Tata Motors Limited
Q4 2016 Earnings Call Transcript

Published: 30 May 2016

[Vijay Somaiya:]

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 Management 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?

[C Ramakrishnan:]

Thank you, Vijay. Good evening and welcome to all of you for this annual Analyst Meet following our declaration of services for the full year March 2015-16. I will go to 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, its global consolidated results. Net revenue for the quarter came in higher at 81,000 crores compared to 68,000 crores in the same quarter of last year. For the quarter, EBITDA was 12,000 crores and EBITDA margin was about 15.4%, up from 13.6% in the same quarter last year. Profit after tax was about 5,177 crores, up from 1,700 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 263,000 crores to 275,000 crores; EBITDA of 40,000 crores; EBITDA margin was 14.6%, somewhat down from the previous year. Year 2014-15 was an exceptionally high performance year for JLR, if you all recall. Profit after tax for the full was about 11,000 crores compared to 13,900 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 includes onetime reserves and charges that we have taken of about 1600 crores, about £166 million, including for the industry-wide recall in the U.S. 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 into the dividend lynch. [Ph] We skipped our dividend last year in lieu of the financial performance and the losses. And the Board of Directors, I am happy to share with you, has 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, 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 grow 26.7%, and we’re also seeing the results of ongoing cost reductions and other margin improvement initiatives in Tata Motors standalone. In Jaguar Land Rover, in terms of highlights, EBITDA before onetime reserves and charges for the quarter was about 15.2%. The solid EBITDA margin was before onetime reserves and charges, as I mentioned, in Q4 in particular but lower than the same period last year with higher total sales, have been offset by less favorable market and model mix, foreign exchange movements in this quarter, and onetime reserves and charges of £166 million for the recall of the faulty airbags and certain provisions for the doubtful debts and the capitalized investment charge-off we have 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 of the debt in the balance sheet. Cash and bank balances globally including investments, liquid investments as of March, was about 52,000 crores. CapEx and product development expenses for the Group, Tata Motors Group, was about 36,000 crores for the year. Getting into a little more details in terms of India business financials, first of all the P&L account, net revenue for the quarter was about 12,600 crores, up from 10,800 crores in the same quarter last year. EBITDA was about 1,000 crores, up from about 300 crores in the previous year’s quarter. EBITDA margin, as I said earlier, jumped from 2.8% to this quarter at 8.1%. Profit before tax, before exceptional item was about 399 crores and after the charge-offs, it was about 370 crores and profit after tax with certain tax reversals came in at 465 crores. All of these numbers were significantly negative in the same quarter in the previous year. Likewise, for the full year, total revenues of about 42,000 crores, up from 36,000 crores. EBITDA for the full year was about 2,740 crores, compared to the whole year’s negative EBITDA of about 800 crores in the previous financial year. EBITDA margin likewise of 6.5% for the whole year, reversing declines, which was negative 2.2% for the previous year. Similarly, not reading out the numbers, we had 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 continuous 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 we’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 issue as on March 2015 stood at 0.6 is to 1 and CapEx and product development in Tata Motors India business was about 3,000 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%. 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 for high mobility vehicles for Indian Army. We successfully completed the huge following, the season 3 of the T1 Prima truck racing championship. We got further contract for 25 Starbuses which are diesel series hybrid electric buses with full low floor configuration. We announced the 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 driven, 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 seem to grow significantly, I must caution, this is on the 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 the coming -- in this financial year. Jaguar Land Rover financials, net revenue €6.6 billion, up from €5.8 billion in Q4 of last year; for the full year, €22 billion revenue, almost the same as last year, €21.8 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 that for the whole year the EBITDA margin of 14.9%, both of which look somewhat lower compared to very exciting and high performance year we had in ‘14-’15. 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 coming quarter, the receivables provision that we had to create and certain product write-offs that we had to provide for all aggregating to about €156 million. Profit after tax for the quarter in Jaguar Land Rover was about €472 million, up from $300 million in the same quarter last year and for the full year was about €1.3 billion. In terms of balance sheet, the total product and development in CapEx spend in JLR was about €3.2 billion, positive free cash flow for the year. Positive free cash flow for the year, after the spent of £3.2 billion, free cash flow positive was about £791 million after the CapEx spend. Cash and financial liquidity on the balance sheet was about £4.7 billion, and in addition we have access to liquidity through committed lines of credit of about close to £2 billion. With the balance sheet that I talked about just now with 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 are more or less similar at about 12,500 units for the quarter. Strong retail sales are witnessed across all regions, including North America up 24%, UK up 23%, China was up 19% and Europe 55%, and other overseas markets 15%. Strong free cash flow in the quarter, about £1.4 billion after the CapEx spend of about £740 million. As shared with you earlier, about the provision we had to take in one of the earlier quarters in this financial year of about £240 million in terms of the cars destroyed or fully damaged by the fire in the Tianjin port in China. Out of this £240 million, we created provision -- we created in one of the earlier quarter, we have started receiving insurance claims and other credits. In this quarter, we received about £58 million credits, partially as insurance settlement, partially as cars available for sales. And we had further recovery of insurance of about £33 million in the previous quarter. For your information, our share of profit from China JV for the quarter was almost £50 million. Now, 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. And quickly running through these slides; for your information, this would 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 on a consolidated position, net revenue of about 3,000 crores, profit before tax 300 crores compared to a loss in the previous year as we had to take some significant NPA provisions. Profit after tax about 257 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, it’s also beginning to play on the NPA provision in return. Tata Technologies, our IT and engineering subsidiary, net revenue about 2,700 crores, up from 2,600 crores in the previous year; profit before tax 461 crores, profit after tax 382 crores, both up from the previous year. Tata Daewoo commercial vehicles in Korea, net revenue slightly lower at KRW 880 billion, slightly lower, particularly many of their export markets, international markets are affected, even though in the domestic market, they continued to perform very solidly including market share gains. Profit before tax about £45 billion -- sorry -- KRW 55 billion and profit after tax at 46. Just to caution, the previous year ‘15, financial numbers in Korea included certain onetime 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 526 crores to 545 crores; profit before tax 80 crores; and profit after tax 55 crores, all reflecting the growth in the 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 in 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 will 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 product momentum to continue, 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 year, will drive future growth in volume as well as help us gain market share. As I shared with you before, we have our product plan finalized till 2020 and we expect we’ll be in a position to launch two new vehicles every year, going forward, and will 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 2016-17, we expect the total investment spending, CapEx and product development to be £3.75 to £3.8 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 £5 billion, plus access of our liquidity, we don’t see it as a challenge in pursuing our original earning strategy. We’ll 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 as 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 available. 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, the next 30 minutes. Thank you very much.

[Vijay Somaiya:]

I request the participants to please introduce yourselves before asking the question. Binay, can you start here, please?

[Binay Singh:]

Thank you. Binay from Morgan Stanley. First of all, congratulations to the team for very strong set of earnings growth on India as well as JL side. Two questions, one on China variant, secondly on Range Rover sales trend. Starting with the China joint venture, very impressive numbers, we’ve seen sequentially profits growth despite volumes being similar. Last quarter, we estimated 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; it wasn’t so good. So, how would you see sales trend in that segment? Thanks.

[Unidentified Company Representative:]

I just want to go back to China. China is coming back. You know that we had last year a lot of vehicle [ph] changes, the runout of vehicles but also the ramp up of the new plants in China is now coming back. The locally produced vehicles as Range Rover Evoque and the Discovery Sport have a high quality and this in the really sales [ph] coming up. The question about Range Rover, what is -- the question about Range Rover in China or around the world.

[Binay Singh:]

Overall, like the retail sales for Range Rover…

[Unidentified Company Representative:]

Range Rover overall is a very special vehicle. And so Range Rover itself will continue to be strong in terms -- by the way Range Rover and Range Rover long wheelbase, from the Range Rover Sport, we now also have an conversion [ph] with 575 Horsepower. And by the way there was one probably [indiscernible] in front of the door, you should just have a look at presentation. So, we are really very optimistic that sales for these very special products, these are very good product substance. And by the way, these are very good quality that these vehicles will continue to be very strong in the market.

[Binay Singh:]

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…

[Unidentified Company Representative:]

No, there is no runoff to the China joint venture.

[Unidentified Company Representative:]

There’s no runoff. And by the way, we see -- because ramping up a plant takes time and we see that the product is now really in a good momentum.

[Binay Singh:]

And also in Range Rover, you are not seeing any slowdown, so in the sense….

[Unidentified Company Representative:]

No, not all.

[Binay Singh:]

Right, thank you so much. Congratulations again.

[Kapil Singh:]

Hi there. This is Kapil from Nomura. Congratulations on great set of numbers. I wanted to check first of all what has caused this turnaround, if you could break it out 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.

[C Ramakrishnan:]

Could you repeat the question?

[Kapil Singh:]

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 of the benefit from operating leverage, commodities, currencies, if you could quantify some of those, please?

[C Ramakrishnan:]

I presume the question is about JLR in China [multiple speakers] JLR and Tata Motors?

[Kapil Singh:]

JLR.

[C Ramakrishnan:]

JLR, if you see in the last fiscal year and just going back about a year ago, about in 2014-15, we saw some exceptionally good quarter in the 17%-18% EBITDA and even above. In this fiscal year, we have seen different quarters performing differently. The first quarter was good; [ph] 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 quite positively in JLR as they have before. The overall volume improvement and the performance of the new products as well as growth in many other markets, we just saw the slide in terms of the type of retail sales improvement we’ve seen in other markets. The success of the new launches in the last two to three years as well as the volume growth that we have seen differently contributes quite significantly to the performance. And then what highlighted in the exchange impact in this quarter -- you are referring to this quarter or the…

[Kapil Singh:]

Yes, fourth quarter of the JLR.

[C Ramakrishnan:]

Fourth quarter.

[Unidentified Company Representative:]

Sure, I can respond to that. So, as you know, FX is always complicated, but I’ll try to make as simple as possible. Basically, we did have in the quarter good news [ph] operating exchange, but fundamentally things are, the pound actually retained and also there was movement on the euro. And so fundamentally, we had good news [ph] operating exchange that was offset partially by hedges that we had 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 126, we saw revaluation of our euro payable after that revaluation of euro payables, net-net exchange was modestly negative at the EBITDA level for JLR in the quarter year-over-year.

[Unidentified Company Representative:]

I just want to highlight that volume effect at the end of the year seems that all regions overcompensated the weakness in China. So, it’s very optimistic thing that we can grow all around the world.

[Kapil Singh:]

Could you repeat that currency benefit again, especially sequentially third quarter and fourth quarter, what is movement above EBITDA?

[Unidentified Company Representative:]

Okay. Sequentially, the answer is the same as it is for the quarter year-over-year. 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 is good news. And then we did have some revaluations of payables in the quarter. [Multiple speakers] In the quarter, actually -- actually sequentially, it was about neutral exchange. For the quarter, year-over-year, it was negative including the effect of revaluation.

[Kapil Singh:]

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 quarter going forward?

[Unidentified Company Representative:]

It is indeed a very significant element you’ve seen and as we already mentioned that we’re going to launch XF long wheel base [indiscernible] based on the very first [Indiscernible] 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.

[Kapil Singh:]

No, I was talking about financial numbers in relation with the vehicles which had the EBITDA numbers in the China JV, what would be relevant in this. And the question is, how does it compared to JLR business, because you called out the ‘our share of profit in the JV for the last quarter’ which is about £50 million for the quarter, representing our share but at the JV level, EBITDA is I’m not sure that you discussed.

[Unidentified Company Representative:]

[Inaudible] So, our Chinese JV’s profit, [indiscernible]...

[Kapil Singh:]

No, profit after tax.

[Unidentified Company Representative:]

Profit after tax. What was the tax rate in China? [Multiple speakers]

[C Ramakrishnan:]

I don’t recall it, top of my head.

[Amyn Pirani:]

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

[Unidentified Company Representative:]

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 especial fixed marketing is growing up, because at the end of the day, you’re going to sell more products and we new vehicles which we are launching in the market, definitely new vehicles expanding the product portfolio, we also have fixed marketing.

[Aditya Makharia:]

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 our thoughts at the industry level and where does JLR stand on this? And secondly, just some concerns on U.S. car sales picking also, any thoughts if you could share on that geography? Thanks.

[Unidentified Company Representative:]

Let’s start with the U.S. question first. We have seen that we had a very successful year in the units. We’re launching right at the moment XE, which was not in the market out so far. So, we absolutely, not only cautious optimistic but, we are really optimistic that we will see another strong year in next season. And first of all, I’d like to highlight that this is kind of [indiscernible] devices. Overall, diesel is quite important for the country’s automotive industry, why? Because whenever -- and calculate the efficiency and the environmental impact of similar performing engines, then the diesel is engine still in advantage in comparison to the respective petrol engine. So, whenever diesel engines will be banned all around the world, this will have a significant impact to all fleet requirements, legislative requirements all around the world.

[Aditya Makharia:]

Thanks.

[Priya Ranjan:]

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’ve been doing much, much better than what the numbers suggest. So, what are the corrective actions we are taking in particularly in multi-axle side? And also on the LCV side, do we that the things are now turning around? And we have lost number one share to the number two competitor, Mahindra. So, how are we thinking in terms of market sale in the LCVs, please?

[Unidentified Company Representative:]

Okay. So, the first part of your question, we are underperforming, you’re referring to relative market share?

[Priya Ranjan:]

Yes, relative market share in multi-axle vehicles?

[Unidentified Company Representative:]

So I think, we need to understand the situation that the CV market is going through for the last four years. I think when the market started growing into a big -- the question is that, in the timeline, a lot of capacity came into the market. I think the [indiscernible] have added capacity in the last four years and we saw that [indiscernible] also and adding capacity. I think what we’ve seen is that in the last two years, the market started recovering. There is a lot of reasons that we spend in this country, [ph] particularly having some of the newest laws [ph] that I think [indiscernible]. So, I think in tractor trailers and tippers, relatively speaking, the role of these products is very important because it’s [indiscernible] in multi-axle trucks is [indiscernible] and the customers [indiscernible]. I think we need to look at these things slightly longer term as we’re sitting on even in multi-axle vehicle market share in the excess of 50%. And [indiscernible] market share, we’ve chosen to go with the more balanced approach in terms of fighting for market share versus profitability. But I think, this is a continuing gain. There are segments evolving like in 31-ton; [ph] we have launched product called 3723, which is [indiscernible] but one of our competitors got a bit of head start there. But in the last six months, having more than 45% [ph] market share, we are almost up to 50%. So, there are a lot of these products where we are seeing fell behind but we are gaining and growing from the backbone of our growth over the next two years. And otherwise I would say that it is -- the market share distribution, which is quite difficult because now [indiscernible] longer period of time. Talking about LCV, I think LCV has gone through -- again, there was a period when the financing was relatively visible [ph] and then the corrections took place. We started correcting much faster, whereas some of our competition started correcting much later. That has a role to play in the market share. There has been a shift from the commercial vehicles towards pickups that obviously has some impact on the market share, if you add LCV and pickups together. But I said, the market is evolving and [indiscernible] 12-month snapshot is not good enough. We have to see it over a longer period of time. And with the interaction, particularly in the last six months, a product like Ace Mega has [indiscernible] between the small commercial vehicle and a pickup, our market share towards the end of the year is much higher than in the earlier part. So, it’s a combination of products as well as the distribution list we have, we defiantly believe we will have the sort of market share we intend to keep in a growing market India.

[Priya Ranjan:]

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 East and North, but we are not taking their state in South and West?

[Unidentified Company Representative:]

As I said that when you are at 55% [ph] market share, the amount of effort you can make in terms of cost to gain market share [indiscernible] 85% [ph] market share in East and North for instance. You need to [indiscernible] in terms of predicting market share as compared to somebody [indiscernible]. But, I think overall, if you look at the things [indiscernible] 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 defiantly believe we will at least be able to gain that to 60 and above.

[Priya Ranjan:]

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

[Unidentified Company Representative:]

Yes, 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 from approximately seven weeks ago, great momentum in the market. I think you have all seen the test results of the Tiago and it’s generally considered as the hatchback item [ph] 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 the statement in a minute. As we talk tonight, we have exceeded 20,000 orders. We have seen by the officially announced statistics of retail and the wholesales [ph] 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 [indiscernible] for power train, for engine as well as for a complete vehicle was actually 60% petrol, 40% diesel. And we have expected a fair mix of volume over the top speed execution levels. What we see at this point of time is very good 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, very strong order book towards the top end model, the effect, which also exceeds on the couple of components our capacity. If I take the total capacity framework, we see on most of the models, 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 for 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 to structurally improve the output capacity.

[Yogesh Aggarwal:]

Hi, this is Yogesh from HSBC. So, just couple of questions, firstly in the UK market, where you finance cars, JLR cars, have you seen any impact on the financing business because of the slowdown?

[Unidentified Company Representative:]

No, not at all. And first of all, I don’t think [indiscernible] in the UK, we are growing in the UK quite nicely [indiscernible] being a launched, our growth potential is even higher. So, we don’t see any slowdown, also not concerning in terms of [indiscernible] see in the overall industry a certain slowdown.

[C Ramakrishnan:]

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

[Yogesh Aggarwal:]

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

[C Ramakrishnan:]

These are arranging out -- 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. So, you have built some other costs or provide some more attractive financing where you should have the cost, but we are not in that business in JLR.

[Yogesh Aggarwal:]

Got you. And this last quarter, there was £63 million loss above EBITDA because of the hedging, do we have comparative numbers for this quarter?

[C Ramakrishnan:]

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

[Yogesh Aggarwal:]

Yes.

[Unidentified Company Representative:]

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. Pramod?

[Pramod Kumar:]

Hi, 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 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 is the product mix on the wholesale side done specially from Range Rover and Range Rover Sport and also how should one look at that by 17, and in terms of product mix and geographical mix compared to 4Q level? That will be my first question.

[C Ramakrishnan:]

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.

[Pramod Kumar:]

Yes, probably Range Rover, Range Rover Sport as a percentage of wholesale, because quarterly on the retail side, there was a bit of a slippage. So…

[Unidentified Company Representative:]

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 related to the turnover difference. If you need these kind of figures, I have to…

[Pramod Kumar:]

Fair enough. But directionally, how should one look at FY17?

[C Ramakrishnan:]

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

[Pramod Kumar:]

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 the FY17 how would you look at them?

[Unidentified Company Representative:]

Overall, we aren’t really -- we can confirm the mix out [indiscernible] 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.

[Pramod Kumar:]

Sounds great, and second question pertains to the diesel, because there has been -- actually the media kind of phase 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 U.S., 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 gas diesel exposure in FY17 versus FY16?

[Unidentified Company Representative:]

Overall, we have just launched our absolutely new [indiscernible] plant, and this plant is a [indiscernible] plant, so that we can really produce diesel and petrol engines in the future, depending demand, the individual demand of the market. So, we are flexible on that side. We expect that in the markets like India, as I we discussed recently, petrol is becoming stronger, maybe a keynote statement of France today that the Mayor of Paris [indiscernible] to ban diesel 2020 onwards. So, we expect that there’s a shift also in one of the other markets to petrol. From a production point of view, we are flexible.

[Pramod Kumar:]

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

[Unidentified Company Representative:]

I don’t have it available right now.

[Unidentified Analyst:]

It is Akshat [ph] 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 stand alone, if you could highlight?

[C Ramakrishnan:]

On Tata Motors standalone, historically, if you take the last three four years, our annual spend has been between 3,000 to 3,500 crores. It is slightly higher in the coming years, would be around 3,500 to 4,000 crores, that’s 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.

[Unidentified Analyst:]

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?

[C Ramakrishnan:]

The 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 to five-year term starting from next quarter onwards. And we hedge in declining percentages. If you take the next one or two or three or four quarters, the hedge book will be almost 15-30% for the exposure, and it’ll gradually start declining as we get into the year, two year, three years four, and therefore hedges may not be more than 10-15% hedge at that time. That’s broadly the strategy. And we tend to take a hedging policy which is at a net level in terms of our payables and receivables.

[Unidentified Analyst:]

And then, so, you get realizations in various -- in yuan your and rupees and the Brazilian currency; so, what you actually hedge, you hedge your receivables, you hedge your payables, you hedge your capital commitments?

[C Ramakrishnan:]

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

[Unidentified Analyst:]

So basically your revenue is in dollars?

[C Ramakrishnan:]

Good part of the revenue is in dollar. And if you take our cost structure apart from UK cost, which as you saw before almost 30% to 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 favored on the materials we have a currency as portion in terms of pound versus euro.

[Unidentified Analyst:]

So, about every quarter you are recurring, why are you hedging? Every quarter on volume here is loss, loss, loss, so why do you keep hedging first? Now you’re cash flow positive, you can move; it’s a fact, most competitors -- you’re hedging are losing money and you have a good balance sheet you can bear a currency loss. So, what is that because makes accounting so complicated and you’re hedging five years in a row -- who knows five years…

[C Ramakrishnan:]

Sure. Five year -- four beyond hedges will be 10% to 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 revenues and cash flows. Number two, what you’re seeing in terms of the questions and the answers we have provided is one side of the coin, which is different, which is basically the difference of the hedge book that we have. And if you remember, fundamentally even the pound weakened against the dollar, there is also a gain, which comes to the top line. We need to stick both together. So, what is being called out and answered separately is what is happening on the ones side of the equation which is hedge provision.

[Unidentified Analyst:]

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

[C Ramakrishnan:]

In terms of the tax rate, the India operation is not likely to be very significant because we do have carry forwards and R&D credits. So, we have provisions set out. So, the tax portion would be restricted to 15% to 17% [ph] and making [indiscernible] not 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 base, which is about between 20% to 25%.

[Unidentified Analyst:]

[Inaudible]

[C Ramakrishnan:]

Slightly below 20.

[Unidentified Analyst:]

And so even in [indiscernible] are you welcomed if you have to pay taxes, profit, [indiscernible] will have so much of carry forward deprecation.

[C Ramakrishnan:]

Carry forward depreciation will have carry forward R&D credits that we did because they are amounts we spend on R&D and product development, we also have carry forward losses…

[Unidentified Analyst:]

I think that is [Indiscernible]?

[Unidentified Company Representative:]

That’s what I said.

[Unidentified Analyst:]

And expect good profit.

[Vijay Somaiya:]

Last two questions.

[Sonal Gupta:]

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?

[Unidentified Company Representative:]

I only can say it 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 piece drive abilities like a sports car. And it has all the latest technology also an electrical, electronic, architectural infotainment. So, it’s really a convincing year. And I hope you also like it from that point of view.

[Sonal Gupta:]

I think it does look very attractive. My second question is on -- I mean electrification clearly is a big thing on auto side. And I just want to understand if there are any numbers if you can give in terms of what proportion of your fleet or space should be hybrid in electric plug-in hybrids potentially by FY20 if you have -- or 2020 if you have any such numbers?

[Unidentified Company Representative:]

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

[Abhishek Gaoshinde:]

Hi, this is Abhishek from Reliance Securities. As talks are going on regarding the returns [ph] exit from European regions, how do we see it to impact on JLR business and what our plans to counter the upcoming change?

[Unidentified Company Representative:]

Practice is indeed in every newspaper and so I see it as the very hot time. And I see personally that and I believe that the UK, and I can’t give you a vote, I have to really respect the demographic process. But I hope that the discussion is opening up from one dimension and discussion about only economy, [indiscernible] questions about society, politics and movements, military issue and last but not the least [indiscernible] I have the opportunity to listen peace in my generation and I hope that also my children can listen peace in the future and I’m prepared really [indiscernible] major personal contribution to that. We have [indiscernible] the UK can both reasonable and I’d say stay in [indiscernible]. And then there is nothing to change.

[Abhishek Gaoshinde:]

[Inaudible] is very low, even if they exit, they will continue the state policies within Europe, that’s not to say with the European Union for the next two years?

[Unidentified Company Representative:]

I guess, nobody can give you…

[Abhishek Gaoshinde:]

That was an acknowledgement and I can say…

[Unidentified Company Representative:]

Nobody can give you, I guess an answer on that. If you look at [indiscernible] every nation also wants to make business in the future with the UK. UK is a fifth biggest nation in terms of GDP. And therefore I guess, it will also continue, the rest is…

[Vijay Somaiya:]

Chirag, last question.

[Chirag Shah:]

Chirag from Edelweiss. On electrification, just wanted to understand what part of product development you expect to early earmarking for your drive towards electrification? How important is the spend that you’re -- if you can give us some flavor on your overall spend…

[Unidentified Company Representative:]

Sorry, I can break it down and break it out as kind of slice this year but also then overall. We have a certain period of time, but 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 a big advantage out of this trend of technology right at the moment.

[Chirag Shah:]

And second question was on a 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 [indiscernible] as well as [indiscernible] capacities are well placed? Because in the past we did have issues on production plants and there were disappointments over there.

[Unidentified Company Representative:]

No, at the moment, I don’t see, neither limitation nor restriction, we also have in close relationship and discussions with our suppliers, so that we can continue the growth. We’re not growing in let’s say relative numbers as relative numbers maybe higher but you can see that in absolute figures and the growth is not very impressive and we have really I guess managed this kind of growth objective.

[Vijay Somaiya:]

Thank you. Thank you, everyone for taking out time to attend the meeting. And I request everyone to join for refreshment. Thank you.