TATA MOTORS LIMITED
ANNUAL REPORT 2009-2010
DIRECTOR'S REPORT
TO
THE MEMBERS OF
TATA MOTORS LIMITED
The Directors present their Sixty-Fifth Annual Report and the Audited
Statement of Accounts for the year ended March 31, 2010.
FINANCIAL PERFORMANCE SUMMARY
(Rs. in crores)
Company Tata Motors' Group
2009-10 2008-09 2009-10 2008-09
A. FINANCIAL RESULTS
(i) Gross Revenue 38,364.10 28,568.21 95,567.42 74,093.31
(ii) Net Revenue
(excluding
excise duty) 35,593.05 25,629.73 92,519.25 70,880.95
(iii) Total Expenditure 31,414.77 23,877.29 83,905.09 68,684.45
(iv) Operating Profit 4,178.28 1,752.44 8,614.16 2,196.50
(v) Other Income 1,853.45 925.97 1,793.12 798.96
(vi) Profit before 6,031.73 2,678.41 10,407.28 2,995.46
Interest, Depreciation,
Amortization,Exceptional
items & Tax
(vii) Interest and
Discounting
Charges (Net) 1,103.84 673.68 2,239.71 1,930.90
(viii) Cash Profit 4,927.89 2,004.73 8,167.57 1,064.56
(ix) Depreciation,
Amortisation & Product
Development Expenses 1177.90 925.71 4385.33 2854.52
(x) Profit/(Loss) for
the year before
Exceptional
items & Tax 3,749.99 1,079.02 3,782.24 (1,789.96)
(xi) Exceptional items 920.45 65.26 259.60 339.29
(xii) Profit/(Loss)
Before Tax 2,829.54 1,013.76 3,522.64 (2,129.25)
(xiii) Tax Expense 589.46 12.50 1,005.75 335.75
(xiv) Profit/(Loss)
After Tax 2,240.08 1,001.26 2,516.89 (2,465.00)
(xv) Share of Minority - - 54.17 (40.25)
Interest and Share of
Profit/(Loss) in respect
of investments in
associate companies
(xvi) Profit/(Loss)
for the year 2,240.08 1,001.26 2,571.06 (2,505.25)
(xvii) Balance Brought
Forward from
Previous Year 1,685.99 1,383.07 (1,553.66) 1,764.12
(xviii) Credit taken - 15.29 - -
for Dividend
Distribution Tax
for Previous Year
(xix) Amount Available
for Appropriations 3,926.07 2,399.62 1,017.40 (741.13)
B. APPROPRIATIONS
(a) Debenture
Redemption Reserve 500.00 267.80 500.00 267.80
(b) General Reserve 500.00 100.13 520.32 138.20
(c) Other Reserves - - 13.08 41.95
(d) Dividend
(including tax) 991.94 345.70 1,001.85 364.58
(e) Balance carried
to Balance Sheet 1,934.13 1,685.99 (1,017.85) (1,553.66)
DIVIDEND
Considering the Company's financial performance, the Directors have
recommended a dividend of Rs.15/- per share on the increased capital of
506,381,356 Ordinary Shares of Rs.10/- each (previous year-Rs.6/- per
share) and Rs. 15.50 per share on 64,176,560 'A' Ordinary Shares of Rs.10/-
each (previous year-Rs. 6.50 per share) and any further Ordinary Shares
and/or 'A' Ordinary Shares that may be allotted by the Company prior to
August 12, 2010 (being the book closure date for the purpose of the said
dividend entitlement) for 2009-10. The said dividend, if approved by the
Members, would involve a cash outflow of Rs.991.94 crores (previous year-
Rs.345.70 crores) resulting in a payout of 44% of the unconsolidated
profits of the Company.
OPERATING RESULTS AND PROFITS
After the economic downturn and difficult market conditions in the
automotive sector globally in 2008-09, during the year, economies across
the world (with a few exceptions) showed signs of recovery and growth. The
Indian economy bounced back quickly and strongly growing at 7.2% in 2009-
10. The automotive sector in India started the year steadily, gathered
momentum in different segments in the second half of the year and ended the
year with a record growth and performance.
The Company's turnover, in this background and with a strong portfolio
coupled with successful launch of new products and variants in commercial
vehicles and passenger vehicles, was Rs.38,364 crores, a growth of 34.3%
over the previous year. The volume growth coupled with other actions on
pricing and cost reduction enabled the Company to achieve significant
improvement in EBIDTA margin to 11.7% (6.8% in 2008-09). The Profit Before
Tax of Rs.2,830 crores and Profit After Tax of Rs.2,240 crores also grew
significantly over the previous year by 179.1% and 123.7% respectively.
The Tata Motors' Group turnover was Rs.95,567 crores, a growth of 29% over
previous year contributed mainly by market recovery, improved realization
and successful launch of new products. Consolidated Profit Before Tax was
Rs.3,523 crores (Loss of Rs.2,129 crores in 2008-09) and Consolidated
Profit for the year was Rs.2,571 crores (Loss of Rs.2,505 crores in 2008-
09).
The performance of the Company and its subsidiaries is elaborated in the
Management Discussion and Analysis Report which forms a part of this Annual
Report. A snapshot is given below.
VEHICLE SALES AND MARKET SHARES
The Company recorded a sale of 633,862 vehicles in 2009-10, a growth of 34%
over previous year (472,885 vehicles) in the domestic market in India,
representing a 25.5% share in the industry (improving from 24.4% share in
the previous year).
Commercial vehicle sales were highest ever at 373,842 vehicles achieving a
robust growth of 40.9% over previous year and a market share of 64.2% (a
gain of 0.4%, over previous year). A strong product portfolio, successful
launch of new products and variants, extensive efforts in marketing and
finance enablement for customers and leadership in market research and
penetration, contributed to the significant improvement in overall
performance. Some of the key highlights were:
- In M&HCV, growth of 36.5% to 155,161 vehicles and a market share
improvement to 63.3% (from 61.9% in the previous year); launch of the next
generation of heavy trucks-Prima range; completion of delivery of 1,625 low
entry buses to Delhi Transport Corporation and delivery of major portion of
the orders of over 5,000 buses under JnNURM Scheme of Government of India
for modernizing the public transport in India.
- The Light Commercial Vehicle (LCV) sales recorded a spectacular growth of
45.4% in FY 2009-10. While this was largely aided by the growth in the
small commercial vehicles, the rest of the segment also grew handsomely.
The competition in the small commercial vehicle range increased resulting
in a 0.5% loss in the domestic market share reducing it to 64.8%. The
Company's sales increased by 44.2% to 218,681 LCVs. The Company launched
new variants on the Ace platform, Ace EX. Super Ace and the 407 Pickup
which are expected to help in gaining volumes.
Passenger vehicle sales were 260,020 vehicles, highest ever, achieving a
growth of 25.3% over previous year and a market share of 13.7% (stable
compared to 13.6% in the previous year). The Company continues to be
amongst the top three players in the passenger vehicle market which has
over 25 players. The growing sales of the new generation Indica Vista and
successful launch and market response for the Indigo Manza mainly
contributed to the growth. Some of the key highlights were:
- In the Small Car segment, increase in market share to 13.3% (as against
12.7%, in the previous year), with the growing sales of Indica Vista, sales
of the Nano and the Fiat Punto;
- Commencement of sales of Nano in July 2009 and completing deliveries of
30,763 cars to the customers and commencement of trial production in the
Sanand plant.
- The Indigo range sales of 54,551 units, a growth of 10.9% over the
previous year and also the highest ever sales by the Company in this range,
mainly due to the launch of the Indigo Manza in October 2009.
- Sale of 33,507 Multi-Utility Vehicles (MUVs), a decline of 14.7% against
the last year and as a result the market share dropped to 12.4%. The Grande
Mk II which was launched in December 2009 has been well accepted in the
market and is expected to help in regaining market share in the UV segment.
- Sale of 24,884 Fiat cars which has given Fiat a 1.3% market share as
against 0.5% in the previous year with Linea sales at 11,102 nos. (a
segment share of 10.1%) and the Grande Punto sales at 13,281 (a segment
share of 3.5%).
- The Company sold 225 Jaguar and Land Rover vehicles through its exclusive
dealerships in India in the first year of the sales of the Jaguar Land
Rover brands.
The Company's international business remained affected by the economic
downturn in many of the key markets. The Company's commercial vehicle
exports grew moderately by 4.7% to 27,878 vehicles and passenger vehicles
exports declined by 9.9% to 6,231 vehicles. With improved economic outlook
and market recovery and with the new product range, the Company expects
significant improvement in its international business in the future.
Tata Motors' Group sales were 880,396 vehicles across its entire range of
products and markets. The key highlights were:
- The Company has sold 667,971 vehicles.
- Jaguar Land Rover achieved sale of 193,982 vehicles as compared to
167,348 vehicles in 2008-09 (in 10 months since Tata Motors acquisition of
the business in June 2008). Jaguar Land Rover continued to enhance its
product offerings through an all new XFR, powertrain offerings and 2010
model year vehicles. The new Jaguar XJ was unveiled in London in July 2009
and had its public debut at the Frankfurt Motor Show in September 2009.
- In South Korea, Tata Daewoo Commercial Vehicle Company Limited (TDCV)
successfully launched the new premium truck platform - Prima; TDCV sales
were stagnant at 9,011 vehicles in Korea and international markets as
compared to 9,137 vehicles in the previous year.
- In Thailand, Tata Motors (Thailand) Limited saw a very good response to
the CNG version of the Tata Pick-up vehicle-Xenon.
TATA MOTORS FINANCE LIMITED-CUSTOMER FINANCING INITIATIVES
The vehicle financing activity under the brand 'Tata Motor Finance' (TMF)
of Tata Motors Finance Limited, a wholly-owned subsidiary company, financed
a total of 1,44,806 vehicles during the year as compared to 1,00,611
vehicles in the previous year. Total disbursements were Rs.6,697 crores as
against Rs.4,900 crores in the previous year. The disbursals for new
commercial vehicles were Rs.5,123 crores (96,593 units) as compared to
Rs.3,319 crores (59,467 units) during the previous year. For passenger
cars, total disbursements were Rs.1,454 crores (48,213 units) as compared
to Rs.1,288 crores (41,144 units) in the previous year. The market share in
terms of products financed by the Company increased from 22.4% in
commercial vehicles to 26% and remained constant at 21% in passenger cars.
TMF has shown improvements in disbursements as well as Net Interest
Margins, mainly driven by the overall economic recovery coupled with a
strong focus on controlling costs, improving quality of fresh acquisitions,
micro management of collections. TMF's strategy on controlling, managing
and reversing non-performing assets (NPAs) and 'Risk Scored Pricing Model'
thrust on customer relations and a branch based re-organised field
structure has set a robust platform to enable future growth.
HUMAN RESOURCES & INDUSTRIAL RELATIONS
Industrial Relations were cordial at all locations. In a challenging
environment and business conditions, the support from the workforce and
unions was positive throughout. The key highlights in the human resources
and industrial relations were:-
- The Company's plant at Uttarakhand was conferred with the prestigious
Golden Peacock Award for Safety & Environment and the National Award for
energy conservation by the Ministry of Power. The Pune plant received the
Frost and Sullivan Green leader award for 2009 in the automotive sector.
The Jamshedpur plant obtained a revised and updated certification under SA
8000-a global social accountability standard for working conditions,
certifying labour practices at the facilities including those of suppliers.
Towards organizational health and safety, the plants at Jamshedpur, Pune,
Uttarakhand and Lucknow are certified under OHSAS 18001. The communication
on progress during 2009-10 was submitted to the United Nations Global
Compact. The Company has also submitted GRI report for 2008-09 based on G3
Guidelines of sustainability reporting framework. The Company also
undertook several initiatives, including on-line tools for performance
improvement, employee development and training.
- At Jaguar Land Rover, the year under review was dominated by the economic
downturn and the need to cut costs quickly, which resulted in large numbers
of non-production shifts in the 3 UK plants (Castle Bromwich, Halewood and
Solihull). Jaguar Land Rover worked closely with its Trade Unions and
negotiated a Framework Agreement which secured Euro 68 million of cost
savings. It closed its Defined Benefit pension scheme to new workers with
effect from April 24, 2010, by introducing a Defined Contribution scheme.
All Jaguar Land Rover sites have been prepared to commence certification
process for OHSAS 18001 external accreditation for Health and Safety
standards, commencing July 2010.
The Company had 482 employees who were in receipt of remuneration of not
less than Rs. 24 lacs during the year or Rs. 2 Lacs per month during any
part of the said year. The Information required under Section 217(2A) of
the Company's Act 1956 and the Rules made there under is provided in the
Annexure forming part of the Report. In terms of Section 219(1)(b)(iv) of
the Act the Report and Accounts are being sent to the shareholders
excluding the aforesaid Annexure. Any Shareholder interested in obtaining a
copy of the same may write to the Company Secretary.
FINANCE
The borrowings of the Company as on March 31, 2010 stood at Rs. 16,625.91
crores (previous year Rs. 13,165.56 crores). The key highlights were:-
- In 2009-10, the Company raised Rs.4,200 crores from the issue of Secured,
Rated, Credit Enhanced, Listed, 2% Coupon Non-Convertible Debentures (NCDs)
with premium on redemption and Rs.200 crores from the issue of 9.95%
Secured NCDs.
- In a challenging financial market environment, the Company successfully
rolled over in May 2009, the bridge finance it had obtained for acquisition
of the Jaguar Land Rover business for a period of 18 months, till December
2010. Subsequently, the Company was able to prepay this loan facility in
October 2009 from certain divestments, improved cash generation from
operations and also through fund raised, US$ 375 million from the issue of
Global Depository Receipts and US$ 375 million from issue of Foreign
Currency Convertible Notes.
- Further, the Company made a limited period enhanced conversion offer to
the non-U.S. holders of the 0% JPY 11,760 million and 1% US$ 300 million
Convertible Notes. The offer met with great success with bondholders
representing 93% of the JPY bonds and 76% of US$ series bonds, opting to
convert their bonds into Ordinary Shares, which resulted in debt of US$ 345
million being extinguished against the issue of 26.64 million Ordinary
Shares.
- The Company also sold 20% stake in Telco Construction Equipment Company
Limited (Telcon), in favour of Hitachi Construction Machinery Co. Ltd.
(Hitachi) for a consideration of Rs.1,152.51 crores (net of expenses)
resulting in the Company's shareholding being reduced to 40% (on
consolidated basis).
Jaguar Land Rover completed guarantee arrangements to facilitate the
drawdown of a Euro338 million loan from European Investment Bank for its
projects aimed at emission reduction, besides other financing activities
like an inventory financing facility; renewal of a US$200 million loan; and
repaid short term borrowing totaling f220 million.
Tata Motors' Group debt:
Equity ratio in the operations continues to remain high at 4.3:1, though
significantly bought down from 5.9:1 as at March 31, 2009. The Board is
conscious of this, and the need to strengthen the long-term funding for the
business.
The Company will further consider suitable steps to de-leverage and hence
de-risk the balance sheet from volatility and has also taken and will
continue to implement suitable steps for raising long term resources to
match the Company's fund requirement and to optimize its loan maturity
profile. The Company's rating for foreign currency borrowings was revised
by Standard & Poor to B (Positive Outlook) and by Moodys' to B3 (Stable
Outlook). For borrowing in local currency the rating was revised to A+
(Stable Outlook) by Crisil and to LA+ (Stable Outlook) by ICRA.
INFORMATION TECHNOLOGY INITIATIVES
Tata Motors' Group continued to reinforce its IT capabilities in all areas
of business in design/engineering, manufacturing, vendor interface and
dealer/customer interface functions. The major initiatives undertaken
were:-
- In Product Development/Engineering, 3D design visualization capability,
enriching digital content by adding behaviour to digital models, Knowledge
Based Engineering tools and enhanced digital collaboration with vendors;
- Digital manufacturing solutions and validation was extensively deployed
for the Nano facilities planning; manufacturing Execution systems
implemented in the high-volume plants at Uttarakhand and Sanand;
- Supplier portal, which facilitates close collaboration from design/
development stage to production planning and scheduling;
- CRM-DMS program enhancements, which further enrich the on-line common
platform system for the Company's sales, spare parts service activities and
for all channel partners, giving the Company an on-line real-time market
and customer interaction and information capability;
- Extension of customer touch points through web, call centre and SMS.
- Jaguar Land Rover completed the process of separating its operations in
markets where it previously operated as a part of the Ford legal entity and
the process to separate the IT infrastructure and support systems is
expected to be completed shortly. Jaguar Land Rover also rolled out its new
SAP solution to many of its existing National Sales Companies around the
world including South Africa, Brazil, North America, France and China.
Jaguar Land Rover has initiated a major programme to re-engineer Product
Creation capability, covering every aspect of Product Lifecycle Management
(PLM) from concept to recycling, delivering a system that will provide
everyone with immediate access to all Product Creation information, with
simple-to-use, graphically-orientated user interfaces.
Tata Technologies Limited continues to be a key strategic partner in
several of these technology initiatives.
NEW PRODUCT, TECHNOLOGY AND ENVIRONMENT-FRIENDLY INITIATIVES
Product Development
Tata Motors' Group continuously assesses customer needs to develop new and
innovative products which deliver better value to its customers. In
pursuance of this strategy, the Company has developed significant in-house
capabilities and works with a range of partners to keep its product profile
rich and meet market expectations. Some of the key initiatives and projects
include:-
- The new heavy truck range Prima unveiled in May 2009, will be enriched
through several product and application variants such as tractor trailers,
tippers, rigid trucks over the next few years. TDCV received the Grand
Prize of 2009 Good Design Selection of Korea for the Prima, and development
on a range of light trucks is underway.
- The new range of buses (based on the Prima platform with bodies being
made by Tata Marcopolo displayed at the Delhi Auto Expo in January 2010)
have been launched. Tata Hispano has developed a new Intercity Coach the
Xerus and a new Suburban Bus, the Intea and is working on developing a
range of other buses.
- In small commercial vehicles, the Ace platform is being exploited to
introduce variants to address various market segments. The Ace EX and Super
Ace have been launched and the Company will introduce the multi-purpose
vehicle, Venture, the passenger vehicle variant, Magic Iris and the micro-
truck Ace Zip.
- The Aria, India's first indigenously developed crossover vehicle,
showcased at the last Auto Expo is expected to be launched in the first
half of 2010-11.
- Variants of the Nano, to suit specific needs of the domestic and
international markets are being developed. Increased thrust is being made
to explore opportunities for launch of the Indica Vista and the Indigo
Manza in various international markets.
- In July 2009, Jaguar Land Rover launched to the world, the beginnings of
its response to Environmental and C02 challenges with more compact and
efficient vehicles. The New XJ launched in early 2010-11, features the next
generation Jaguar's aerospace-inspired aluminum body architecture enhanced
power train with ultra efficient petrol and diesel engine variants, highest
standards of personal luxury and specifications, amongst which is its
instrument cluster with a 12th thin film transistor (TFT) screen. The Range
Rover Evoque, a new more compact product, with class leading C02
performance and technology is under development. The product will showcase
technology features including 'Park-for-you' and 'Magna-ride' to deliver
outstanding Chassis dynamics, whilst also showcasing increased use of
Aluminium and composites for exterior body panels to reduce weight.
Development of Environment-friendly Technologies
As a responsible automobile manufacturer, Tata Motors' Group aims to
develop vehicles and technologies to reduce the carbon footprint by
developing vehicles running on alternative fuels and hybrids such as:
- Development of a complete range of CNG vehicles including Ace, Magic,
Xenon, Winger, Indigo and also trucks and buses. Over 2200 CNG fuelled
buses were supplied to Delhi Transport Corporation. Tata Motors (Thailand)
Limited was the first OEM to offer a factory fitted CNG variant of the
Xenon pickup in the Thai market. Tata Daewoo Commercial Vehicle Co. Ltd.
(TDCV) pioneered the development and introduction of the first Liquefied
Natural Gas (LNG) tractor trailer and the LPG MCV truck in the South Korean
market.
- Hybrid technologies offer perfect solutions for certain commercial
vehicle applications. The Company is working on developing Diesel and CNG
hybrid solutions for city bus applications in India and also in Spain
through its subsidiary Tata Hispano. Tata Hispano received a grant from the
Spanish Government for the development of a Hybrid Low Floor City Bus. The
Company is working on both, series and parallel hybrid solutions and plans
to display the vehicles during the Delhi Commonwealth Games in October
2010. A mild-hybrid on the Ace platform-Ace Ex with a start-stop
arrangement which delivers a saving in fuel consumption in heavy traffic
conditions was launched in the previous year.
- On the electric vehicle range, the Company has secured its position in
research and development of electric vehicle technology. Ace EV, displayed
at Zaragosa exhibition in 2008 and Vista EV displayed at Geneva Motor show
in 2009, are in advanced stages of development. These vehicles will be
launched in the European markets, especially the northern European market
where there are strong fiscal incentives for such vehicles in the urban
city centers.
- The Company is simultaneously working to introduce a range of
technologies, which will help in reducing fuel consumption on its petrol
and diesel powered vehicles such as improved fuel injection systems,
electric power steering, radial tyres for commercial vehicles, low
resistance tyres, automatic transmissions and weight reduction of
components.
- Despite the severe financial conditions of the last 12 months, Jaguar
Land Rover has continued to invest heavily in process and product research.
During the past 12 months, 120 technology projects have been progressed
toward implementation on future programmes. The 10 model year programmes
delivered a range of advanced technologies including Dual View Screen
(world first), Continuously Variable Damping, Auto Headlamp Dipping and
Advanced All-Round Camera features. All of these were well received by the
press and customers alike and served to raise the technology image of
Jaguar Land Rover products.
- Further, an extensive range of new technologies are under development for
future programmes including 'Series' and 'Parallel' hybrid vehicles, with
the first generation of full parallel hybrids moving towards application
readiness later this year. Other projects include Limo-green (series
Hybrid), Power train downsizing, EV transmissions, etc; some of which have
been successful in securing government funding.
SUBSIDIARY/ASSOCIATE COMPANIES AND CONSOLIDATED FINANCIAL STATEMENTS
a. During the year, the following changes have taken place in subsidiary
companies:
Subsidiary companies formed/acquired:
* Tata Hispano Motors Carrocera S.A., (Hispano) became a subsidiary
consequent upon the Company exercising its put option and increasing its
stake from 21% to 100%. Consequently its wholly owned subsidiary
Carrosseries Hispano Maghreb, Morocco also became the Company's subsidiary.
* Jaguarl-andRover Limited, the Company's subsidiary formed the following
subsidiaries, viz. Jaguar Land Rover Brazil LLC, Limited Liability Company
'Jaguar Land Rover' (Russia), Land Rover Parts Limited and Land Rover Parts
US LLC.
Companies ceasing to be subsidiary companies:
* The Company partially divested 20% stake in Telco Construction Equipment
Company Limited (Telcon) in favour of Hitachi Construction Machinery Co.
Ltd (Hitachi). Consequently, its stake in Telcon was reduced to 40% (on
consolidated basis), resulting in Telcon and its 5 subsidiaries, viz.
Serviplem S.A., Baryval Assistencia Tecnica S.L., Comoplesa Lebrero S.A.,
Inner Mongolia North Baryval Engineering Special Vehicle Corporation Ltd
and Eurl Lebrero France, ceasing to be subsidiaries of the Company in March
2010 and have become associate companies.
* INCAT Holdings BV, INCAT KK and Lemmerpoort BV, subsidairies of Tata
Technologies Limited and Jaguar & Land Rover Asia Pacific Company Limited,
a subsidairy of Jaguar Land Rover Limited were liquidated.
* Miljo Innovasjon AS was merged with Miljobil Grenland AS.
Name changes:
* Tata Technologies Inc. from INCAT Systems Inc.
* Tata Technologies (Canada) Inc. from INCAT Solutions of Canada Inc.
* Tata Technologies de Mexico, S.A. de C.V from Integrated Systems de
Mexico, S.A. de C.V.
* Jaguar Land Rover Nederland BV from Land Rover Nederland BV.
* Tata Hispano Motors Carrocera S.A. from Hispano Carrocera S.A.
b. As required under the Listing agreement with the Stock Exchanges,
Consolidated Financial Statements of the Company is attached. In accordance
with the Statement of Accounting Standard on Consolidated Financial
Statements (AS 21) and the Accounting Standard on Accounting for
Investments in Associates (AS 23) and Accounting Standard on Accounting for
Joint Ventures (AS 27), issued by the Institute of Chartered Accountants of
India, the subsidiaries, associates and joint venture have been considered
in the Consolidated Financial Statements of the Company. On an application
made by the Company under Section 212(8) of the Companies Act, 1956, the
Central Government exempted the Company from attaching a copy of the
Balance Sheet and the Profit and Loss Account of the subsidiary companies
and other documents to the Annual Report of the Company. Accordingly, the
said documents are not being attached with the Balance Sheet of the
Company. The gist of financial performance of the subsidiary companies for
FY 2009-10 are provided under 'Subsidiary Companies: Financial Highlights-
2009-10' in the Annual Report. The Company will make available these
documents/details upon request by any member of the Company or its
subsidiary companies who may be interested in obtaining the same and will
also be kept open for inspection by them at the Registered Office of the
Company and at the Head Offices of the subsidiary company concerned. The
same would also be posted on the website of the Company.
c. Associate companies
As on March 31, 2010, the Company had the following associate companies:
Tata Cummins Limited (TCL), in which the Company has a 50% shareholding,
with Cummins Engine Co. Inc., USA holding the balance. TCL is engaged in
the manufacture and sale of high horse power engines used in the Company's
range of M & HCVs. Tata Auto Comp Systems Limited (TACO) is a holding
company for promoting domestic and foreign Joint Ventures in auto
components and systems and is also engaged in engineering services, supply
chain management and after market operations for the auto industry. The
Company's shareholding in TACO is 26%.
Tata Precision Industries Pte. Ltd., Singapore, in which the Company has a
49.99% shareholding, is engaged in the manufacture and sale of high
precision tooling and equipment for the computer and electronics industry.
Nita Co. Ltd., Bangladesh, in which the Company holds 40% equity, is
engaged in the assembly of TATA vehicles for the Bangladesh market.
Telco Construction Equipment Co. Ltd. (TELCON), in which the Company
divested a further 20% stake during the year in favour of Hitachi, is
engaged in the business of development, manufacture and sale of
construction equipment and allied services. Consequently Telcon is owned
60% by Hitachi and 40% (on consolidated basis) by Tata Motors.
Fiat India Automobiles Limited, a 50:50 joint venture company between Tata
Motors Limited and Fiat Company located in Ranjangaon, Maharashtra is
engaged in the manufacture of Tata and Fiat branded products as well as
engines and transmissions for use by both the partners.
Automobile Corporation of Goa Ltd. (ACGL), a Company in which Tata Motors
Limited has a 42.37% shareholding, was incorporated in 1980, jointly with
EDC Limited (a Goa government enterprise). ACGL is a listed company engaged
in manufacturing sheet metal components, assemblies and bus coaches and is
the largest supplier of buses (mainly for exports) to the Company.
FIXED DEPOSITS
In December 2008, the Company launched a public fixed deposit scheme to
meet a part of the funding requirements of the Company. The scheme has
received an overwhelming response and the management of the Company is
thankful to all the investors for participating in the scheme and the faith
reposed in the Company. The aggregate amount collected under fixed deposit
scheme as on March 31, 2010 was Rs. 3,173.45 crores from 2,87,343
depositors. The Company has no overdue deposits other than unclaimed
deposits. The Company has discontinued the acceptance and renewal of
deposits w.e.f. May 28, 2010.
ENERGY, TECHNOLOGY & FOREIGN EXCHANGE
Details of energy conservation and research and development activities
undertaken by the Company along with the information in accordance with the
provisions of Section 217(1)(e) of the Companies Act, 1956, read with the
Companies (Disclosure of Particulars in the Report of Board of Directors)
Rules, 1988, are given as an Annexure to the Directors' Report.
DIRECTORS
Mr N A Soonawala who had been on the Board of the Company since May 1989,
stepped down from the Board of Directors w.e.f. March 31, 2010 in
accordance with the 'Policy for Retirement Age of Non-Executive Directors'
adopted by the Company. His contributions particularly in areas of capital
raising, recent acquisitions and its financing/refinancing, financial
management and accounting and capital market matters, have helped the
Company in meeting its aspirations to become a truly global Company;
particularly in times of difficulties such as the global meltdown, market
swings, Nano relocation. Mr Soonawala was on the Board for more than 20
years and was a Member of the Executive Committee of the Board,
Remuneration Committee and the Nomination Committee. Mr Soonawala had by
his counsel and guidance tremendously contributed to the Company over the
years in its strategic direction and in its financial structure. The
Directors place on record the debt the Company owes to Mr Soonawala in
contributing to the Company's growth and premier position in the automobile
industry.
Mr. R. Gopalakrishnan, a Director of the Company since December 1998, who
retires by rotation at the ensuing Annual General Meeting has conveyed his
decision not to offer himself for re-appointment. Mr. Gopalakrishnan was
also a Member of the Executive Committee of the Board, Investors' Grievance
Committee and Ethics and Compliance Committee and has added value to
deliberations at Board/Committee Meetings. The Directors place on record
their appreciation of the contribution made by Mr Gopalakrishnan during his
tenure as Director of the Company.
The Board at its meeting held on May 27, 2010, appointed Mr Ranendra Sen as
an Additional Director, w.e.f. June 1, 2010 in accordance with Section 260
of the Companies Act, 1956 and Article 132 of the Articles of Association
of the Company.
Mr Carl-Peter Forster was appointed as Chief Executive Officer and Managing
Director of the Company w.e.f. April 1, 2010. An abstract and memorandum of
interest under Section 302 of the Companies Act, 1956 has been sent to the
members of the Company.
In accordance with the provisions of the Companies Act, 1956 and the
Articles of Association of the Company, M/s Ratan N Tata and R A Mashelkar
are liable to retire by rotation and are eligible for re-appointment.
Attention of the Members is invited to the relevant items in the Notice of
the Annual General Meeting and the Explanatory Statement thereto.
CORPORATE GOVERNANCE
A separate section on Corporate Governance forming part of the Directors'
Report and the certificate from the Practicing Company Secretary confirming
compliance of Corporate Governance norms as stipulated in Clause 49 of the
Listing Agreement with the Indian Stock Exchanges is included in the Annual
Report.
AUDIT
M/s Deloitte Haskins & Sells (DHS), Registration No. 117366W, who are the
Statutory Auditors of the Company hold office until the conclusion of the
ensuing Annual General Meeting. It is proposed to re-appoint them to
examine and audit the accounts of the Company for the Financial Year 2010-
11. DHS have, under Section 224(1) of the Companies Act, 1956, furnished a
certificate of their eligibility for re-appointment.
Cost Audit
As per the requirement of the Central Government and pursuant to Section
2338 of the Companies Act 1956, the Company carries out an audit of cost
accounts relating to motor vehicles every year. Subject to the approval of
the Central Government the Company has appointed M/s Mani & Co. to audit
the cost accounts relating to motor vehicles for the Financial Year 2010-
11.
DIRECTORS' RESPONSIBILITY STATEMENT:
Pursuant to Section 217 (2AA) of the Companies Act, 1956, the Directors,
based on the representation received from the Operating Management, confirm
that:
- In the preparation of the annual accounts, the applicable accounting
standards have been followed and that there are no material departures;
- They have, in the selection of the accounting policies, consulted the
Statutory Auditors and have applied them consistently and made judgments
and estimates that are reasonable and prudent so as to give a true and fair
view of the state of affairs of the Company at the end of the financial
year and of the profit of the Company for that period;
- They have taken proper and sufficient care, to the best of their
knowledge and ability, for the maintenance of adequate accounting records
in accordance with the provisions of the Companies Act, 1956, for
safeguarding the assets of the Company and for preventing and detecting
fraud and other irregularities; and
- They have prepared the annual accounts on a going concern basis.
ACKNOWLEDGEMENTS
The Directors wish to convey their appreciation to all of the Company's
employees for their enormous personal efforts as well as their collective
contribution to the Company's record performance. The Directors would also
like to thank the employee unions, shareholders, fixed deposit holders,
customers, dealers, suppliers, bankers, Government and all the other
business associates for the continuous support given by them to the Company
and their confidence in its management.
On behalf of the Board of Directors
RATAN N. TATA
Chairman
Place: Mumbai
Date : May 27, 2010.
Annexure to the Directors' Report
(Additional information given in terms of Notification 1029 of 31-12-1988
issued by the Department of Company Affairs).
A. Conservation of Energy
The Company has always been conscious of the need for conservation of
energy and has been steadily making progress towards this end. Energy
conservation measures have been implemented at all the plants and offices
of the Company and special efforts are being put on undertaking specific
energy conservation projects like installation of Variable Frequency Drives
& Circulation pumps in paint shop, replacement of forced draft exhaust
arrangement by natural draft exhaust arrangement for the extraction of
fumes in paint shop, installation of energy efficient motors, LED & CFL
lamps, Wind Ventilators, Super Magnetic Dust Separators, Solar Photovoltaic
Hybrid System for corridor lighting, use of natural light in plant by using
Polycarbonate translucent sheets, switching off unwanted high bay lights &
shop substation transformers, downsizing of the motors, provision of heat
resistive cover for furnaces, introduction of Propane in place of LIDO in
ovens and heat treatment furnace, transferring cylinder block core
production from Shell Core method to Cold Box method, etc. These changes
have resulted in cost savings for the Company of around Rs. 8.5 crores &
annual CO2 reduction of 15179 tCO2. The company's CVBU Pune plant was
awarded a Trophy and Certificate for 'Green India Awards-2009 & was
declared as 'Green Leader' by FROST & SULLIVAN, Banglore. ACE Plant at
Pantnagar plant won first prize in 'Automobile Manufacturing' sector, an
award for 'National Energy Conservation Awards-2009' by Bureau of Energy
Efficiency (BEE), Ministry of Power, Government of India. Car Plant at Pune
bagged the First Prize in Safety, Health & Environment (SHE) competition
organised by the Confederation of Indian Industry (CII), Western Region,
for the year 2009-10. Jamshedpur plant won the Best Entry Award for the
Energy Conservation (ENCON) Contest 2009-10 organised by the Confederation
of Indian Industry (CII) in the Eastern region (ER). Lucknow has been
awarded the Excellent Energy Efficient Unit Award at the 10th National
Awards for Excellence in Energy Management-2009 conducted by CII-Godrej
Green Business Centre at Chennai. The Company's endeavour for tapping wind
energy has also made significant contributions. Total energy produced by
wind power for this year was 529.5 lakh units and this resulted in savings
in electricity charges of Rs.18.2 crores.
B. Technology Absorption
The Company has continued its endeavor to absorb the best of technologies
for its product range to meet the requirements of a globally competitive
market. All of the Company's vehicles and engines are compliant with the
prevalent regulatory norms in India and also in the countries to which they
are exported. The Company has also undertaken programs for development of
vehicles which would run on alternate fuels like LPG, CNG, Bio-diesel,
Electric traction etc.
Major Technology absorption projects undertaken during the last year
include:
Technology for Technology Status
Provider
Model based development for KPIT Cummins, Completed
Engine Stop Start functionality India
ALC (Touch, Appearance, Light, Colour) Delphi,
Interior Harmony development methodology Germany Completed
Acoustic tuning for Infotainment
system Delphi, USA Completed
EMC reliability through design specifications IDIADA-NSI, Completed
& verification on vehicle Spain
Parallel Hybrid Technology for Buses Eaton In
Progress
Hardware in Loop (HIL) System and Test
Framework development for Body Control KPIT, India Completed
Module and Instrument Cluster
In keeping with the requirement of technological up gradation of its
engines development facility, the company has added facilities such as
440KW High Dynamic Transient Dynamometer with state-of-the-art Raw gas
emission measurement facility and intake airconditioning system for
developing heavy duty commercial vehicle engines up to 8 L. The Company has
also added a variety of testing facilities and equipment such as Sound
Quality Studio, Acoustic transmission loss test rigs for specific body
panels, cost effective telemetry based measurement system for pass by
noise, wheel force transducers to gather road load data in a single set up
and has also indigenously developed in-house capability to conduct side
pole impact crash tests. The Company has developed following new
technologies/methods and processes for its range of passenger cars and
commercial vehicles such as:
a) Plastic balance gears;
b) Spoked flywheel;
c) Mass dampers on rear suspension arms;
d) Dual mass flywheel system; etc. During the year, the Company has filed
150 Patent applications, 44 Design applications and 78 Copyright
applications. Six Patents were granted, 30 Designs and 34 Copyrights were
registered to the Company for applications filed in the earlier years.
Major Technology imports include:
Technology for Imported from Year of Status
Import
Development &
application of a
two cylinder common FEV, Germany 2007-08 Under
rail diesel engine for small 2008-09 Implementation
passenger car and small
commercial vehicles. 2009-10
Gas Injection technology for
LCV, MCV & HCV engines AEC,Australia 2009-10 In Progress
Stop-Start feature for
various vehicle platforms Lucas, UK 2009-10 In progress
Continental,
USA
Concept-Automated Manual One
transmission for Prodrive,UK 2009-10 Unit imported
commercial vehicles Porsche, as Technology
Germany Demonstrator
Completed
Multiplexed wiring systems Continental, 2009-10 Completed
for bus platforms USA
Gas Injection technology AFS, Canada 2009-10 Completed
for Ace, Xenon, Winger
engines
Engine Management for Series AEC, 2008-09 Implementation
Hybrid Technology for Buses Australia, 2009-10 In Progress
Design & Development of Ricardo
New Generation engine UK Ltd. UK 2006-07 Under
platforms for LCVs and UVs implementation
Design & Development of New AVL List
Generation engine GMBH,Austria 2007-08 Completed
platforms for ICV/MCV Delphi
Diesel
Systems,
France
Design & Development of
Infinitely variable transmission M/s Torotrak 2007-08 Under
based on full toriodal traction- (Holdings) implementation
Drive variators for Ltd. UK
various vehicle platforms.
Design & Development of flush Wagon
sliding and plug SAS, France 2007-08 Completed
Design & Development of Electric Tata Motors
Hatchback in windows European 2008-09 Under
Vehicle-Indica Vista EV Technical implementation
Centre plc,
UK (TMETC)
During the year the Company spent Rs. 1,170.97 crores on Research and
Development activities including expenditure on capital assets purchased
for Research and Development which was 3.29% of the net turnover.
C. Foreign Exchange Earnings and Outgoing
Rs. in crores
Earnings in foreign currency 3,047.56
Expenditure in foreign currency (including
dividend remittance) 2,398.70
MANAGEMENT DISCUSSION AND ANALYSIS
Business Overview
As the Indian economy bounced back and grew by 7.2% in 2009-10, the
automotive industry in India recorded steady growth in the first two
quarters and recorded significant growth in the last two quarters of 2009-
10.
The commercial vehicle industry grew by 40.1% compared to the decline of
17.4% in 2008-09. The passenger vehicle industry, which had showed a
decline of 0.5% in the previous year, grew by 24.8% in 2009-10.
With single digit inflation, the monetary policies of the Government were
relaxed leading to a fair availability of vehicle finance in the market,
albeit at costs higher than the historical lows. Fuel costs remained fairly
stable during the year benefited by the stable international crude oil
prices. From April 1, 2010, India was due to migrate its emission norms to
the Bharat Stage IV in the 13 metro cities and Bharat Stage III in the rest
of the country. Due to the imminent increase in vehicle prices as a result
of the technological changes in the vehicles conforming to new regulations,
there was a spurt in the demand in the last quarter. The GDP grew by 7.4%
in 2009-10 as compared to preceding year. The commodity prices also
remained stable for most part of the year thereby keeping the input costs
in check. All these factors resulted in the Indian automotive industry
posting a significant and profitable growth in 2009-10.
The Company's total sales increased by 31.9% to 667,971 vehicles in 2009-10
in the domestic and overseas markets. The commercial vehicle sales
increased to 373,842 in the domestic market, an increase of 40.9% and the
Company consolidated its leadership position by introducing new products to
complement its existing product portfolio. The passenger vehicles volumes
grew by 25.3% to 260,020 vehicles in the domestic market on the back of the
launch of the Nano and the Indigo Manza. The Company's exports increased by
1.7% during the year, due to the slow recovery in major international
markets.
The industry performance in the domestic market during 2009-10 and the
Company's share is given below:
Category Industry sales Company sales
(Nos.) (Nos.)
2009-10 2008-09 Growth 2009-10 2008-09 Growth
Commercial 582,538 415,724 40.1% 373,842 265,373 40.9%
Vehicles
Passenger 1,899,144 1,521,421 24.8% 260,020 207,512 25.3%
Vehicles#
Total 2,481,682 11,937,145 28.1% 633.862 472.885 34.0%
Category Company
market share %
2009-10 2008-09
Commercial 64.2 63.8
Vehicles
Passenger 13.7 13.6
Vehicles#
Total 25.5 24.4
Source:
Society of Indian Automobile Manufacturers report and Company Analysis
* Including Magic and Winger sales.
# Including Fiat & Jaguar Land Rover branded cars.
The input prices remained stable for most part of the year. The Company
continued its cost reduction efforts to improve profitability. Through its
continued focus on new product development, the Company launched many new
products and variants in the market.
Industry Structure and Developments Commercial Vehicles
The domestic Commercial Vehicle market in 2009-10 recorded a robust growth
of 40.1% which resulted in the highest ever sales of 582,538 units in 2009-
10. The market recorded significant growth in the second half of the year
mainly due to a buoyant economy and easy availability of credit. This can
be attributed significantly to the growth in the Index of Industrial
Production (IIP) which grew steadily from a very low growth in the initial
part of the year to significantly higher growth towards the end of the
year. Cumulatively, the IIP growth rate for 2009-10 was 10.4% as against
2.8% for the previous year. The growth in IIP was seen across all sectors
and segments. Aided by these, the growth in volumes in the CV market, was
seen across all segments.
The domestic industry performance during 2009-10 and the Company's share is
tabulated below:
Domestic Industry sales Company sales
(Nos.) (Nos.)
Category 2009-10 2008-09 Growth 2009-10 2008-09 Growth
M&HCV 245,063 183,516 33.5% 155,161 113,697 36.5%
LCVs* 337,475 232,208 45.3% 218,681 151,676 44.2%
Total 582.538 415.724 40.1% 373.842 265.373 40.9%
Domestic Company
Market Share (%)
Category 2009-10 2008-09
M&HCV 63.3 62.0
LCVs* 64.8 65.3
Total 64.2 63.8
Source:
Society of Indian Automobile Manufacturers report and Company Analysis.
* Including Magic & Winger sales
The Company's commercial vehicle sales in the domestic and international
markets, at 401,720 vehicles, were 37.6% higher than the previous year. The
Company reported domestic sales of 373,842 vehicles, a robust growth of
40.9% over the previous year. The Company recorded its highest ever sales
in the domestic commercial vehicle market. A strong product portfolio,
coupled with its leadership in market penetration/reach and extensive
efforts toward finance enablement for customers helped the Company in
increasing its market share in the last year. Most of the key international
markets were affected more severely than India, by the downturn in the
previous year. With a steady recovery in some key markets, commercial
vehicle exports also grew by 4.7%.
In the domestic market, the M&HCV segment grew by 33.5% on the back of
strong growth in the Indian economy. Growth in the core sectors of the
economy benefited the M&HCV segment. The Company's model LPT 3118 was well
received in most domestic markets and aided an increase in M&HCV sales. The
Company unveiled in May 2009, the range of its next generation of heavy
trucks-Prima. The Prima sales have started and over the couple of years,
the Company plans to launch variety of models, rigid trucks, tractors and
tippers in the 'Prima' range. The market share of the Company increased
from 62.0% to 63.3% in this growing market. The Company also completed the
delivery of the 1,625 low floor entry Marcopolo buses to Delhi Transport
Corporation (DTC) in 2009-10, in addition to 650 buses supplied in the
previous year. As a part of the stimulus package to help the automotive
industry during crisis in the previous year as also to modernize the public
transportation in the cities, the Government of India announced its
intention to procure modern city buses under the JnNURM scheme. The Company
secured orders for over 5,000 buses, a significant portion of which have
been supplied in 2009-10 and the balance will be supplied in 2010-11.
The LCV segment showed spectacular growth throughout 2009-10 and grew by
45.3%. While this was largely aided by the growth in the small commercial
vehicles, the rest of the segment comprising the 4 and 7 tonne segments
also grew handsomely. The Company launched specific products in both these
segments which helped increase in volumes and market shares. The Company
also launched the 407 Pick-up which was well received and is expected to
increase sales of pick-ups. Tata Ace sales continued to record higher
volumes despite completing almost 4 years and its success is unmatched in
the Indian auto industry. However competition in the small commercial
vehicle range increased with launch of vehicles by competition resulting in
the Company losing market share of 0.5% to 64.8%. The Company launched new
variants on the Ace platform, Ace EX. Super Ace which are expected to help
in gaining additional volumes going forward.
At the Auto Expo in January 2010, the Company unveiled the Magic Iris and
the Venture in the passenger carrier range and also the new range of buses
powered by the next generation of LCVs. These products would be in
commercial production in 2010-11 and would assist in improving the
Company's market share.
Passenger Vehicles
The sentiment in the year 2009-10 was significantly positive as compared to
the previous year. The overall recovery in the economy coupled with the
introduction of new models in the market, availability of finance and
aggressive pricing by all the players, resulted in a growth of 24.8% over
last year.
The domestic industry performance and the Company's performance in the
segments that it operates in is tabulated below:-
Domestic Industry sales Company sales*
(Nos.) (Nos.)
Category 2009-10 2008-09 Growth 2009-10 2008-09 Growth
Small Car 1,191,300 935,386 27.4% 158,093 115,160 37.3%
(mini+
compact)
Midsize Car 225,726 245,571 (8.1%) 68,420 53,057 29.0%
Utility 270,724 223,255 21.3% 33,507 39,295 (14.7%)
Vehicle/SUV
Total 1,899,144 11,521,421 24.8% 260,020 207,512 25.3%
Passenger
Vehicles#
Domestic Company
Market Share* (%)
Category 2009-10 2008-09
Small Car 13.3 12.3
(mini+
compact)
Midsize Car 30.3 21.6
Utility 12.4 17.6
Vehicle/SUV
Total 13.7 13.6
Passenger
Vehicles#
Source:
Society of Indian Automobile Manufacturers report and Company Analysis.
* Including Fiat & JLR branded cars.
# Including all segments.
In 2009-10, the Company recorded sales of 266,251 vehicles (including Fiat
& Jaguar Land Rover) in the domestic and overseas market, the highest ever
for the Company. The Company continued to be amongst the top three players
in the Indian passenger vehicle market with domestic sale of 260,020
vehicles, its highest ever and with a market share of 13.7%. The Company
continued to gain market share month-on-month on account of new products
that were launched and had matured during the year. The Indica Vista
launched in the previous year continued to receive increasing market
acceptance and the Indigo Manza launched in October 2009 was extremely well
received in the market. The Company also rolled out the Tata Nano in July
2009. With a slow recovery from the economic turmoil of the previous year
in key export markets, passenger vehicle exports declined by 9.9% over the
previous year.
The small car industry continued to be the fastest growing segment of the
passenger vehicle industry with a growth rate of 27.4%. A large share of
this was driven by a recovery in the economy as well as fiercely increasing
competition with the entry of global automobile manufacturers. With the
introduction of 9 new models, a total of 25 models now compete for a share
of this attractive market. With the growing sales of the Vista and the
introduction of the Nano and Fiat Punto, the Company improved its overall
market share to 13.3% as against 12.3% in the previous year. The Company
received a total of 2.03 lakhs bookings for the Nano after the launch in
March 2009. With deliveries commencing from July 2009, the Company
delivered 30,763 Nanos from its Uttarakhand facility. With construction at
the Sanand facility in Gujarat progressing on an accelerated pace, the
Company started trial production in the last quarter of 2009-10 and
commercial production at Sanand started in April 2010.
The entry midsize car industry grew at 17.7% with sales of 176,604 units
during 2009-10. The Indigo range registered an increase of 10.9% consequent
upon launch of the Indigo Manza in October 2009, leading to market share
gain, ending the year with the highest ever sales in the Indigo range in
March 2010. The Indigo CS continued to be well received in the market.
The Utility Vehicle market, which had declined by 6.5% last year, reversed
the trend in 2009-10 and bounced back, growing by 21.3%. The Company sold
33,507 units, a decline of 14.7% against the last year and as a result its
market share dropped to 12.4% from 17.6% in the previous year. The Grande
Mk II launched in December 2009 has been well accepted in the market and
the Venture and Aria (unveiled in the Delhi Auto Expo) to be launched in
mid 2010-11 will assist in regaining market share in this segment.
The Company sold 24,884 Fiat cars in 2009-10, representing 1.3% market
share of Fiat brand against 0.5% in the previous year. Linea sales at
11,102 units (market share 10.1% in the upper mid-size car market) and
Grande Punto sales at 13,281 units (market share 3.5% in the B compact car
market) have assisted the Company in achieving a higher market share.
The Company sold 225 Jaguar and Land Rover vehicles in its first year of
launch of the Jaguar Land Rover brands in India. These brands are getting
an extremely good response in the market and the Company is increasing its
dealership footprint across the country.
Financial Performance as a measure of Operational Performance (on a
standalone basis)
Overall economic recovery and a benign liquidity environment along with
government stimulus have driven domestic demand revival during the current
year. With the upturn in economy, the Company revenue has grown by 38.9% in
2009-10. Operating margin was higher due to increase in volumes and cost
reduction initiatives taken by the Company. The Company recorded Profit
before tax of Rs.2,829.54 crores, growth of 179.1%. The Profit before tax
includes Rs.1,112.51 crores profit on sale of controlling stake in a
subsidiary company and loss of Rs.850.86 crores on redemption of
investments in preference shares held in a subsidiary company. The Profit
after tax which increased to Rs.2,240.08 crores from Rs.1,001.26 crores in
2008-09 had recorded a growth of 123.7%. The following table set forth the
breakup of the Company's expenses as part of the net turnover.
Percentage of Turnover
2009-10 2008-09
Turnover net of excise duty 100.0 100.0
Expenditure:
Material (including change in
stock and processing charges) 71.7 75.7
Employee Cost 5.2 6.0
Manufacturing and other expenses (net) 11.4 11.4
Total Expenditure 88.3 93.1
Other Income 5.2 3.6
Profit before Exceptional Item,
Depreciation, Interest and Tax 16.9 10.5
Depreciation (including product
development expenditure) 3.3 3.6
Interest and Discounting Charges (Net) 3.1 2.6
Exchange Loss (Net) on revaluation of 0.2 0.3
foreign currency borrowings, deposits
and loans given
Loss on redemption of investments in 2.4 -
Preference Shares held in a
subsidiary company
Profit before Tax 7.9 4.0
Turnover net of excise duty
Turnover net of excise duty increased by 38.9% to Rs.35,593.05 crores in
2009-10 from Rs. 25,629.73 crores in 2008-09. The total number of vehicles
sold during the year increased by 31.9% to 667,971 units from 506,421
units. The domestic volumes increased by 34.0% to 633,862 units from
472,885 units in 2008-09, while export volumes, marginally increased by
1.7% to 34,109 units from 33,536 units in 2008-09. Gross turnover from sale
of vehicles including export and other incentives increased by 37.1% to
Rs.34,677.40 crores from Rs.25,302.71 crores in 2008-09. Sale of Spare
parts for vehicles increased by 19.5% to Rs. 2,263.54 crores from
Rs.1,894.92 crores in 2008-09.
Material (including change in stockand processing charges)
(Rs. in crores)
2009-10 2008-09 Change %
Consumption of 20,392.60 16,187.68 4,204.92 26.0
raw materials
and components
Purchase of
product for sale 4,513.23 2,180.32 2,332.91 107.0
Processing Charges 1,212.90 810.60 402.30 49.6
Change in Stock-in-
trade and Work-
in-progress (606.63) 238.04 (844.67) (354.7)
Material (including
change in stock and
processing charges) 25,512.10 19,416.64 6,095.46 31.4
Net Raw Material consumption including processing charges increased by
31.4% to Rs.25,512.10 crores from Rs.19,416.64 crores in 2008-09, due to
increase in vehicle volumes. Material cost as a % of net turnover decreased
to 71.7% from 75.7% for the last year. The input price increases during the
year was off set by cost reduction programme through value engineering and
other measures.
Employee Cost:
The employee cost increased by 18.4% to Rs.1,836.13 crores from Rs.1,551.39
crores in 2008-09, mainly due to normal annual increments/promotions and
increase in headcount. The Company continues to focus on measures to
improve/manage employee cost and productivity.
Manufacturing and Other Expenses:
The manufacturing and other expenses as a percentage of net turnover have
remained at 11.4% for both the years. In absolute terms, the expenses have
increased to Rs.4,066.54 crores in 2009-10 from Rs.2,909.26 crores in 2008-
09. The increase is due to variable costs on account of increase in
volumes, such as sales incentives, warranty, freight etc.
Other Income increased to Rs.1,853.45 crores from Rs.925.97 crores in 2008-
09, mainly due to higher profit on sale of investments. Other income for
2009-10 includes profit of Rs.1,801.12 crores (Rs.520.27 crores for 2008-
09) on sale of its investments [including profit on sale of shares in
Telcon] and dividend from subsidiary companies Rs.7.62 crores (Rs.307.34
crores for 2008-09).
Profit before Exceptional Items, Depreciation, Interest and Tax increased
by 125.2% to Rs.6,031.73 crores from Rs.2,678.41 crores of 2008-09. The
increase reflects volume effect, increased operating margin and increased
in other income.
Depreciation and amortization (including product development expenditure)
for 2009-10 increased by 27.2% to Rs.1,177.90 crores from Rs.925.71 crores
in 2008-09. The increase represents impact on account of additions to fixed
assets towards plant and facilities for expansion and new products.
Further, there has been an increase in amortization consequent to
capitalization of product development cost relating to various new products
- Prima, Indigo Manza, Nano and other products.
Net interest cost increased to Rs.1,103.84 crores from Rs.673.68 crores of
2008-09. The borrowings have increased mainly on account of capital
expenditure and investment in subsidiary SPV companies related to
acquisition/meeting additional funding requirements of Jaguar and Land
Rover business. A significant portion of the volume effect was offset by
the Company by raising finances at competitive rates.
Exceptional Items:
TML Holdings Pte. Ltd., Singapore (TMLHPL), a wholly owned subsidiary of
the Company, had accumulated losses on account of finance charges and
acquisition related expenses for the Jaguar and Land Rover acquisition. In
order to restructure TMLHPL's balance sheet, it has redeemed preference
shares of the face value of US$195.1 million at a discount of US$189.2
million. Consequent to the redemption, the Company has recognized a loss of
Rs.850.86 crores.
Profit Before Tax (PBT) of the Company increased to Rs.2,829.54 crores from
Rs.1,013.76 crores in 2008-09, representing an increase of 179.1%.
Tax expenses increased to Rs.589.46 crores from Rs.12.50 crores in 2008-09.
The effective tax rate for 2009-10 is 20.8% of PBT as compared to 1.2% for
2008-09. While the tax expense continues to be lower as compared to
marginal rate of tax of 33.99%, the increase in tax rate in the current
year is mainly due to the fact that the Company had marginal tax liability
in 2008-09, on account of overall low profitability, higher proportion of
'Other Income' not liable to tax/liable to lower tax.
Profit After Tax (PAT) of the Company increased by 123.7% to Rs.2,240.08
crores from Rs.1,001.26 crores in 2008-09. Basic Earnings Per Share (EPS)
increased to Rs.42.37 as compared to Rs.22.70 last year for Ordinary Shares
and Rs.42.87 as compared to 23.20 for 'A' Ordinary Shares.
Balance Sheet size (Fixed Assets, Investments and Net Current Assets) of
the Company increased to Rs.33,100.02 crores as at March 31, 2010 from
Rs.26,425.64 crores as at March 31, 2009. The increase is attributable to
capital expenditure incurred by the Company and strategic investments. As
at March 31, 2010, the Share Capital of the Company stood at Rs.570.60
crores.
Fixed Assets (Rs. in crores)
2009-10 2008-09 Change %
Gross Fixed Assets 23,648.96 20,852.06 2,796.90 13.4
(including capital
work in progress)
Accumulated
Depreciation (7,212.92) (6,259.90) (953.02) 15.2
Total 16,436.04 14,592.16 1,843.88 12.6
The gross fixed assets including Capital Work in Progress increased to
Rs.23,648.96 crores as at March 31, 2010 as compared to Rs. 20,852.06
crores as at March 31, 2009. After considering the depreciation the net
block represent Rs.16,436.04 crores as at March 31, 2010, an increase of
Rs.1,843.88 crores. The major additions were Nano project at Sanand, plant
and facilities for World Truck etc. and product development cost, mainly
towards Nano, Prima and other new products.
Investments increased to Rs.22,336.90 crores as at March 31, 2010 as
compared to Rs.12,968.13 crores as at March 31, 2009. The Company has
invested Rs.10,575.60 crores in equity and preference shares of TML
Holdings (Pte) Ltd, Singapore, which in turn prepaid the bridge loan taken
for acquisition of Jaguar and Land Rover business. Further, TML Holdings
(Pte) Ltd, Singapore has redeemed preference shares of Rs.877.16 crores.
The Company sold part of its investments in Tata Steel Ltd and 20% stake in
Telco Construction Equipment Co. Ltd.
Net Current Assets (Rs. in crores)
2009-10 2008-09 Change %
Current Assets, 11,537.98 9,540.25 1,997.73 20.9
Loans and Advances
Current Liabilities (14,609.16) (8,597.97) (6,011.19) 69.9
Provisions (2,763.43) (2,078.95) (684.48) 32.9
Net Current Assets (5,834.61) (1,136.67) (4,697.94) 413.3
Net current assets decreased to Rs.(5,834.61) crores as at March 31, 2010
from Rs.(1,136.67) crores as at March 31, 2009. The inventories have
increased due to increase in turnover. The sundry debtors have increased
due to higher year end sale and sale to various state transport
undertakings whose payments are received after 60 to 90 days of billing.
Current liabilities have increased due to increase in purchase bill
discounting and liability towards premium on redemption of non convertible
debentures. Provisions have increased mainly on account of increase in
proposed dividend.
Gross debt (total of secured and unsecured loans) increased to Rs.16,625.91
crores as at March 31, 2010 as compared to Rs.13,165.56 crores as at March
31, 2009. The following were the main changes impacting the gross debt:-
1. Issue of privately placed Non-Convertible Debentures of Rs.4,200 crores
and US$375 million (Rs.1,794 crores) Foreign Currency Convertible Notes
(FCCN). These were used for payment of bridge loan taken for Jaguar and
Land Rover acquisition.
2. Debt taken for investments in fixed assets.
3. Increase in Fixed Deposit portfolio by Rs.1,940.98 crores
4. Reduction in debts (FCCN/CARS) mainly on account of positive movement of
exchange rates.
5. Offer to the FCCN holders, an option to convert their Notes into
Ordinary Shares during a limited period. This enabled the Company to lower
the debt by Rs. 1,556 crores.
Net debt (gross debt reduced by available cash and bank balances and mutual
fund investments) stood at Rs. 14,962.33 crores as at March 31, 2010 as
compared to Rs. 12,486.66 crores as at March 31, 2009.
The cash generated from operations before working capital changes and
before considering deployment in the vehicle financing business was
Rs.4,354.63 crores as compared to Rs.1,556.70 crores in the previous year.
This reflects turnaround in the operations mainly due to volumes and
profitability. There has been a net positive movement of Rs.2,750.61 crores
as compared to negative Rs.95.66 crores in 2008-09, in respect of cash
flows relating to receivables, inventory, trade payable and vehicle
financing loans. Thus the net cash generated from operations was at
Rs.6,586.03 crores as compared to Rs.1,295.02 crores in the previous year.
The cash and bank balances have increased by Rs. 611.44 crores.
Opportunities and Risks
Opportunities
Road development:
Continued improvement in road infrastructure in coming years is expected to
have a positive effect on automobile sales. According to Ministry for Road,
Transport and Highways, the government will spend about Rs.1,000 billion
over future years, with a target of building 20 km of road every day. The
Golden Quadrilateral road project was 99% complete as on March 31, 2010.
Over 65% of the planned roads under the North South East West (NSEW) road
corridor project have been completed till February 2010. Rural connectivity
is expected to correspondingly improve which would expand significantly the
population/markets/supply sources participating in the overall economic
growth. The Eleventh five year plan has projected a requirement of about
Rs. 41,000 crores for improving rural road conditions/connectivity under
the PMGSY programme (Pradhan Mantri Grameen Sadak Yojna).
Improvement in road infrastructure at a faster pace will facilitate swifter
transportation of goods and passengers, and would in turn create a demand
for safer, reliable and faster vehicles. With its wide range of goods and
passenger transportation vehicles ranging from 0.75 Ton load carrier to
large haulage tractors (49T) for goods movement, buses and coaches for
public transportation and passenger cars and utility vehicles for personal
transportation, the Company is poised to gain significantly with these.
Population Dividend and Increase in income levels:
India has the youngest population in the world, with about 65% under the
age of 35. Further, about 63% of the Indian population is in the working
age group (19-64 years). The income levels in India, have more than doubled
in the last seven years as indicated by Per Capita Income. It is predicted
that the Per Capita Income in India, would continue to increase with
comparatively higher saving rate. Growing middle income level population
and rise in their average income levels all augur well for the automotive
industry, both in terms of personal transportation needs as well as goods
movement.
Growing consumer culture:
In India, the demand for a better lifestyle has enhanced consumption levels
and rapid growth in several segments like retail chains, cellular phones
and cable and satellite television. Proliferation of mobile phones and
satellited televisions is leading to urbanization of mindset and
consumerism in rural people. With increasing desire for leading urban
lifestyle, per capita movement between villages and urban centres is
expected to witness an explosive growth in the coming year, which will lead
to huge demand for passenger carriers and buses. Consumerism is also
expected to lead to an increase in car penetration from the current levels
of 8 per thousand towards the 500+levels witnessed in the developed
countries. The Company, with its wide portfolio is expected to benefit from
improvement in lifestyle and higher aspiration levels in passenger cars and
potential growth in freight movement.
Rural Market Growth:
As per the recent report by Accenture Consulting, rural spending is now
less dependent on farm income, with less than 50% of the rural income being
contributed by farm income. Income remittances from migrant rural
populations and increases in non-farm activities such as trading and agro-
processing are boosting non-farm income. The increase in procurement prices
and improved access to finance and institutional credit has brought greater
wealth to rural households. Policy measures such as the waiver of
agricultural loans and the National Rural Employment Guarantee Scheme
(NREGS), which guarantees 100 days of employment to one member of every
rural household, and increased government spending in rural areas, have
helped to reduce rural under-employment and raised rural income levels. It
is estimated that compared with 48% of motorcycles sales in the rural
areas, only 11% of cars/UVs sales are today contributed by the rural
market, which indicates a potential growth opportunity in this market. The
Company has planned affordable transport solutions and distribution
channels to leverage the opportunities presented by this market.
International Business:
India continues to be a cost competitive source for the automotive industry
globally, both for vehicles and components. India's manufacturing base
continues to benefit from these scale economies coupled with
technology/quality improvements. The Company has opportunities to increase
its exports significantly, particularly with the new and contemporary
product offerings in commercial vehicles and passenger cars. The Company is
also setting up/exploring manufacturing footprint overseas, which would
combine these advantages with local operations and sourcing in these
markets.
Risks
Hardening of interest rates and other inflationary trends:
Further hardening of consumer interest rates could have an adverse impact
on the automotive industry. Increase in inflation could also have a
negative impact on automobile sales in the domestic market.
Fuel Prices:
As compared to the volatility in international oil prices in 2008-09 (from
a high of US$145 per barrel in June 2008 to a low of US$30 per barrel), the
fuel price has remained high at about US$85 in 2009-10. In India the fuel
prices are subsidized by the Government and going forward may be
decontrolled. Higher fuel prices will force the consumers to think of
alternative transportation solutions or defer purchases. The Company's
product programmes encompasses initiatives to improve fuel efficiency of
its products and investing in programmes for development of alternative
solutions. The Kirit Parikh committee recommendations that the retail
prices of petrol and diesel to be market determined and that an additional
excise duty of Rs.80,000 per car to be levied on diesel cars, if
implemented, could adversely impact demand.
Input Costs:
With many economies coming out of recession, prices of commodity items like
steel, non-ferrous, precious metals, rubber and petroleum products are
expected to rise significantly. Whilst the Company continues to pursue cost
reduction initiatives, increase in price of input materials could severely
impact the Company's profitability to the extent that the same are not
absorbed by the market through price increases and/or could have a negative
impact on the demand in the domesticmarket.
Government Regulations:
Stringent emission norms and safety regulations could bring new
complexities and cost increases for automotive industry, impacting the
Company's business. WTO, Free Trade Agreements and other similar policies
could make the market, more competitive for local manufacturers.
In the international markets, many of which have stricter norms of
regulations related to emission, safety, noise, technology etc, the Company
competes with international players which have global brand image, larger
financial capability and multiple product platforms. These factors may
impact demand of the Company's products in international markets.
Global Competition:
India continues to be an attractive destination for the global automotive
players. The global automotive manufacturers present in India have been
expanding their product portfolio and enhancing their production
capacities. To counter the threat of growing global competition, the
Company has planned to bridge the quality gap between its products and
foreign offerings while maintaining its low cost product
development/sourcing advantage.
Exchange Rates:
Our operations are subject to risk arising from fluctuations in exchange
rates with reference to countries in which we operate. These risks
primarily relate to fluctuations of Pound to US Dollar, Japanese Yen and
Euro, and fluctuations of Indian Rupee against Pound, US Dollar and Euro.
We import capital equipment, raw materials and components and also sell our
vehicles in various countries. These transactions are denominated in
foreign currencies, primarily the U.S. dollar and Euro. Moreover, we have
outstanding foreign currency denominated debt and hence we are sensitive to
fluctuations in foreign currency exchange rates. We have experienced and
expect to continue to experience foreign exchange losses and gains on
obligations denominated in foreign currencies in respect of our borrowings
and foreign currency assets and liabilities due to currency fluctuations.
Although we engage in currency hedging as per our policy in order to
decrease our foreign exchange exposure, the weakening of rupee against the
dollar or other major foreign currencies may have an adverse effect on our
cost of borrowing and consequently may increase our financing costs, which
could have a significant adverse impact on our results of operations.
New Project Execution:
Intensifying competition, reducing product life cycles and breadth of the
Company's product portfolio, necessitates the Company to continuously
invest in new products, upgrades and capacity enhancement programme. Though
the Company employs sophisticated techniques and processes to forecast the
demand of new products yet the same is subject to margin of error. Timely
introduction of new products, their acceptance in the market place and
managing the complexity of operations across various manufacturing
locations, would be the key to sustain competitiveness.
Outlook
In 2009-10, the first half was slightly weak; however economies across the
world (with a few exceptions) have signs of revival. In 2010-11, global
growth is expected to be more than 4% as compared in 2009-10. The Indian
economy is expected to grow by 8.8% according to the IMF World Economic
Outlook. Other structural factors being favourable, this augurs well for
the Indian automotive sector. Key markets for Jaguar Land Rover such as
China, Russia, and Middle East are expected to grow, while the UK, USA is
expected to recover moderately. Commercial vehicle industry continues to be
highly dependent on the developments in infrastructure and manufacturing
activity in the country. With increase in the Government spending on
infrastructure and increase in the industrial production, the commercial
vehicle industry is expected to do well in the next year.
With recovery in the global markets, there is expected to be an increase in
the commodity prices, in turn increasing the input costs. Interest rates
and liquidity may be affected as a result of inflationary pressures. The
competition in both commercial and passenger vehicle segments is expected
to intensify in the next year.
On the above background, the Company will continue to focus on retaining
its advantage of rich product portfolio, market reach and penetration and
the 'Tata' brand, in order to be close to its customers. The Company will
continue to introduce to the market, new products and variants, some of
which have already been unveiled at the Delhi Auto Expo this year. These
will offer superior value to the customers and improve the Company's market
position. Aggressive cost reduction will be accentuated to offset the
increase in input costs.
The Company will also aggressively pursue opportunities in the
International markets as they recover from the downturn.
Jaguar Land Rover will continue to focus on cost reductions to improve its
cost base and competitive positioning in the market. It will also focus on
increasing its presence in the emerging markets such as China and Middle
East along with launching new products and variants and new technology
initiatives for emission level reductions.
Internal Control Systems and their adequacy
The Company has in place adequate system of internal control. It has
documented procedures covering all financial and operating functions. These
controls have been designed to provide a reasonable assurance with regard
to maintaining of proper accounting controls, monitoring of operations,
protecting assets from unauthorized use or losses, compliances with
regulations and for ensuring reliability of financial reporting. The
Company has continued its efforts to align all its processes and controls
with global best practices in these areas as well.
Some significant features of the internal control systems are:
Corporate policies on accounting and major processes;
Well-defined processes for formulating and reviewing annual and long term
business plans; Preparation and monitoring of annual budgets for all
operating and service functions;
State-of-the-art ERP, Supplier Relations Management and Customer Relations
Management, connect its different locations, dealers and vendors for
efficient and seamless information exchange;
An on-going program for reinforcement of the Tata Code of Conduct. The Code
covers integrity of financial reporting, ethical conduct, regulatory
compliance, conflict of interests review and reporting of concerns. All
employees of the Company are regularly exposed to communications under this
program;
Bi-monthly meeting of the management committee at apex level to review
operations and plans in key business areas;
A well established multidisciplinary Internal Audit team, which reviews and
reports to management and the Audit Committee about the compliance with
internal controls and the efficiency and effectiveness of operations and
the key process risks;
Audit Committee of the Board of Directors, comprising independent
directors, which is functional since August 1988, regularly reviews the
audit plans, significant audit findings, adequacy of internal controls,
compliance with Accounting Standards as well as reasons for changes in
accounting policies and practices, if any; A comprehensive information
security policy and continuous upgrades to IT system; Documenting major
business processes and testing thereof including financial closing,
computer controls and entity level controls as part of compliance with
Sarbanes-Oxley Act;
Anti-fraud programme.
The Board takes responsibility for the total process of risk management in
the organisation. The Audit Committee reviews reports covering operational,
financial and other business risk areas. Through an Enterprise Risk
Management programme, each Business Unit addresses opportunities and the
attendant risks through an institutionalized approach that is aligned to
the Company's objectives. This is also facilitated by internal audit. The
business risks is managed through cross functional involvement and intense
communication across businesses. Results of the risk assessment and
residual risks are presented to the senior management.
Material Developments in Human Resources/Industrial Relations
A cordial industrial relations environment prevailed at all the
manufacturing units of the Company during the year. The permanent
employee's strength of the Company as on March 31, 2010 was 24,310. In
April 2010, the Company entered into a landmark three year wage settlement
with its Union at Pune through amicable process of negotiations.
Comments on the performance of major subsidiaries
The consolidated financial results for 2009-10 include the results of Tata
Motors and its subsidiaries. The consolidated operations are significantly
dominated by Jaguar Land Rover (JLR) and the Company (TML). The
consolidated financial information for 2008-09 includes JLR for 10 months
as compared to 12 months in 2009-10.
Following is the brief overview of the performance of the major
subsidiaries:
Jaguar and Land Rover Business:
During the year, external environment for JLR remained unstable with
depressed demand in most of the key markets, low confidence level in
financial markets, volatility in exchange rates and rising input material
prices. Market for premium cars remained weak especially in the first half
of the financial year, but in the later half of the year improved with
growth witnessed in each successive quarter. Wholesale volumes for 2009-10
were 193,982 units. The prior reporting period only covered ten months and
therefore not directly comparable; however the overall trend showed an
improvement.
The financial results of JLR continued to show improvement throughout the
year and resulted in JLR reporting a profit before tax of Euro32 million
for the year. In addition to this, the last quarter results represented
second successive quarter of positive profit after tax, contribution margin
improvement and positive cash flow.
The key markets, in which JLR operates, experienced negative economic
growth in the early part of the financial year. However, most of these
major markets started witnessing growth from third quarter of the year.
Wholesale volumes for the full year ending March 2010 were 47,418 units for
Jaguar and 146,564 units for Land Rover. The prior reporting period only
covered ten months and therefore not directly comparable, however the
overall trend showed an improvement. Limited availability of the X-Type
(production ceased in December 2009) and the outgoing XJ (production ceased
in May 2009) have suppressed sales, counteracted by the demand driven by
the introduction of the new 10MY product launches.
Retail volumes in the UK for the period totalled 57,056 while retail
volumes in North America totalled 41,720. Retail growth in China continued
to be strong across all products with total retail volumes of 17,004.
Retails in Russia totalled 8,831 units, significantly lower than previous
periods reflecting the difficult local market conditions. During the year,
automotive sector in the UK, Europe and the USA, benefitted from a variety
of vehicle scrappage schemes. However, these schemes had minimal benefit
for premium vehicle segment in which it operates.
The new Jaguar XJ was unveiled in London in July 2009 and had its public
debut at the Frankfurt International Motor show in September 2009. The
vehicle received significant media acclaim ahead of customer deliveries
commencing in 2010-11. This is an important new model which replaces the
previous generation XJ model. The new model features the next generation of
Jaguar's aerospace-inspired aluminium body architecture, a choice of
standard or long wheelbase models, enhanced power trains with all of
Jaguar's new ultra-efficient Gen III 5.0 litre petrol and 3.0 litre diesel
engines available, together with the highest standards of personal luxury
and specification. Among the product innovations is its instrument cluster
with a 12th in film transistor (TFT) screen.
During 2009 Jaguar launched 10MY products including the introduction of a
new naturally aspirated and supercharged 5.0 litre petrol engine for the
models XF, XK and XKR and the all new XFR, along with an acclaimed new 3.0
litre diesel engine in the XF model giving significantly improved
performance and fuel economy. Jaguar's 10MY product actions continued to
deliver positive sales performance. Sales of the Jaguar XF were up 30% in
quarter 4 versus the same period last year.
The new LR-V8 5.0 supercharged petrol and LR-TDV6 3.0 diesel engines
introduced in the 2010 model year (MY) were designed to deliver significant
improvements in performance, fuel economy and emissions. 2010 MY Range
Rover was available for sale from July 2009 with 2010 MY Range Rover Sport
and Discovery 4/LR4 being available from September 2009. Fuel consumption
in the Range Rover LR-V8 5.0 supercharged has been reduced by 7.3 per cent
and CO, emissions reduced by 7.4 per cent. The LR-TDV6 3.0 diesel reduces
fuel consumption by 8.9 per cent and CO, emissions by 8.3 per cent in the
Range Rover Sport and 9.7 per cent and 9.6 per cent respectively in
Discovery 4/LR4 (on EU combined cycle).
Land Rover during the year confirmed the production plan of its exciting
LRX concept car. The new vehicle will debut in 2010-11 and join the Range
Rover line-up in 2011-12 and will be the smallest, lightest, most efficient
Range Rover ever.
On June 1, 2009, JLR's official entry to the fast growing Indian car market
was marked by the opening of a flagship showroom facility in Mumbai. JLR
will continue to grow its presence in the Indian market by opening
additional dealerships across India.
During the year, JLR also completed guarantee arrangements to allow the
drawdown of a Euro338m EIB loan which will further advance Jaguar Land
Rover's research and development programmes focused on technologies that
will reduce CO, emissions from its vehicles; agreed a syndication of an
inventory financing facility to increase the available funding from Euro85m
to Euro116m; negotiated renewal of a US$200m loan for another year and
repaid short term borrowing totaling Euro 220m.
In November 2009, JLR completed the process of separating operations in
markets where it previously operated as part of Ford legal entity. JLR
continued to work with Ford to separate its IT infrastructure and support
systems that is expected to be completed by the end of first quarter of
FY 2011.
Tata Daewoo Commercial Vehicles (TDCV): Financial year 2009-10 was a very
challenging year for TDCV. TDCV faced severe slowdown in its main export
markets, coupled with an appreciating currency. These factors had an
adverse impact on its profitability. However, TDCV paved the way to
strengthen its presence in the domestic market with the successful launch
of its new range of premium trucks 'PRIMA'. The financial instability of
the company's sole distributor in domestic market has brought new
challenges and opportunity for the company to set-up alternate marketing
and distribution channels. In heavy commercial vehicle, TDCV sold 3,080
vehicles in 2009-10 with a market share of 28.1% as compared to 2,678
vehicles and market share of 28.4% for 2008-09. In the medium duty truck
market TDCV sold 2,273 units in 2009-10 with a market share of 23.7%
compared to 2,138 units in 2008-09 and a market share of 25.6%; a fall of
1.9% in total market share. The Gulf Cooperation Council block, which is
the major export market for TDCV had been one of the worst affected during
the global financial crisis. These countries are largely dependent on oil
revenues and with oil prices at relatively lower level, they cancelled
and/or indefinitely postponed their order for our commercial vehicles. The
Company exported 3,562 units in 2009-10 compared to 4,184 units in 2008-09,
a decline of 14.9%. Majority of exports were made to countries like Iraq
and Algeria. TDCV bagged an export order of 2,570 units from the IRAQ
Ministry of Defense, out of which 1,500 units have been shipped during
2009-10.
Tata Motors Finance Ltd (TMFL):
The year under review has been a year of consolidation for TMFL resulting
in an improved operating performance. Many facets of TMFUs operations,
including disbursements, management of non-performing assets as well as
collection efficiencies have shown significant improvements. As the economy
recovered during the first half of the year, a strong focus on controlling
overall costs, coupled with a focus on improving quality of fresh
acquisitions and micro-management of collections, has set the organization
on a robust platform. TMFL has shown improvements in disbursements as well
as net interest margins, despite very aggressive prices offered by some
private and state owned banks.
With a spurt in the volumes of Tata Motors, the disbursals of TMFL also
increased substantially. During the year TMFL achieved a market share of
24.8% for Commercial Vehicles and Passenger car segment combined. The
number of contracts booked in the FY 09-10 was 148,016 as compared to
108,835; an increase of 36% in 2009-10. TMFL initiated several measures to
improve the management of the NPA's and also improve margins and operating
efficiencies. This resulted in increase in its Profit after Tax by
Rs.164.88 crores, which represents 136.6% increase as compared to 2008-09.
Tata Technologies Ltd (TTL):
In 2009-10 the Profit before Tax increased by 35.8% as compared to 2008-09.
This was on account of:
- Cost saving plan containing impact of recession on earnings and margin.
- Improving operational efficiency with project profitability and shared
service.
- Improvement in off-shore customers.
- Accelerating diversification in Global services and PLM Solutions.
Comments on Financial Performance on a Consolidated basis
The sales net of excise duty on a consolidated basis, have recorded a
growth of 30.5% in 2009-10 to Rs.92,519.25 crores. The increase is
attributable to growth in revenue both at Tata Motors and Jaguar Land Rover
business on the background of robust growth in automotoive volumes.
Automotive operations is our most significant segment, accounting for 96.9%
and 95.8% for fiscal 2010 and 2009 respectively, of our total revenues. For
Fiscal 2010, revenue from automotive operations before inter segment
eliminations was Rs.89,615.07 crores as compared to Rs.67,877.07 crores for
fiscal 2009. (A reference may be made to review of performance of TML and
Jaguar Land Rover business discussed above).
The following table set forth selected consolidated financial information
for the Company, including as a percentage of turnover net of excise duty,
for the year ended March 31, 2010 and 2009.
Percentage of Turnover (Rs. in crores)
2009-10 2008-09
Turnover net of excise duty 100.0 100.0
Expenditure:
Material Cost (including change in
stock and processing charges) 67.4 68.5
Employee Cost 9.5 10.3
Manufacturing and other expenses 18.8 24.6
Expenditure transferred to
capital and other accounts (5.0) (6.5)
Total Expenditure 90.7 96.9
Other income 1.9 1.1
Profit before Exceptional Item,
Depreciation, Interest and Tax 11.2 4.2
Depreciation (including product
development expenditure) 4.7 4.0
Interest and Discounting Charges (Net) 2.4 2.7
Exceptional items 0.3 0.5
Profit/(loss) before Tax 3.8 (3.0)
Material Cost (including change in stock
and processing charges) (Rs. in crores)
2009-10 2008-09
Consumption of raw materials and components 54,105.54 40,253.38
Purchase of product for sale 8,538.52 6,978.22
Processing Charges 878.99 559.64
Change in Stock-in-trade and Work-in-progress (1,148.67) 793.04
Material (including change in stock
and processing charges) 62,374.38 48,584.28
Net Raw Material consumption including processing charges increased by
28.4% to Rs.62,374.38 crores from Rs.48,584.28 crores of 2008-09, due to
increase in vehicle volumes. The material cost has come down from 68.5% to
67.4% of net sales. The reduction is mainly on account of improved product
mix, better price realization and continuous cost reduction initiatives.
Employee Cost
While the employee cost has increased on an absolute basis by Rs.1,454.35
crores, as a % to net revenue it has come down from 10.3% to 9.5% in the
current year. The increase in employee cost at TML and other subsidiaries
(excluding Jaguar Land Rover business) mainly relates to increase cost on
account of normal yearly increases, performance payments, impact of wage
revisions and on account of increased volumes. The increase in Jaguar Land
Rover business mainly relates to higher pension costs, primarily due to
actuarial assumptions and volumes.
Manufacturing and Other Expenses (Rs. in crores)
2009-10 2008-09 Change
Expenses for manufacture,
administration and selling
(a) Stores, spare parts and 1,058.99 765.57 293.42
tools consumed
(b) Freight, transportation,
port charges, etc. 2,050.44 1,995.73 54.71
(c) Repairs to buildings 57.05 45.55 11.50
(d) Repairs to plant, machinery, etc. 278.13 268.33 9.80
(e) Power and fuel 689.45 686.30 3.15
(f) Rent 106.71 95.38 11.33
(g) Rates and taxes 181.63 152.49 29.14
(h) Insurance 161.92 145.64 16.28
(i) Publicity 2,974.18 2,633.52 340.66
(j) Incentive/Commission to dealers 595.57 388.34 207.23
(k) Works operation and other expenses 9,130.42 10,323.41 (1,192.99)
Expenses for manufacture,
administration and selling 17,284.49 17,500.26 (215.77)
Excise Duty on change in Stock-in-trade 86.95 (58.68) 145.63
Total 17.371.44 17.441.58 (70.14)
Manufacturing and other expenses decreased marginally to Rs.17,371.31
crores from Rs. 17,441.58 crores of 2008-09. As a % to net revenue
(excluding expenditure transferred to capital and other accounts) it has
come down from 24.6% to 18.8% in the current year. As could be seen from
the above table that despite increase in volumes, the group has been in a
position to contain the cost at all levels. The increase in stores, spare
parts and tools consumed is due to higher level of production. The
publicity expenses have increased by Rs.340.66 crores, mainly towards new
product introductions (Nano, Prima, New Jaguar XJ). The incentives/
commission relates to Tata Motor's business, where the increase is mainly
volume driven.
The works operation and other expenses during the current year have come
down to 9.9% from 14.6% of net revenue. The major factor of decrease has
been significant reduction in provision towards residual risk on vehicles
sold by Jaguar Land Rover business. There has been a significant drop in
the resale value of the cars in those markets in 2008-09, which
necessitated provisions in the last year. During the year on account of
improvement in the resale prices, these provisions have been written back
and there have been significantly lower provisions in the current year.
Expenditure transferred to capital and other accounts represents amounts
allocated out of employee cost and other expenses for the amounts
capitalized mainly for product development costs. Expenditure transferred
to capital and other accounts decreased marginally to Rs. 4,592.50 crores
from Rs. 4,638.83 crores in 2008-09.
Other Income increased to Rs. 1,793.12 crores from Rs.798.96 crores in
2008-09, mainly due to higher profit on sale of investments. The other
income in the current year includes profit on sale of controlling stake in
Telcon Rs.1,057.92 crores. The profit (net) on account of sale of other
investments was Rs.693.62 crores in 2009-10 as compared to Rs.718.16 crores
for 2008-09.
Profit before Interest, Depreciation, Exceptional items and Tax has
increased from Rs.2,995.46 crores in 2008-09 to Rs.10,407.28 crores in
2009-10. The increase reflects significant turnaround during the year in
the operations of the Company and Jaguar Land Rover business. Depreciation
and Amortization (including product development expenditure) for 2009-10
increased by 53.6% to Rs.4,385.33 crores from Rs.2,854.52 crores in 2008-
09. The increase in depreciation and amortization expenses of Rs.1,380.36
crores represent impact on account of increased capitalization at TML
including the effect of assets installed in the earlier years for which
full effect has come in the current year. Further, there has been an
increase in amortization of product development cost consequent to
commencement of commercial production of new products mainly Prima, Nano
and other products. The increase is also attributable to product
development written off during the year of Rs.498.20 crores as compared to
Rs.347.75 crores in 2008-09 and increased depreciation of tooling's at
Jaguar Land Rover business.
Net interest cost (Rs. in crores)
2009-10 2008-09 Change
Interest and discounting charges
Interest expenses 2,126.34 1,982.82 143.52
Discounting Charges 671.30 480.09 191.21
Interest capitalized (332.32) (292.31) (40.01)
Interest received (225.61) (239.70) 14.09
Interest expenses 2,239.71 1,930.90 308.81
Net interest cost increased by 16% to Rs. 2,239.71 crores from Rs.1,930.90
crores in 2008-09. Out of the total increase of Rs. 308.81 crores,
Rs.191.21 crores represents increase in level of acceptances consequent to
higher volumes in the current year. The TML group has been successful in
containing the costs through borrowings at lower rates and by substituting
part of the borrowings through issue of equity. (Please refer to details of
Gross debt).
Exceptional Items (Rs. in crores)
2009-10 2008-09 Change
Exchange (Gain)/Loss (84.47) 339.29 (423.76)
(Net) on revaluation of
foreign currency borrowings,
Deposits and loans given
Others 344.07 - 344.07
Others consist of (a) employee separation cost of Rs.191.12 crores of
Jaguar and Land Rover; (b) unamortised debt issue cost of Rs.105.04 crores
written off on prepayment of bridge loan for acquisition of Jaguar Land
Rover business; and (c) provision for a product liability case.
Consolidated Profit before Tax (PBT) has increased to Rs.3,522.64 crores in
2009-10 from a Loss before Tax of Rs.2,129.25 crores in 2008-09,
representing a positive swing of Rs. 5,651.89 crores. This represents a
remarkable recovery in the automotive volumes and improvement in the
performance of Jaguar Land Rover business.
Tax expense has increased to Rs. 1,005.75 crores in 2009-10 from Rs.335.75
crores in 2008-09. The tax expense as a % to PBT was 28.6% in 2009-10. The
tax expense is higher during the year due to significant increase in
proportion of taxable profits in TML as also on account of provision for
tax made at subsidiary companies of Jaguar Land Rover which have been
consolidated on a line by line basis.
Consolidated Profit for the year of the Group increased to Rs.2,571.06
crores from a Loss for the year of Rs.2,505.25 crores in 2008-09.
Consolidated Balance Sheet size (Fixed Assets, Investments and net current
assets) of the Group increased to Rs.45,383.10 crores as at March 31, 2010
from Rs.42,267.17 crores as at March 31, 2009. The increase is attributable
to capital expenditure for expansion and setup of new facilities and
product development cost incurred by the Group.
Fixed Assets (Rs. in crores)
2009-10 2008-09 Change %
Gross Fixed assets 72,919.85 69,002.38 3,917.47 5.7
(including Capital
Work-in-Progress)
Accumulated Depreciation 34,413.52 33,269.05 1,144.47 3.4
Net Fixed assets 38,506.33 35,733.33 2,773.00 7.8
Net Fixed Assets including Capital Work-in-Progress increased to
Rs.38,506.33 crores as at March 31, 2010 as compared to Rs.35,733.33 crores
as at March 31, 2009. The gross fixed assets have increased by Rs.3,917.47
crores. The increase is mainly in TML (refer discussion of standalone
performance). There was decrease in Net fixed assets of Rs.788.91 crores
due to sale of controlling stake in Telcon, which is now accounted as an
associate.
Investments increased to Rs.2,219.12 crores as at March 31, 2010 as
compared to Rs.1,257.40 crores as at March 31, 2009. The movement (net) of
Rs.961.72 crores represents decrease due to sale of investments of Tata
Steel Ltd. and increase on account of (a) reporting of investments in
Telcon as an associate consequent to sale of controlling stake and (b)
investments in Mutual Funds of Rs.988.05 crores.
Net Current Assets
(Rs. in crores)
2009-10 2008-09 Change %
Current Assets,
Loans & Advances 42,529.64 32,685.97 9,843.67 30.1
Current Liabilities (34,077.33) (23,980.16) (10,097.17) 42.1
Provisions (7,643.50) (8,140.02) 496.52 (6.1)
Net Current Assets 808.81 565.79 243.02 43.0
Net Current Assets increased to Rs.808.81 crores as at March 31, 2010 from
Rs.565.79 crores as at March 31, 2009. The increase in current assets
represents-(a) increase in inventory by Rs.361.43 crores and sundry debtors
by Rs.2,396.32 crores, which have necessitated due to increase in volumes
and also increase in sale to government customers; (b) Cash and bank
balances increased by Rs.4,621.98 crores due to surplus cash at Jaguar Land
Rover business, representing level of operations. The Company is exploring
possibilities of deploying the cash towards repayment of borrowings and/or
parking of the surplus cash to generate income; and (c) Loans and advances
increased by Rs.2,464.13 crores, which represents increase in vehicle
financing activity to support the demand; net increase in receivable on
account of Minimum Alternative Tax credit entitlement in future years and
increase in excise duty/VAT and other dues from the government.
Current liabilities have increased on account of increase in sundry
creditors and acceptances and liability towards premium on redemption of
Non-Convertible Debentures created during 2009-10 of Rs.1,745.79 crores.
The increase in creditors/acceptances relate to volumes in the current
year, more particularly in the last quarter. Provisions have decreased due
to decrease in Provision for warranty and residual risk at Jaguar Land
Rover business.
Gross debt (total of secured and unsecured loans) increased marginally to
Rs.35,192.36 crores as at March 31, 2010 as compared to Rs.34,973.85 crores
as at March 31, 2009. Bridge Loan taken for Jaguar and Land Rover business
was paid during 2009-10, through funds raised, improved cash generation
from operations and sale of certain investments.
Net debt (gross debt reduced by available cash and bank balances and mutual
fund investments) stood at Rs.27,170.49 crores as at March 31, 2010 as
compared to Rs.32,505.52 crores as at March 31, 2009. The reduction
represents surplus cash and bank balances and increase in mutual fund
investments as explained above.
The cash generated from operations before working capital changes and
before considering deployment in the vehicle financing business was
Rs.7,955.29 crores as compared to Rs.2,776.58 crores in the previous year.
After considering the impact of working capital changes and inflows on
account of securitization of financing loan portfolio (net of deployment),
the net cash generated from operations was at Rs.9,326.93 crores as
compared to Rs.749.83 crores in the previous year. The cash increase on
account of change in operating assets and liabilities of Rs.2,600.85 crores
in 2009-10 was due to increase in trade and other payables by Rs.8,079.11
crores due to increase in manufacturing activity which was partially offset
by (a) Increase in trade and other receivables amounting Rs.4,342.63 crores
due to increase in sales volumes; (b) Increase in inventories amounting to
Rs.1,244.53 crores on account of increase in manufacturing activity and due
to higher sales volume; and (c) Increase in vehicle/loans and hire purchase
receivables by Rs.521.10 crores.
CAUTIONARY STATEMENT
Statements in the Management Discussion and Analysis describing the
Company's objectives, projections, estimates, expectations may be 'forward
looking statements' within the meaning of applicable securities laws and
regulations. Actual results could differ materially from those expressed or
implied. Important factors that could make a difference to the Company's
operations include, among others, economic conditions affecting
demand/supply and price conditions in the domestic and overseas markets in
which the Company operates, changes in the Government regulations, tax laws
and other statutes and incidental factors.
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