet numbers but also see the latest market trends, then electrification but also hybridization is accelerating. So we assume that in 2020 only a small percentage of our overall volume will be electrified, but really accelerating after 2020 quite drastically.

Okay. Thank you.

This is Abhishek from Reliance Securities. As talks are going on regarding the [Britain's] exit from European region, how do we see it to impact on the JLR business and what are our plans to counter the upcoming challenge?

[Praxis] is indeed in every newspaper and quite clearly it's in a very hot time. I see personally that and I believe that the UK, I'm Chairman so sorry I can't give you a vote. I have to really respect the democratic process. But I hope that the discussion is opening up from a one dimensional discussion about only economy so that by far all the more bigger aggressions about society, politics movements, military issue, and last but not the least freedom and peace. I have the opportunity to live in peace in my generation and I hope that also my children can live in peace in the future and I'm prepared really to also make a personal contribution to that. Therefore it would be great relief if the UK can vote reasonable and I would say stay in the EU and then there is nothing to change.

The chance of exit is very low. So even if they exit, they will continue the trade policies that's what they say with the European Union for the next two years?

Nobody can give you an answer on that. Things are a little bit theoretical. But I'm quite sure that every nation also wants to make business in the future with the UK. UK is the fifth biggest nation in terms of GDP and therefore, I guess it will also continue. The rest is future.

Chirag, last question.

Chirag from Edelweiss. On electrification, just wanted to understand what part of your product development CapEx are you earmarking for your drive towards electrification? How important is the spend? If you can give us some flavor on your overall spend of CapEx.

Sorry, I can't break it down and break it out as a kind of slice this year, but also then overall but over a certain period of time. But it's quite clear it's going to increase because we also have to fulfill specific requirements and I see that especially electrification is really very important in the future with all the technical advantages, but also disadvantage out of this kind of technology right at the moment.

And second question was on capacity, if you can just help us understand at least for next 12 to 18 months, how is the UK manufacturing capacity and are there any bottlenecks that you are foreseeing because there is too much of product ramp-up plan that we have? Are capacities both engine as well as Solihull as well as Castle Bromwich plant; maximum of these capacities are well placed because in the past we did have issues on production plants and there were disappointments over there?

No, at the moment I don't see neither a limitation nor a restriction. We also are in close relationship and discussions with our suppliers so that we can continue to also grow. We're not growing in let's say relative numbers. In relative numbers maybe higher, but if you're seeing it in absolute figures, the growth is not so impressive and we really can manage this kind of growth objectives.

Thank you, everyone, for taking out time to attend the meeting. And I request everyone to join for refreshments at the back of the room. Thank you.