Tata Motors Limited
Q3 2022 Earnings Call Transcript

Published: 31 Jan 2022

Sneha Gavankar:

Good day, welcome to Tata Motors Q3 FY22 Earnings Conference Call. I hope you and your loved ones are keeping safe. I’m joined today by Mr. Thierry Bolloré, CEO, Jaguar Land Rover; Mr. P B Balaji, Group CFO, Tata Motors; Mr. Adrian Mardell, CFO Jaguar Land Rover; Mr. Girish Wagh, Executive Director, Tata Motors; Mr. Shailesh Chandra, President, Passenger and Electric Vehicle Business, Tata Motors; and my colleagues from the Investor Relations team. Today, we plan to walk you through the earnings presentation followed by Q&A. As a reminder, all the participant lines will be in listen-only mode and we will be taking questions via Team’s platform, which is already open for you to submit your questions. You are requested to mention your name and the name of the organization you represent while submitting questions. I now hand over to Balaji to begin the presentation.
P B Balaji:

Thank you. Thanks Sneha. Thanks all of you for taking the time to attend our session. We will spend about an hour going through the deck at a reasonable pace and then subsequently open it up for Q&A. So Safe Harbor statement Anish. Just one call out apart from the traditional Safe Harbor statement, do draw your attention to the discontinued operations accounting treatment which is identical to what it was last quarter. The numbers that we are going to talk about today do not consider that but in the reported numbers accounting will force us to show that differently. So that's the only difference that is there. What we are discussing today in terms of the slides do not take into account that numbers to ensure it's like for like competitive and this setup will disappear from Q4 onwards because the business is now subsidized. Next slide please. Pretty intense period of action both in Tata Motors as well as in JLR. Commercial vehicles we have unleashed rather more than unveiled almost 21 commercial vehicles across all segments on one day received very well. We then introduce the CNG technology in Tiago and Tigor called iCNG and I'm sure Shailesh will want to talk about it a little bit more. We touched and made for brief moments in December, we were the second largest car maker, but I think the gap is that the second player is now closing quite well. In JLR, chip supplies have started to improve with production of 41% over the previous quarter. And the order bank is now sitting at a very strong 155,000 and we'll talk about, Adrian will want to talk about it a little bit more. And of course, Ranger continues to win many more awards, including the “What Car?” award. Next slide please. Overall the quarter saw 72,000 crores of revenue, decline of 4.5 %. PBT before exceptional item of INR 700 crores improved over the last quarter, but definitely lower compared to the same period last time. EBITDA of 10.2% sequentially improving but year-on-year down 460 bips and EBIT also improving sequentially but declined over the previous year. Free cash flow was positive INR 4000 crores for the quarter both JLR and Tata Motors being FCF positive. Next slide please. Components of growth, the big decline of the -- off the 4.5% growth decline that you saw 22.7% is related to volume and mix. Pricing, we have tried our level best to put through including managing VMEs efficiently in JLR, but that could only give about 14%. So there's a fair bit of price that's still to be recovered which is impacting the margins. We'll talk about later and all other businesses are pretty quiet. Profitability declined from 6.4 to 1.7 on year-on-year basis. JLR contributed about 420 bips out of it. Tata Motors about 50 bips, others reflect. Net automotive debt, the external debt that you see out there sitting at 36,000 crores. Working capital related impact is now at 17,000 crores. We expect to see that reversing with every passing quarter as growth comes back. And of course, the leases continue to remain about 7,000 crores. Next slide please. Let me hand this over to Adrian to take us through JLR performance. Adrian over to you.
Adrian Mardell:

Many thanks, Balaji. Good afternoon, so good evening everybody on the call. Next slide if you would do please. So these are the JLR direct results. You can see standard format for us. Retails are down at this quarter versus previous quarters. We did signal that last time the stock pipeline finished vehicle pipeline is in all time lows and the actual big data going forward will be production which we'll take you through later, revenue is actually up quarter over quarter. Although again 21% versus the same quarter last year and we'll take you through those details in the presentation. Also, we basically optimize the revenue base available to us. We were close to breakeven bottom line in the quarter just £9 million adverse significantly better than quarter two, as we signaled we would be in October. EBITDA 12% back into double digits will obviously continue to be above double digits going forward. And the two commitments we have actually called out in October EBIT positive for the second half, we said while actually we were EBIT positive in quarter three 1.4% and cash flow positive in half two, also, while we were cash flow positive in quarter three £164 million. So we are making good progress. We're back in the stabilization and growth period now. Next slide, if you would, please. So these are the key highlights that we show actually in words. The couple of items not caught out on the last page is the refocus program did another £400 million pounds EBIT in the quarter and I'll take you through more details of that later in the presentation and validate your reference 155,000. Order bank was grown by 30,000 units from the end of September and I'll take you through those details also later in the presentation. Next slide if you would please. Okay, so these are the details in quarter three retails and wholesalers. I'm going to take you to wholesales first bottom of the page, up 8%, 69,000 units slightly ahead in the UK of previous quarter also in North America and also in Europe and China just a little bit lower in the overseas markets. When you see the next page on the you will understand why that is so. Retailers have said will be down versus last quarter. The big data here is the production levels and I will take you through those levels of production. They did grow significantly, Q3 to Q2, and our pipeline will begin to build from this point forward. Next slide if you would, please. So this is the family slides. It's super important to us. I am taking to wholesales again, first of all, obviously drives our revenue base. The super important plus we built out our old Range Rovers in the quarter, of course, quarter three was the last quarter of build for the Range Rover. We managed to do that you see that within the wholesale data here. Clearly there were customer orders and this was the final chance we had to build those units. So we were successful building those old Range Rover units in quarter three. And we had to make compromises elsewhere on the other families you see at the bottom there. So we prioritize those customer orders and others simply because we can build those other costs later from quarter four onwards. Retails you can see there. Our bias in Range Rover again, because of the wholesale position, production position, we were able to slightly be ahead on those Range Rover retails in the quarter also as we managed to maintain that pipeline level. Liquefaction on the far right, up to 69% of our vehicles were electrified that was up three percentage points from quarter two with 66% and significantly higher than last year. The step change, of course, was the 21 month year vehicles that were introduced in quarter four last year. Next slide if you would please. Okay. So we've actually got two profit ratios for you today. And what we've done on this one, this is a quarter-over-quarter profit bridge. What we've done on this one is, we've tried to show you the progress we've made in the semiconductor constrained environment. So you can see quarter two we lost just over $300 million and in the volume and mix volumes were higher, 8% higher, £106 million pounds positive because of that a significant shift as I mentioned early in the production of the vehicles to the Range Rover family drove us significantly more value in Q3 than over Q2. Our China Business actually that was a production were lower than in Q3 versus Q2. There were some discrete supply challenges we had within the China business including some of our suppliers impacted by snow falls in the northern region later in the quarter. Emissions is all about quarter three, quarter two, excuse me. We completed our emissions positions for the year earlier this calendar year at the end of September and that's why that negative actually is compared to a benefit last quarter. The BEV environment continues 72%. I think that's a key indicator for us going forward and over this period of supply constraint. You will see that for marketing, closer to that 2% level. Contribution costs actually were flat. Material costs quarter-over-quarter in this environment of low supply, it's obviously impacting our supplies as well. We're looking to offset the cost increases coming at us with cost and manufacturing was a little bit higher. Utility costs, of course come into there. Now a lot of you asked about those input costs, you'll see some of those coming through. And we did have, we did have increased campaign provisions in the quarter and I'll take you through more details on the later slide specific to warranty. Structural cost. We are at the low point of our engineering capitalization cycle as engineers come up completed programs on MLA highs of Range Rover, they move on to new platforms, which haven't yet hit our capitalization points later in the year. We talked about this for the last three years and we're now at the low piece of our cycle around. Just above 30% of the engineering costs is capitalized, and we charge on average, over a cycle it will be 50% plus, but it will grow to over and 60% at peak. So at the low points of the cycle here and you'll see when I compare year-over-year, it's had a dramatic impact on the year-over-year results. The battery end of life was all about Q2 and the removal of those reserves at the end of quarter two. And on FX and commodities again, that's all really about activity that happened in the prior quarter which hasn't repeated this time and therefore those are really swings in the Sterling, relative to our overseas European and dollar denominated loans and liabilities. So that's the walk from last quarters 4.7% EBIT negative margin, you see that to 1.4% this year. Next slide, I want to land on just a couple of points. This is an additional one for year-over-year. And then it could simply be said, look the complete difference versus last year is all in volumes. I mean, look at it's minus 432 million. So be easy for me just to dismiss the volume story. But there are real things happening offsetting themselves, which is important to draw out. The mix I've talked about already. I've also talked about the emissions we closed out earlier this year. VME you can see were three percentage points lower. We will continue to be that over the period of supply constraints. And what we're really looking for is where that normalizes beyond our belief as it were normalized below and beyond below 5%. But that will be a discussion we'll come back to later quarters. Those contribution cost year-over-year, you see there in the manufacturing costs particularly $40 million two or three things happening. Now the utilities, I mentioned pay awards, and also the duty costs relevant to the changes in our relationship with January 1 last year weren't prevalence in quarter three. That's about a third of that number. Material cost down is maybe the commodity cost increases year-over-year. As I've said our intention is to find ways to offset those cost increases in this relatively low production environment for suppliers. We're a little bit short in quarter three and the campaigns again, I'll get into a more detail. But you can see they had a significant impact in the value of our quarterly business in quarter three. The other one that I wanted to reference just mentioned it the capitalization. Look, we're capitalizing more than £100 million less in the quarter than we were last year and that's the difference between being the high points of the cycle and the low point of the cycle as those engineers come up our MLA high platform and move on to other platforms EMA, which we've talked about, of course, apart re-imagined and Panthera or Jaguar electrification. So that capitalization will raise again going forward. So if you think about our underlying results 1.4%, there are a lot of one offs in there but the two negative pieces on campaign on capitalization are really low points and worst points for us. We do expect those to improve going forward. So a true underlying was stronger than 1.4% on just 69,000 units. The FX and the commodities is all about this time last year. There wasn't much happening on those currencies between September and December this year. Next slide, if you would, please. Okay, this is quite dramatic. Don't forget, there were just 69,000 wholesalers in the quarter and our underlying cash flow. The piece of cash we talked about, for the 11 quarters I've been in this role was significantly positive more than £200 million on just 69,000 units. There was a one off in the cash tax there you can see that normally isn't a receipt. But we did have some tax receipts in the quarter for that 50 some million pounds, but even so our underlying cash and 69,000 units was close to $170 million which was dramatic. Working capital again negative. Most of that negative after the ebbs and flows of payables, receivables and inventory net themselves that much of that negative was the repayment of the payment of those claims, which we've referenced for the MLA mid cancellations 12 months ago. Going to the bottom of the page, that's year-to-date data. It's very, very clear what's happening now a £1.5 billion, £1.496 billion cash outflow for the year is all working capital. So we are in the super low point of our cycle, building just 23,000 cars a month and all of that will come back to us as the semiconductor challenges start to free themselves up going forward. The worst of those, of course, are behind us. So actually cash breakeven for the first nine months on just 218,500 units. So our average cash breakeven for the quarter is just 73,000 vehicles, which is probably the richest per unit data we've had for more than 11 years. Next slide, please. Investment, we're still at the lower point in the investment cycle and that will increase as we find the lows, those Range Rover and Range Rover Sport products and pay the suppliers for those tools at £512 million in the quarter, year-to-date, £1.56 7 billion. So we are actually lowering our full year guidance to £2.2 billion pounds this year you'll see on one of our final slides. Paying just over £500 million every quarter. We expect it to tick up a little bit in Q4, but not substantially. Next slide please. Okay. The business update in the key things driving that data. Look we've shown you, I think for the first time at least three years production volume. That's the key data here, even though obviously, our revenue and our cash is determined by wholesales. What we were able to do in our quarter two through September is really lower the stock pipeline, which meant wholesales were quite a bit higher than the 51,000 cars we actually built in quarter two. There has been a step change in production in quarter 3 from 51,000 to 72,000 units. So up 40%. But obviously it was a small pipeline build in that quarter. And we only wholesale 69,000 of those units. But the key point here is the production level is going to be commensurate for the wholesale level going forward. We are signaling because the questions will come about Q4, we are signaling an increase in quarter four versus quarter three. You can see there's a range there rather than a single point. And particularly, as we go through into the second half of quarter four we're increasing our confidence that again, there will be another step improvement in production levels. A lot of that may actually manifest itself for increased revenues at the back end of the quarter and in quarter one. Any more details of that I will leave to the Q&A. has been leading a lot of this information with his equivalents in a lot of the supply base. So if you wish you will I'm sure be able to provide some nice texture around where we actually are with those key discussions. Next slide if you would please. Okay, so supply has been low. Production has been low and customers continue to order. Our vehicles grown from 125,000 order bank at the end of September to 155,000 at the end of December. Again I could easily dismiss this just to be Range Rover cars 30,000 units who don't forget, in the new order bank, the old Range Rover orders are falling and so the Range Rover Sport orders both of those vehicles will be replaced over the next six to nine months. So the order banks growing both in Defender and in Range Rover and in other nameplates even though we're consciously, we're consciously not allowing customers to order the lowest value derivatives here because they are the last units to be built. We do not want customers to be waiting 12 months or more for their vehicles. So we have plenty of an opportunity not only to fill this order banker supply comes back but to reopen other derivatives which we believe will increase the order pace going forward. So we are in a very nice place on the customer order position but we do need to obviously increase production to avoid this continuing to grow. Next slide if you would please. Refocus; so the refocus program has had a an environment we wouldn't have anticipated to operate in an environment where net revenue improvements obviously and the techniques we use particularly the digital transformation techniques win-by-win analysis market-by-market analysis. So we're building the car that sell quickly, and most value be, valuably done environment has worked really well with the supply and demand we've seen. Our cost reduction environment, not as well, you've seen that in the earlier slides clearly, with supplier factors, like our factory has been 60% fall it's more challenging to get cost efficiencies passed through to us. However, we did manage our best quarter since the program began in Q3 £500 million in this data set to the techniques and methods we've been used since the transformation program started £400 million of that was EBIT related. £100 million was investments. And we're signaling the EBIT related to continue into quarter four even if the investment reductions do not continue through the end of the fiscal year. So a new guidance is £1.4 billion for the quarter beyond the £1 billion we signaled at the start of the year. The program continues to build momentum is a big point and we'll continue to do so through FY ‘23 or so. Next slide if you would please. So this is the warranty position. I've shown you a lot of information here. In fact, I have shown you the information for the 11 quarters that have actually been in this role. One of the first things I did say to you is that warranty was close to 6% in the quarter. You see it including the campaign cost set in the first column and I referenced that close to 6% on several costs because I then talked about an environment moving into sub 4%. In fact, a new target line which we've drawn across the phase out 3.5%. And we've, I think, helpfully broken out the underlying i.e. the warranty on the vehicles in the current warranty periods obviously differs by market three, four or five years and the one offs which are the campaign costs, which actually show the total number in great there. You can see over the last five quarters, and 3.5% is pretty close actually because the gray line for most of those quarters were three of them anyway been below the underlying level, as we release campaign reserves for the period through quarter three through to quarter one you see all the gray lines less than that. This quarter, we've agreed to put in place additional campaigns. One of them is a top up to a program TDV6 which I last told you about in quarter two, you can see the gray line there. We're coming towards the finalization of those programs that are actually in China, Taiwan and South Korea has been a lot of work over the course of the last three months and final evaluations. Of course, we're asked to test each of those powertrain units. We are substantially through the program and we've taken the duration here to increase our provisions through to program finalization. And we're signaling additional two programs, which were working actually with the different regulators on at the moment. Most of these are customer protection programs. So one of which actually relates to an extended warranty program we had in place. And we've agreed actually to bring the customers in ahead of any potential failure point. So three additional campaigns are put in place has increased the optical number this time but I would encourage you to look at that 3.5 percentage line. The gray line which is the total cost ebbs and flows around that and we believe it will continue to ebb and flow around that in the future even though it will be below and above on any given quarter. Next slide if you would please. Breakeven points of the data has been even more dramatic as the power of their techniques and refocus kicked in. So if you look at half to a second from the right, I've lowered the guidance for breakeven in half to down to 300,000 units annualized or 75,000 units a quarter was just under 70,000 in quarter three. It will be higher in quarter four. We had a very rich Range Rover mixes we produced in passed out to our old loss of our old Range Rovers through to December. We're now in the change quarter for Range Rover where we start building the old one, and we'll make ensure that the new one is ready to go before we ramp up builds. And we will have a weaker mix of new Range Rovers in quarter four, which will work itself through into the first half of next fiscal year. So we'll increase our breakeven in Q4 to around the 80,000 units. But in our second half average of 75,000 units is the lowest break import we've had for 10 years or 11 years. So we're super proud of the work that the teams have done under the refocus program which really is how to optimize our position in periods of low supply. If you wanted to -- the guidance going forward is still around that 350,000 units of course, we will allow spend levels to increase somewhat to drive demand as supply reduces in FY23. And going forward, that's about 15% lower than the guidance we would have been given just over 12 months ago. Next slide if you would please. So the pages quarter four revenue will be above Q3. We are expecting a positive breakeven for EBIT margin as well even though breakeven point will increase investment will be a bit higher up towards the £600 million for not breaching it. And we do expect positive cash flow in quarter four also. That would be the full year position that would result off the back of that revenue, of course down around breakeven EBIT margin slightly shorter as I see the data today, but there's a lot of time to go investments around that £2.2 billion and negative full year cash flow, all of which will be working capital, all of which will come back to us as we build more cars. The guidance on FY24 And FY26 continues. FY24 of course, will very soon be in our sights and we will give guidance on ‘23 when we next meet at the May announcements for the full year FY ‘22. And of course, you would expect it to be somewhere between FY ‘22 and ‘24. And the key issues you see the prices there continue to work really, really hard on those bottlenecks we have on the supply chain. We're definitely breaking through but we're not at the end of these challenges yet nor is anyone else as you would know. And continuing to execute our electrification strategy under reimagine and their modern luxury which will be personified in the new Range Rover which will be in dealers during quarter four. The refocus programs gone beyond the 1 billion target levels. So we will reset that for FY ‘23 and then positive EBIT going forward. We're now in the stabilization through the growth phases of this difficult last two years. I think that's my last slide balance sheet. So it'll be back to you.
P B Balaji:

Thank you Adrian. Moving on to Tata Motors. Next slide please. Overall INR 21,000 crore revenues from pickup and wholesales and retails and you will also see that sequentially unlike JLR, we've had a few challenges and I'm going to talk about that in the coming slides. We see strong revenue recovery but margins from a commodity costs as well as a few one offs have created a challenge for the quarter cash flow being positive of course. Next slide please. Overall if I just pull out the volume and revenue piece I think CV at 19% growth with market share gain across product segment this year has been a very strong performance. PV of course has had a standout year and continues this way. Highest ever growth, highest ever volumes this quarter over the last nine years. Full calendar year this is the highest volume that we've delivered, touching distance between now within number two and EV of course penetrations not touching almost 5.6%. So very, very strong performance in volume and revenue coming through. On the profitability side commodity inflation is knocking off almost 430 bips which for the CV almost about 500 bips of margin is going away because of inability to price to the extent of the inflation. We have taken up prices so the last since March of last year, almost 26% price has gone through, it is not that we’ve not taken prices, but the steel inflation has been there. The good news of steel is now starting to stabilize. So therefore I expect things to improve here on. PV of course EBITDA 4.2% higher than last year by about 40 bips and the subsidization related one off costs impacted margin by 200 bips without reserving more like 6.2%. Free cash flows strong with operating cash funding CapEx very similar to the JLR story. Next slide please. Numbers the way they play out, volume this is compared to last year same time, volume mix and realizations, stepping up quite significantly. But see the variable cost line which leaves an unrecovered price of almost 430 bips between realizations and variable costs. Passenger vehicle related one offs and 80 bips and the fixed cost is basically coming from FME as the step up growth, as well as higher depreciation and amortization with the new cars being launched. So that's the story there. Next slide, please. On the cash flow side, operating cash profit after tax is now more or less taking care of the investments. And as profitability steps up we believe this number should really start stepping up further. On a full year basis now working capital is more or less normalized to about INR 750 crores negative and all outflow that you see is basically finance costs and therefore as the operating cash picks up we expect this number to chip down as well. Next slide please. Investment spending is about INR 900 crores this quarter. We expect to end the year anywhere between INR 3000 crores to INR 3200 crores down from the INR 3500 crores that we had earlier. So CapEx is under control.\ Next slide. We want to commercial vehicles on the market share side this market share improving across all segments particularly reassured we have been calling out a CV market share is an area of focus for us. Glad to see that picking up as well I’m sure Shailesh is going to talk about it, sorry Girish is going to talk about that. And also what is heartening to see is that actually salience has really gone out of whack now starting to normalize again. So overall, business from a competitive growth perspective is performed particularly well. Next slide. Volumes have been just the CV numbers. The key number which I'm sure all of you have keen to understand is why is despite significant increase in volumes, we are not seeing the margins improved 540 bips is the EBITDA drop, and almost entirely explained by the commodity cost increase that we are seeing. So that is a challenge that we have in front of us and the good news is that as October was our worst month November, December started coming out we are starting to see this margins pick up. And therefore I do expect to see as steel now stabilizes in the next round of pricing has gone in January Q4 they should start turning again. Next slide, please. Girish, can I hand this over to you?
Girish Wagh:

Yes, thanks, Balaji. So highlights for the quarter gone by the volumes increased by around 15% over quarter two and around 19% over the last quarter and as we saw the Omicron third wave on the horizon, we also pulled back some of the production and uptake and therefore retail was marginally ahead. As Balaji mentioned, we've been able to gain market share across all the segments and again this year in nine months is almost 300 bips. To counter this commodity increase impact we have been increasing vehicle prices across, I mean all the quarters we have taken a price increase. And we also have been continuing our efforts on the cost production. As Balaji also mentioned in the beginning, we launched 21 new products in Q3. It's a simultaneous launch event that we did wherein we got very good response. It was right from 750 kg payload vehicle to a 55 ton GVW vehicle and also buses were launched together a very good response. We do continue our actions on debottlenecking specifically in two areas semiconductors for engine the toll units and CNG components because the CNG demand has gone up. If you see now the CNG salience has gone up for almost 45% for intermediate and light commercial vehicles and upwards of 30% for the small commercial vehicles. So it's almost more than doubled over the previous year. Looking ahead, while we entered this quarter with Omicron third wave, but generally as we talked to most of the stakeholders I think the impact seems to be kind of short lived and the economic activity is getting back depending upon the region. So the wave is at different points of time in different parts of the country. But generally the economic activity is coming back and the customers seem to be coming back. We did this trucker sentiment index which we do every quarter. So this was done in the month of November. The fieldwork happened in the month of November when the market was doing well. And we’ve seen very good improvement trend continuing across all the segments. So whether it is M&HCV, ILCV and small commercial vehicles so it has been improving. Gradually demand recovery is seen across the sector's but led by e-commerce and infrastructure. Only thing is I think the growth that we were seeing over the previous year has been tapering off because of the BS effect. In services and space penetration, one of the focus areas for us I think we have been seeing consistent improvement month over month and we in fact achieved record number of job cards in the month of December. On the electric buses, in addition to whatever buses we’ve been running, we operationalize 60 new electric buses at Ahmedabad for Ahmedabad Janmarg Limited. And now considering all the buses running across the country, we've crossed more than 25 million kilometers and across the country an uptime of about 95% and above. So I think we have been getting very good experience on running these electric buses and also on the gross cost contract model wherein we are also operating the buses not just the maintenance, but operating the buses through the day. So this is one good experience that we are now having under the belt. Looking ahead, yes commodity inflation has been impacting our margins. While we have been taking price increases, the pass through has not been full, and also the price increases have been trailing the commodity increases which have been happening quarter-over-quarter. Now from January 1 as Balaji mentioned I think the steel prices seem to be flattening and stabilizing. So that's a good thing and we have deployed a comprehensive margin improvement plan across all the levers to ensure that we get back to the required levels. There has been some uncertainty in demand in the immediate term due to the third way of COVID. But as I said, I think generally the economic activity is coming back and therefore, we should see towards the end of the quarter the demand coming back to the original levels. We have activated the business facility plan wherein we are looking at fortnightly production planning and also aligning production with the retail. On vehicle financing, most of you must be aware there has been a change in NPA norms, NPA recognition norms by the RBI. And we do see a likely impact not in immediate term, I think this quarter should go fine. But maybe in the following quarters there could be some impact on the small commercial vehicle funding which we have been monitoring along with the . On buses, vans, sector has been a demand does remain sluggish. But there is a good news now. The schools seem to be starting in some parts of the country and we started getting some inquiries in that area. Semiconductor availability is still below requirement. But we have been managing it through daily monitoring and also through varying the product mix to ensure that we are able to meet the market requirement to the maximum. So that's the update from CV side. Balaji back to you.
P B Balaji:

Thanks Girish. Next slide please. Moving on to passenger vehicles, passenger electric vehicles. Next slide. The key highlight for this quarter has been the market share increase that has been extremely strong now at . And also a quick call out on the powertrain mixes it is now -- EVs are now nearing almost 6% of the portfolio is just about 2% because they're about a year back. So significant shifts that you're seeing in this one. Next slide, please. Performance in terms of numbers, wholesale and retails growing at almost 40% plus, and revenue is now at in this quarter is now multi year high. EBITDA increasing to 4.2% on a reported basis and of course, once you adjust for this one offset, there is almost 6.2%. And business is now touching distance of an EBIT breakeven and we are confident of achieving that pretty soon. So all that commitments that we made in terms of winning sustainably now playing out exactly as we had planned for. Next slide, please. EV let me hand this over to Shailesh. It was the growth drivers of probably the most interesting part of this. Shailesh this one or next one do you want to take?
Shailesh Chandra:

Thank you Balaji. So this just shows the trend on the left side if you see the lighter green one shows the industry trend and the dark bar shows the volumes. And essentially if you see we have been the main driver of the eco EV industry growth which has been increasing 3.5 times on a year-to-year basis. We started with a very moderator market sharing the second pair in the market 11% in FY ‘18. And as of last quarter we have reached 81.6% year-to-date. Few things which are really driving this growth. One is 12,000-13,000 customers who have already bought the vehicle, they have spreading positive word of mouth. These people are very expressive. The early adopters and are the majority posting their experience on the social media which has really attracted lot of and just one data point which I want to share is that when we had launched Nexon EV we had only 30% of the buyers who are using EV as their primary car or the only car, this number has increased to 65% today, which means that it is already being seen as a mainstream car. Second big thing which has happened is that the concern around public charging infra is going very fast because these 12,000, 13,000 customers based on the telematics data that we have 95% to 96% of the times they are charging at home. So this whole issue around public charging clearly is coming out to be an overstated thing and that sort of comfort is increasing. Two states Maharashtra and Gujarat came with demand incentives on top of the center's incentive. Remember that personal segment did not have the benefit of same and these two governments have extended 50% of that I will say what fame incentive was to the personal segment buyers also and this has really boosted the demand in these two states and this is a major driver of electric vehicles. Also EVs are proven to be better value proposition in terms of performance, driving costs, of course maintenance cost, and that is being realized today. A free segment which was pretty much nonexistent after the onset of COVID has strongly come back and also the increase in petrol and diesel prices are helping shift towards the EVs and in the last few months, we have really ramped up the supplies of EV which is also one of the big factors. Next slide Balaji. Quickly giving you an update on the PV business starting with the quarter highlights. For the industry, the industry degrew by 15% year-on-year primarily because of the semiconductor shortages. Otherwise the demand was pretty much similar to the last festive season. Q3 demand wise, I will say booking generation in the industry was as good as last quarter of the financial year. We are seeing a structural shift continue towards the SUV on the back of new launches. This has increased from 32% to 40% now at the loss of share of purchase frantically and to some extent sedans. As far as our performance is concerned Tata Motors 14% market share with covered which is nearly 44% growth in PV and 264% growth in EV. We did the highest ever retail in our history in quarter 109,000K. We also immersed as number one SUV manufacturer in Q2 after the launch of Tata Punch. Before this, we used to be player number five in SUV so there is a major change in the competitive landscape as far as a CV is concerned. Balaji already mentioned that we have narrowed the gap with number two player. Next one became the highest selling SUV in the last quarter. And he also attained a monthly sale of 13,000. This used to be around for 4,000 and 4,500 in FY ‘20 and over a period of time we have now taken it up to 14,000 and 13,000 as of last month. And as I said number one SUV we now out of 45 models that we have in the industry. EV sent us the new peak of 5,500 unit and in fact in quarter three we were 93% market share and this helped us take our EV penetration to 6%. Going forward in quarter four, industry outlook is better as compared to quarter two and quarter three. Pending bookings are strong in the industry with very low channel inventory in less than 10 days. Semiconductor supply situation is relatively better as compared to quarter two and quarter three. As far as Tata Motors is concerned, we have a very robust booking pipeline and lower channel entry less than 6 days actually, as we started the quarter four. The new launches that we had in quarter three Punch was the main one has very strong response and we have a good booking pipeline which is available with us despite ramping up our supplies, we are yet to meet the requirement of the market. This month, we also launched Tiago and Tigor iCNG models clearly differentiated versus what was existing in the industry and which has been taken very well. And we have received some very strong bookings in just a matter of 14 days. For the last two quarters, we have been working on capacity debottle making actions and this is going to continue to help us improve our supplies from there it is. You have seen in the chart that Balaji has shown that every quarter we have been improving our supplies very well mitigating all the factors around the semiconductor situation. And we hope to improve it further given a better outlook of semiconductor that we see. Critical electronic part outlook as I said better, EV demand remains strong. We have the highest pending booking in terms of number of leads I will say still and we are very fast ramping of the supplies. Talking about the challenges for the industry semiconductors remains a big problem because it is improving quarter four as compared to quarter two, quarter three but cannot still unleash the full demand potentially. Third wave of COVID infection was an issue at the start of this quarter I would say but I would say that was behind us. It has not led to any significant impact this month. And from next month onward, we expect that this should be better. As far as challenges for Tata Motors is concerned pretty much the same two challenges what is for the industry. We have not got impacted at all, I would say this month also because of COVID third wave we managed it very well our business agility plan. And now the challenge remains to bring down the waiting period for those strong pipeline of bookings that we have and including the EV, which remains a priority for us. So that was the update on PV and EV. Back to you Balaji.
P B Balaji:

Thank you. Thanks Shailesh. Next slide, please. I want to take a little bit of time on this because normally we don't spend too much time on this, but maybe it's worthwhile given the changes in the RBI regulation there. Tata Motors finance the intrinsic business fundamentals are in a good place with business going market shares remaining strong, cost income ratio remaining lower 29, NIM expanding to 5.3 continuing assignments happening and good liquidity. But we have two issues to deal with. One is the restructured as well as the MSME portfolio we are seeing increased stress. And even though we're not seeing changes to the expected credit loss, we have taken additional management overlays this quarter. And that is reflected in your stage three assets sitting at almost 10.4%. On top of it, there has been a change in RBI regulations, which some of you may have noticed, were it has got two angles. One is identification of NPAs on a daily basis. And second, ensure in order to get an asset back to normal, all overdues have to be cleared and not just the GNPA overdues. They always been calculating GNPA on a daily basis for the last four years. So therefore that is not an issue. But this recognition of nil overdues before we can take an account out of GNPA meant that the GNPA is short up to 17.5%. Obviously, this is unacceptable the high levels of GNPA. Therefore, we believe it's going to take us about 18 months to cure this. It will call for a behavior change at the this is particularly coming from retail, MSME mostly SUV customers, and therefore, making the behavior change with them will require to strengthen the collection team, focus on the 60 day collection bucket instead of the 90 day bucket. At the same time we will also see growth as a key lever because these are from a return perspective it's in a good place and therefore we would want to drive growth further to ensure we fund this particular shift and use technology to deliver to manage risk even better. There's a lot of interesting ideas that we'll share with you in the coming quarters. And of course continue to forge the partnerships that we've been doing successfully. So this is something which is -- we are well seized of it as a company and as Tata Motors Finance, it enjoys full support as Tata Motors as it navigate this GNPA challenges and also growing profitably. So this is something which we will keep a close watch on. Next slide please. So overall outlook, we see demand as remaining strong. Supply situation gradually improving, but inflation worries do persist. And we do expect to see this resilient performance we have been now turning in the last few quarters to improve further in Q4 FY ‘22 and beyond and JLR already talked about its focused actions and do so have Shailesh and Girish. So let me maybe add one last piece on the EV Helios TPG where we are in final stages of completing the CPs for drawing down the transformer. So we hope to do this in this quarter drawdown should happen. Work is underway to complete the final stages on that. And of course, both the businesses will aim to target to deliver a EBIT margin that's positive and positively cash flows and which are reasonably confident of. So that's what we have to say as a presentation. Let me just quickly move on to the Q&A. What I'm trying to do is spend the first section of Q&A around JLR. There is a series of questions there. Then we'll do the next set of questions around CVs and then we move to PVs. And then once the first main set of issues are covered, we will then mix it up as it goes along.
A -P B Balaji:

So starting with the first question of the day. Jay Kale from Elara Capital. To secure better chip supplies going forward, especially with the onset of EVs at JLR has there been any meaningful cost increase, the JLR has committed to the suppliers. That's question one. And two, how was Tata Motors India PV managed the chip shortage? What has it done differently that JLR has not been able to do? Adrian and Thierry can I hand this to you?
Thierry Bolloré:

Yes, I can tell you that that question Balaji. First point you can imagine that we've centric tension between demand and supply a globally speaking for all the industry. There are some tensions on prices as well. But this is not our real problem at first. The real one is really the availability of our semi processors, semiconductors, which is really what we are looking for permanently. If I may also give you an insight about the specificity of the situation of JLR. It is the following. The first point is that we have little margin of maneuver in terms of mitigation between lower end cars against higher end cars because we only have high end cars. That's the first point, which is different when you look at some of the OEMs, very different. The second elements you have to know is that we have mostly very complicated, sophisticated, proprietary chips, which means that having a second source, for example, is much more complicated, long lasting, if not sometime impossible. That explains these are the two key reasons why we may be as this point especially compared to .
P B Balaji:

Thank you. Thanks Thierry. Next question. Again, for JLR. Can you give an update or an indication on the expected production for fourth quarter, as well as the FY ‘23? The chart seems to be suggesting a marginal improvement. Second, the breakeven point is expected to substantially increase from 70k to 85k in FY ‘23. what is driving it? Mix improvement is in very impressive to expect this to sustain. Adrian?
Adrian Mardell:

Yes. Of course, Balaji thank you. Look we're not going to put specific numbers on Q4. We're confident it's going to be stronger in quarter three, but this is a gradual improvement at this point. And that's why we've shaded this. We are progressing with certain supply bottlenecks. And we do anticipate step changes at points going forward. But only gradual improvement this on Q4 over quarter three. And I'm not going to put a specific number on it because frankly, it changes towards the back end of the quarter particularly and if I give you a number I guess what you're going to ask me in May, why didn't you hit that number. So let me not pretend I have a specific number in mind. I am very confidence of the work that teams are doing. And I'm confident it's going to overcome some more bottlenecks in quarter four which will lead to greater supply. In terms of the points around the breakeven look, don't look at FY ‘23 as a specific actually it says FY ‘23 plus if you go back to that slide and what we're really saying once we move towards a more normal environment and when we move towards a more normal environment we won't continue out to buy us particularly run out vehicles like Range Rover. So you would have seen also, if you read the data pack carefully 55% of our wholesales in Q3 were Range Rovers that is not a normal business for us. We will move towards a normal environment that means that we will be building more of the other families and that means that the mix average will actually start in a normal circumstances to reduce which means our breakeven point will naturally get higher. There was another question around would your breakeven be different if you build quarter four levels in FY ‘23? I saw that, well I think all I'll say is at lowest levels of production, and volumes, you would expect to have breakeven points to be lower for the reasons we've just articulated and explained in quarter three which is why I pulled those reasons out. Next. Apart from product changeover, which we have two product changeovers, the big Range Rover and the Range Rover Sport mix going forward again will weaken as we drive incremental volume. That won't be for all of their FY ‘23. And we'll continue to update you on that on later course. Thanks Balaji.
P B Balaji:

Yes. Thanks Adrian. One more coming down your track from Stephanie Wilson, JP Morgan. Thank you. Can you verify that the UK financing is all unsecured one. And then you had about 230 million of restructuring provisions in the balance sheet as of last quarter end. What is it at the end of December? And third, while orders of Defender look very solid wholesale seem to be down versus last quarter? Why was that? And any feedback from the potential RR customers about not having a for launch? And what would you estimate would be the number of potential customers who are waiting for that?
Thierry Bolloré:

So Stephanie, the answer to your first question is the UK financing is unsecured. Unfortunately, that was a symptom of the privatization of Range Rovers, where we last time we could build the Range Rovers and all the families actually did suffer from a reduced production because of that and you'll see within the order data, the range of the Defender orders, excuse me, rose off the back of that. So Defender orders are solid. We expect to build more Defenders in Q4 than we built in quarter three. Wholesales that is going forward, what increase that's pretty clear, as soon as the point we can actually build them. And don't forget we will at some point, over the course of the next 12 months extend the Defender family with an extension of the 130 range which basically means a bigger body on the Defender going forward. So we have even greater offerings in that family as we go through the course of 2022. Range Rover customers and BEV there's no data that I've seen, at this point, around BEV. Only Range Rover customers, we're just starting to open the order books on our for the new Range Rover, which only orders have come in over the last week or so I'll be well placed to explain to you in May as that order bank is going. We expect the PF to be super successful, as well as the other derivatives we're issuing in quarter four. But at the moment, the orders are new back. Now I don't have any sight of that data. And by the way, even if I did, it's pretty reasonable to assume they would just continue to be more appealing and growing before the release date in any event. That's all I have to say. I think the questions unless I miss one Balaji.
P B Balaji:

The restructuring provisions would you remember it?
Thierry Bolloré:

Excuse me, they dropped to about £200 million at the end of quarter three. We won't pay all of that out in quarter four. So I suspect our finalization on some of those will continue into FY ‘23.
P B Balaji:

Okay, next question is from Raghunandan MK on JLR, can the company collaborate with other OEMs for licensing of EV platform so that EV launches can happen sooner? And second is what is the R&D capitalization rate expected for FY ‘23?
Adrian Mardell:

I can take that. That's Balaji. Well, we are permanently being and also exploring any type of partnership opportunities for the future. At the same time and I think it's interesting when you look at the picture of our new Range Rover you can understand that we are absolutely unique and it's not by chance. And the MLA platform is a unique platform. It's a platform, which is bringing all this proportion that you can see on our cars, but also all the extraordinary capabilities which make them completely unique. And that's a differentiation that we continuously want to enhance. So the consequence is that we are creating as we speak to new platform, because it's going to be, it's going to bring a unique proportion and capabilities to our two cars that we're going to manufacture with that platform and concerning a new Jaguar, we have put the priority of the unique proportion of the car as well. And that's the reason why for the moments we do it by research.
P B Balaji:

Thank you. Thanks Thierry.
Adrian Mardell:

On the capitalization, look I think the best way to think about this rather than give precise numbers at this point the best way to think about this is recognize what's happening, engineers are coming off, both Range Rover and Range Rover Sport, they will increasingly do so over the next three to six months. And then they will go on to the new platforms, EMA and the Jaguar platforms, which will meet their capitalization points as we go through into FY ‘23. If you think about this in blocks of capitalization, 30% to 40%, 40% to 50%, 50% to 60%, they're the three blocks that you should have in mind when vehicles come up to maturity will be in the 50% to 60% range when they are earlier in their stages and the 30% to 40%, you should expect the 30% to 40% range to be predominant over the next quarter to two. And then we'll move into that 40% to 50% range. And now we're starting to signal to you as we go through the quarters and through FY ‘23 when we have a site for a change from that 40% to 50% upwards which we will do in this in the latter stages of those new platforms EMA and the Jaguar platforms. So over this next phase, we are in the 30% to 40% range.
P B Balaji:

Thanks Adrian. One more roll on JLR then I move to CV. Is the FCF target for both quarter taking into account the one off 500 million outflow for restructuring?
Adrian Mardell:

Well, the 500 million flow isn't an outflow for restructuring originally they were the reserves we've settled most of those. I think I've just said to the previous questioner, we have about 200 million still left to settle with the suppliers. It's reasonable to assume less than half of that will be paid in quarter four. But of course that will ultimately be determined by the dialogue and discussions we have given that these are non contractual claims.
P B Balaji:

But the positive cash flows net of restructuring, can we confirm that?
Adrian Mardell:

The positive cash we intent to be natural restructuring ones.
P B Balaji:

Thanks. Okay, switching gears into CV so that we are able to cover all the areas and then I'll come back to JLR towards the end. Girish a lot coming down your tracks. In India most of the demand enablers in terms of improving fleet utilization, fleet profitability, recovering, replacement age of seven plus years how and when do we see them unnecessary demand recovering in FY ‘23?
Girish Wagh:

Right. So yes, you're right I think the freight utilization has gone up. The freight rate has also gone up towards the end of Q3. But if you look at the total industry volume, I mean, this year, we are still going to be less than 40% of the peak. So while we are looking at the industry growth over the previous year, it is still far away from the peak that the industry has already achieved. Even next year, well we will see some double digit growth still going to be a portion of what the was in the peak year that is FY ‘19. Frankly we are still far away from the peak and even while peak utilizations are improving, they are not up to the level that was seen in the previous peak. So there is some ways still to go. And as a result if you see today even in the customer mix, I think it is more of the feet larger accounts who are coming forward and buying and the retail customers are very small. I mean very small amount in terms of their participation. So I think overall I would say the industry is still far away from the peak which had been achieved.
P B Balaji:

Thank you Girish. That question was from Ronak Sarda, Systematix. The next one from Satyam Thakur, Credit Suisse, CV margins don't seem to have improved sequentially in third quarter despite higher volume and some price hikes have counseled CV continue to go up in the third quarter too? What has been experienced in Jan as the Jan price hike been met with another round of discount bump or has it stuck this time? Why do you think discounts have been going up in CV despite rising volumes?
Girish Wagh:

Right. So I think part of the answer to this question was in the earlier answer that I gave. So while the volumes are increasing over the previous year, still far away from the peak, number one. Number two, I think the price increases that we've been taking, in a way trailing the commodity increases, and the price increases that we take have been gradually getting passed on into the market month over month within a quarter. I think now this quarter of the Q4 is a quarter where we've seen that there has been no CV price increase. And we've taken the price increase basis, whatever commodity increases happened in Q3. And now we will continue to pass through the same month over month. As Balaji mentioned earlier, we've already seen a month over month margin improvement happening in Q3 itself. And I think we will continue on the same trajectory during this quarter also. Balaji?
P B Balaji:

Thanks Girish. There's another question on JLR from Satyam I'll come to it in the end as we complete the CV questions and we'll move on to PV and I’ll come back to JLR. So they might hold the question in the . Question from Dinesh Gandhi. Are you seeing any signs in the single and small fleet operators coming back? And with they’ve already talked about the growth, so and what is the under recovery account of commodity costs, which are already covered in the presentation Dinesh and what kind of chip supplies do you expect in fourth quarter for CVs and PVs? So maybe the first section Girish is right --
Girish Wagh:

Yes. So I think I spoke in the first response about the customer mix. So the customer mix is currently skewed completely towards larger accounts. But we've seen a sign of the retail customers now or small customers coming back into the market gradually started from few regions and this is something we will continuously track and as the freight fee declarations go up, the freight rates do go up, the profitability comes back, we will see the retail customers coming back. But as of now, I think it is less and also one should appreciate that whatever new BS6 purchases, the last fleet accounts, or larger accounts are doing, they are selling off their older BS3 BS4 vehicles, which in a way are going to these smaller retail customers. So that's how the whole vehicle changing hands happening currently. But we do see early signs of the retail customers coming into the market. On the semiconductor if I can answer Balaji.
P B Balaji:

Yes.
Girish Wagh:

So we do continue to face shortages. But I think with the efforts that you've taken, you've been able to secure our supplies in Q4 for the medium and heavy the intermediate and lights versus of course, the requirement is pretty low. I think we continue to face challenges in the small commercial vehicle segment and that's something that we have been working with the supplier. Balaji over to you.
P B Balaji:

Yes. Thank Girish. We'll move on to a set of questions on PV that is coming up. So Shailesh over to you. We made Tata Motors PV division strategy clear on that. However, if consumer demand is strong for hybrid during the transition the next three four years, would Tata Motors be considering launching products there? If yes, what will be the lead time for deciding that launch, like we lost CNG seeing strong demand for those variants and the same question another question from Jay Kale again is what are the company's plans on flex fuel engines and CNG in the next two, three years? Shailesh?
Shailesh Chandra:

Yes Balaji. So let me first talk about the hybrid. There are certain players who have taken a position on hybrids and they have the cars available and therefore they are pursuing it primarily to meet the requirement of traffic and they would be few players who for the purpose of complying with the café requirements would go for hybrid. And therefore, the way we see this technology is mainly for compliance and its relevance is only going to sustain itself for next few years. We have to focus on technologies, which will not only help us to meet the café requirement, but also which is going to lead, which is going to enable us to lead the charge as far as zero emission technologies are concerned which is going to be the technology which will sustain itself for the coming years in the coming years rather grow fast. And that's why we have taken a conscious call of focusing on EVs. Just to give you some understanding of what it takes to offset the cafe norm. If we are at a three to 4% penetration level of EVs, we will fully comply to what is needed in the cafe and our targets are much higher. So we definitely don't need hybrid to support complying to cafe. And therefore we keep ourselves focused. We have to make strategic choices to keep our resources directed towards future growth and this is the conscious call we have taken. Just to be clear that as far as our capability is concerned to make hybrid very much there, we were keen on some of the earlier companies who had worked on hybrids intensely. So that's not a problem, but we have made a strategic choice to focus on EVs strongly. It helps meet the future demand and future relevance as well as strongly meeting the need of cafe to the extent that we can be surplus on that. As far as the second question was concerned on CNG. Yes, I think CNG is a segment which is going to grow in the coming years. This will be a subset of, I would say of petrol because, this has been more triggered with the rising cost of petrol. It uses a petrol engine as you know and are therefore to mostly cannibalize petrol and to a great extent also diesel. Replacing diesel in that entry segment cars and they will we see a strong future of this given that there is a deeper penetration and expansion of the CNG outlets that we have seen in the country and therefore we will focus on CNG because it's a more cleaner option on the eye side. So this is something that we continue to focus on. Balaji can you just refresh me the third part of the question which you asked?
P B Balaji:

On the flex fuel Shailesh.
Shailesh Chandra:

Yes. Sorry. Flex fuel. On the flex fuel as you know, the first milestone for us is in 2025, where it is mandated that we need to be ready with E20 for all our models and we are pretty much on track as far as that is concerned. There is a discussion, ongoing discussion with on implementation of flex fuel beyond this ratio going up to 85% also. There is a discussion on the timeline for that. There is the whole ecosystem readiness which is required for that. Whatever is the final outcome of that discussion, we would be ready to comply to that as far as flex fuel is concerned. Over to you Balaji.
P B Balaji:

Shailesh on more question, I will combine the two questions because they have this similar one is from Ronak Sarda, Systematix and Nishit Jalan this other one, is on CNG. Which customer profile do you see CNG picking up and how do you see the mix between petrol, diesel, CNG and EVs going forward? That is one. And also any indication on the order book and how has been the response to the launch? And will you be also doing it in other products as well? And will this work in premium hatchback and compact SUV segment?
Shailesh Chandra:

Yes, I think all the questions are interrelated. Let me start with the customer profile. As you know that with the enforcement of BS6 launch, diesel became less viable in the entry segment, primarily hatchbacks and sedans, compact sedans and also most of the segments which were less than INR 8 lakh diesel really struggled in terms of being relevant in those segments and that's why you will see all the models which exists in diesel has completely gone away. This is also a segment therefore, particularly from a customer property perspective, which is sensitive to the running cost and less worries about rest of the other aspects on performance or for example, sophisticated features. And therefore, the customer profile is if I just have to take a price point less than INR 8 lakh segment as a relevant viability, resale and segment and customer profiles, it also connects well with the customer profile in that segment. Now, talking about the CNG fuel mix distribution which was also the other question that you had, let me give a current situation. First let me talk about Tata Motors how we see the spanning of for the next three to five years. Today diesel is 15% about 60 I'm talking about the exit situation this year because let me focus on where we exit this year. We would be at about 65% to 66% of petrol. Diesel would be 15%, CNG, I believe will be in the range of 10% to 12% as we accept this quarter, and EVs will reach around 7%. In the next three to five years, petrol will possibly come down to about 50% level. CNG will go up to 20% also on the back of a few other models that they might come to and that was also a part of the question and I'll reply to that also. Diesel would come down further to about 10% and I would say EV would, we have already declared a target of going more towards 20%. So this is the kind of mix that I believe would be in a three to five year period. For the industry this would be slightly different given that we are more aggressive on the EVs. For the industry, this would be say 7% to 8% penetration and three to five years and CNG would definitely be a bigger portion, which is 25% because I say this is mainly going to cannibalize the petrol and to some extent diesel will come down from current industry level 18%, 20% kind of a level to 8% to 10%. This is the kind of transition that I see in the next three to four years, but also depends on how the whole mix of fuel prices CNG, petrol, and diesel play out in the coming years. Coming to what are the potential segments which will be relevant for CNG and what models we might therefore consider. I think in SUVs CNG might struggle given that it is very performance oriented segment and less sensitive to running costs. And therefore, I see that CNG will have only partial penetration in those segments. But as I said that there are still segments and you mentioned premium segment what to say inclined towards CNG. But yes, given the price points and the economics of CNG versus a petrol, it might play out to a some extent but not as deep penetration, as we have seen in the entry segments and compact sedan is doing well because of the boot space that you get, which is completely compromised on hatch. And that's the thing that you're seeing in the demand profile also, that we are getting for the two models that is a strong preference for compact sedans therefore given the boot space that it gives. So therefore, we would target a few more segments. We are working on them. But as of now, we have really focused on the hotspot of CNG, which is compact sedan and hatches. And I must tell you that bookings are very strong. Economic reveal the numbers, but would be like three months of bookings already. Balaji back to you.
P B Balaji:

Yes. Thank you. Thanks Girish. Before jumping to JLR one final question on CV that has come in and then we move back to JLR. Is the gain in market, this is from Sandeep Verma. Is a gaining market share in CV segment due to CNG base sales of LCV segment, were the second largest players presence is not there? Do you see continuation of market share gains in the segment? And where do you see the share gain in share in Q4 ‘22? Girish?
Girish Wagh:

Balaji yes. So see, first of all, I think our share gain has been across all the segments. So M&HCV where there is no CNG penetration at all. So ILCV yes, where there is a almost 45% penetration. And you spoke, you asked specifically about SUV, I mean below LCVs So below LCVs we look at the market in two sub segments. One is what we call small commercial vehicles. And the second one is pickups. The pickups is about maybe 60% of the total segment. And in pickups we don't have a CNG offering at all. It's only in small commercial vehicles where we have a CNG offering where as I mentioned in the presentation, I think the penetration is somewhere around 33%. So I think the market share gain number one has happened across the segments and it's not on the back of CNG alone, number one. Number two with regard to Q4 so we have our own retail targets. I think we are working towards building a strong retail capability to reach a particular level and that's what we are working on. And we will continue to improve on this. Back to you Balaji.
P B Balaji:

Thank you Grish. So let's go back to a set of questions coming in on JLR. We’ll go to Satyam Thakur, Credit Suisse. JLR CapEx came in at a new low of billion in FY ‘22. How should we think of this falling CapEx in light of the major ED transition underway as both JNLR is a partnership with some other OEM or cross leveraging of platforms inherent is assumption?
Adrian Mardell:

Let me take that Balaji. Look at this, there's nothing intended or behind this reduction. We give guidance each quarter around 600 million and we have been low for the last three quarters. Now, some elements of CapEx, the non production investment were pretty tough actually on the return on investments required much tougher than historically we would have been, and that certainly is a piece of the underspend here. But you should continue to expect our level to be around 2.5 billion, and maybe next year be slightly higher than that as a piece of catch appear in terms of the spend profiles. Obviously, below each of the spend categories, the different profiles come out at different points. By far the easiest for us to assess is what the engineers are doing and what they're working on. I've already explained that as a part of the capitalization questions. So there's nothing mysterious about the levels we're spending. You shouldn't be thinking that consciously trying to reduce that spend. Anything you'd wish to add to it Thierry?
Thierry Bolloré:

Yes, I think it would be interesting to bridge with the previous question on the platforms as well because remember when we launched one year ago we committed to go from to divide by two, the number of platforms, which is happening first point. And the second point, which is not necessarily visible, is that we are significantly on those platforms to give you control points of the new value chain i.e typically the batteries, i.e of course, the electric motors same with the software on-board off-board and all that together is creating a real scale at the level of JLR that we are benefiting from it as well. Thank you very much.
P B Balaji:

Thank you. Thanks, Adrian. Thanks, Thierry. Next question is from Chirag. Average realization per unit in the quarter is almost 68,000 pounds up from the 61,000 in Q2. Is this driven by a higher Range Rover or Range Rover Sport quarter-on-quarter? Or is there any other driver? How should one liquid realization per unit when it will normalize? And what should be the normalized range?
Unidentified Company Representative:

Yes, look, I called out the data as I did in the presentation, hopefully to head off some of these questions in the past. I'm not sure I was successful with them. We had a huge bias towards the Range Rover in the quarter. We did that because we know we had to close down enough production to make sure that we were ready for the new Range Rover that really has to the average revenue in this instance, up to that 68,000. You need to connect datasets here. It's really important because there's lot of I'm suspecting this some modeling going on beyond below some of this, low volumes, high average per unit, they go together. Right. So as you ask the question, what are the volumes likely to be next year? Well, I can certainly confirm to you, if they're not substantially higher than this year then we will have very high average gross vehicle revenue points. Right now what you might be thinking, well, at what point do they cross over? I suspect they will be above 60,000 times average, until build more than 100,000 cars in a quarter. So there's some frames I've given you there. It's very little to do with Range Rover Sport build in quarter three. It will be more to do with Range Rover Sport build out actually and this quarter and our quarter for which we will attempt to do exactly what we were successful at in our quarter three and that is to build those final vehicles that customers have ordered because of their last chance for us to fulfill that order. And that's just the right thing to do. And that's what we'll do again in quarter four.
P B Balaji:

Thank you. Thanks Adrian, I think that has answered the set of questions around Range Rover and renewable sport and realization per unit. Let me go to a different question. This is from Binay Singh, Morgan Stanley. The second question the global OEMs are highlighting software sales as a revenue opportunity in the long run. How does JLR see this opportunity and lastly, could you talk about China demand outlook for both the JVs as well as the imported models?
Thierry Bolloré:

Well, I think we announced it's very clearly in our strategy reimagined that yes, of course there is a significant chunk an increase in software revenue but because we have what we put us in some sort have onboard software off board as well and it's improving in a fantastic manner for the next generation of platforms as well. So it's a fantastic enabler. But it's an enabler that we are already using, by the way, as we launched our in control renewables, the fleet telematics and of course, making the best of the software over the year in order to improve community services. The answer is clearly yes.
Unidentified Company Representative:

On the China point, Balaji, look the import business originally working strange in terms of production levels, like the rest of our, the rest of our global business, increasingly, in quarter three, the JV or CJR, has become similarly constrained. There were specific production issues in Q3, as I referenced in the main part of the presentation, brands, some suppliers in the north of China. Now they're being worked through. But the conditions now for both imports, and for local is that demand is above our levels. We can currently supply. And obviously what you're seeing similar to other parts of our business as significant increases in GBR and importantly, in our scans or in variable marketing, and I expect those two things for both elements of China to continue as we go into FY ‘23.
P B Balaji:

Thank you. There is another question from Pramod Kumar, UBS. Can throw some color on the hit of GDP £45 million related to the battery end of life on slide nine. Pramod Adrian covering this in the discussion area, we want to speak a little bit on this?
Adrian Mardell:

Yes, it was actually a reserve release we did in September. So we talked quite extensively to it. And our Q2 results, the end of October. That's why I chose the negative this time, because there are two releases. We effectively we're building up end of life provisions on batteries, and the absence of a defined methodology to actually dispose of them that's changed over the last several months. And we removed all of those reserves from our books in September, based off a piece of work we did I think I talked at the time under ignite alongside some external consultants. So there's no we don't eliminate the reserve twice. That's why you're seeing it this time around. But it really relates back to actions we took in September, probably September.
P B Balaji:

Thank you. Let me there's another question is coming up on extraordinary expenses. I think there's one question on PLI Rishi Vora, Kotak Securities. Why did the Tata Group not participate in the PLIs for Advanced Chemistry sales? Which we have considered this extensively. And when you looked at the conditions of this particular PLI, we found that the risk return equation was not working out for us and therefore, we decided to stay away from it after having done a similar amount of work, I would say. So that's why we decided to stay away. Another question from Nishi Jalan on India PVS can share more details on the extraordinary expenses in this quarter related to permission of the subsidiary sharing. See I think the formation of a subsidiary has a series of steps to be done in terms of you will have a one more hit coming close to about 200 crores coming up in the next quarter as well. It's all related to how do you the stamp duty the land transfer premiums, ensuring the buildings are up to the mark; all those are getting ready for PV subsidization is done. So therefore, these are treated as exceptional, extraordinary expenses and hence called out but we are not able to take exception. And hence, that is the underlying cost. There's another item that you will see in the standalone books related to an exceptional item that's an impairment reversal that you have, because the two subsidiaries designed subsidiaries are now being sold to the end business and therefore they may be a fair valued them and then take into them. These were impaired earlier, because we did not in the March of 2020 along with the PV impairment. But the CapEx plans were low. Therefore, these people these companies didn't have the revenue stream coming to them. But with the step up in CapEx and performance of the PV business, that reversal has happened. So that's the background to that exception later. I think there's one final question on the accounting matter which is from Saurabh Jain Ambit Capital. Regarding the PV segment we can see that the PV segment is showing a profit of INR 834 crores as profit from discontinued operation. However, the EBIT margin in the presentation is showing minus 2.6%. Are not able to reconcile? Saurav you recollect I have started by presentation with this saying that there is an accounting item which is just the clearness of accounting were discontinued operations you're not allowed to take the depreciation of that and that is sitting as item in The balance sheet. Obviously one such companies comes into existence from Q4 onwards. The business goes back to normal but for like to like comparison because the underlying business performance doesn’t change, we have showed the number on a like to like basis in the presentation and this is there in the notes to accounts as well. If you need further clarifications feel free to reach out to us. We will explain that in detail if needed.
P B Balaji:

So with that I think we are now coming to the end of this session here. It's on the hour. So thanks everybody for joining us and I hope we have been able to take most of the questions coming our way. Do give us a feedback in terms of whether this format does work for you. We are trying to getting as many questions as possible. And we will try to improve on this going forward as well. Thank you and stay safe. Take care. Bye bye. And Tata Motors and JLR team thanks for your time guys. Well done.

Tata Motors Limited Q3 2022 Earnings Call Transcript

Other Tata Motors Limited earnings call transcripts:

Tata Motors Limited
Q3 2022 Earnings Call Transcript