Directors' Report
 

TO THE MEMBERS OF TATA MOTORS LIMITED

The Directors present their Sixty-Eighth Annual Report and the Audited Statement of Accounts for FY 2012-13.

FINANCIAL PERFORMANCE SUMMARY
        (Rs. crores)
  Company
(Standalone)
Tata Motors Group
(Consolidated)
  FY 2012-13 FY 2011-12 FY 2012-13 FY 2011-12
FINANCIAL RESULTS        
Gross revenue 49,319.73 59,220.94 193,583.95 170,677.58
Net revenue (excluding excise duty) 44,765.72 54,306.56 188,817.63 165,654.49
Total expenditure 42,621.98 49,894.76 162,248.74 141,954.02
Operating profit 2,143.74 4,411.80 26,568.89 23,700.47
Other income 2,088.20 574.08 811.53 661.77
Profit before interest, depreciation, amortization, exceptional item and tax 4,231.94 4,985.88 27,380.42 24,362.24
Finance cost 1,387.76 1,218.62 3,553.34 2,982.22
Cash profit 2,844.18 3,767.26 23,827.08 21,380.02
Depreciation, amortization and product development/ engineering expenses 2,243.38 1,840.99 9,590.89 7,014.61
Profit for the year before exceptional items and tax 600.80 1,926.27 14,236.19 14,365.41
Exceptional items - loss (net) 425.87 585.24 602.71 831.54
Profit before tax 174.93 1,341.03 13,633.48 13,533.87
Tax expense/(credit) (126.88) 98.80 3,770.99 (40.04)
Profit after tax 301.81 1,242.23 9,862.49 13,573.91
Share of minority interest and share of profit of associates (net) 30.12 (57.41)
Profit for the year 301.81 1,242.23 9,892.61 13,516.50
APPROPRIATIONS        
Profit for the year 301.81 1,242.23 9,892.61 13,516.50
Balance brought forward from previous year 1,663.91 2,078.92 18,195.96 6,461.49
Amount available for appropriations 1,965.72 3,321.15 28,088.57 19,977.99
Less: appropriations/(transfer from)        
Debenture Redemption Reserve (130.00) 70.00 (130.00) 70.00
General Reserve 30.18 125.00 59.48 158.03
Other Reserves 63.14 65.38
Dividend (including dividend distribution tax) 722.75 1,462.24 756.14 1,488.62
Balance carried to Balance Sheet 1,342.79 1,663.91 27,339.81 18,195.96
DIVIDEND

Considering the Company's financial performance, the Directors recommended a dividend of Rs.2/- per share (100%) on the capital of 2,719,945,846 Ordinary Shares of Rs.2/- each [previous year: Rs.4/- per share (200%) of face value of Rs.2/- each] and Rs.2.10 per share (105%) on 481,959,620 'A' Ordinary Shares of Rs.2/- each [previous year: Rs.4.10 per share (205%) of face value of Rs.2/- each] fully paid-up and any further Ordinary Shares and/or 'A' Ordinary Shares that may be allotted by the Company prior to August 1, 2013 (being the book closure date for the purpose of the said dividend entitlement) and will be paid on or after August 23, 2013. Based on the current paid-up capital, the said dividend, if approved by the Members, would involve a cash outflow of Rs.724 crores (previous year: Rs.1,464 crores) including dividend distribution tax, resulting in a payout of 240% (previous year: 118%) of the standalone profits for FY 2012-13 and 7% (previous year: 11%) of the consolidated profits of the Company.

OPERATING RESULTS AND PROFITS

FY 2012-13 was a challenging year for the economy – both globally and in India. The world economy grew by a mere 3.1% in 2012 as compared to 3.9% in the previous year. The domestic situation in India was influenced by these global trends and the ripple effect of a global slowdown was felt. After years of b positive growth, the Indian economy slowed down to a GDP of 5% from 6.5% in the previous year.

The Tata Motors Group recorded a 13.4% growth in gross turnover from Rs.170,678 crores in the previous year to Rs.193,584 crores in FY 2012-13. This is the highest turnover recorded by the Group. The consolidated revenues (net of excise) for FY 2012-13 of Rs.188,818 crores grew by 14% over last year on the back of b growth in volumes across products and markets at Jaguar Land Rover. The consolidated EBITDA margins for FY 2012-13 stood at 14.1%. Consequently, Profit Before Tax and Profit After Tax were Rs.13,633 crores and Rs.9,893 crores, respectively.

Tata Motors Limited recorded a gross turnover of Rs.49,320 crores, 16.7% lower from Rs.59,221 crores in the previous year. Weak macro economic factors leading to a continued slow-down in the Medium and Heavy Commercial Vehicles (M&HCV), stiff competition, mainly in Passenger Vehicles business, severely affected the standalone operations and profitability. Additionally, the need to increase marketing expenses to protect and grow market share has resulted in EBITDA margins reducing from 8.1% to 4.8% for FY 2012-13. The reduction of profits from operations was offset by dividend from subsidiary companies of Rs.1,584 crores (including dividend from JLR) as compared to Rs.114 crores for the previous year. The Profit Before Tax and Profit After Tax for the FY 2012-13 were lower at Rs.175 crores and Rs.302 crores, respectvely, as compared to Rs.1,341 crores and Rs.1,242 crores in the previous year, respectively.

Jaguar Land Rover recorded a turnover of GB£ 15,784 million, a growth of 17% from GB£ 13,512 million in the previous year. Volume growth was driven not only by a full year of the Range Rover Evoque, but also by increasing sales of existing models. EBITDA growth also benefitted from a favourable market mix, operating exchange rates due to the strengthening US$ against the GB£ and the Euro. Further, cost efficiency improvements in material costs and manufacturing costs supported by increased production volume levels also attributed to improved results of operations. These resulted in a higher EBITDA and Profit Before Tax of GB£ 2,402 million and GB£ 1,675 million, respectively, as compared to GB£ 2,027 million and GB£ 1,507 million, respectively in the previous year. The effective tax rate was higher than the previous year, since last year it benefitted from recognition of previously unrecognised tax losses in the last year. The Profit After Tax for FY 2012-13 stood at GB£ 1,215 million as compared to GB£ 1,481 million last year (Jaguar Land Rovers' figures as per IFRS).

Tata Motors Finance Limited, the Company's captive financing subsidiary, registered total revenue of Rs.2,890 crores higher by 43% in the previous year and reported a Profit After Tax of Rs.309 crores in FY 2012-13 (previous year: Rs.240 crores). Tata Motors Finance Limited proposed a dividend of 7% per equity share for FY 2012-13.

Tata Daewoo Commercial Vehicle Company Limited, South Korea registered revenues of KRW 823.9 billion (Rs.4,017 crores), a growth of 8% over the previous year. However, the positive impact of higher volumes and various cost control initiatives were negated by a provision of KRW 18.9 billion (Rs.92 crores) on account of a Court verdict in an ordinary wage suit filed by its Union employees resulting in a loss of KRW 9.2 billion (Rs.45 crores) (previous year: profit of Rs.8.74 crores).

VEHICLE SALES AND MARKET SHARES

The Tata Motors Group sales for the year stood at 11,91,968 vehicles, lower by 6% as compared to the previous year. Global sales of all Commercial Vehicles were 593,897 vehicles, while sales of Passenger Vehicles were at 598,071 vehicles.

TATA MOTORS

The Company recorded sales of 765,557 vehicles, a decline of 11% over last year. Industry growth during the year was also muted at 1.1%, resulting in the Company's market share decreasing to 22% in the Indian automotive industry from 25.1% in the previous year. The Company exported 50,938 vehicles during the year, lower by 19%, as compared to the previous year.

Commercial Vehicles

Within the domestic market, the Company continued to strengthen its presence in Commercial Vehicles, with sales of 5,36,232 vehicles, an all time high for the Company, growing 1.1% from the previous year. This represented a market leadership share of 59.5% in the domestic CV market which was mainly supported by steep growth in the LCV segment.

Some of the highlights for the year were:

  • Sales in the LCV segment continued to drive performance, growing by a 21.8% during the year to 3,93,468 vehicles. Market share in the LCV segment expanded by 200 basis points registering a 62.2% market share in FY 2012-13. The Company has grown and consolidated its position in the LCV segment, leading to expansion of the market share, especially in the Ace Segment. Sales of the Tata ACE reached highest ever at over 3,25,000 during FY 2012-13. The Tata Ace family crossed 10,00,000 sales since its launch. During this year, the Company launched 'Tata Xenon', a stylish and rugged pick-up, offering both single cab and dual cab versions, with best in class looks, operating economies and fuel efficiency.
  • Slowdown in economic activity, sluggish infrastructure spending and weak macro outlook coupled with higher operating costs for transport operators, adversely impacted demand in the M&HCV industry. The M&HCV segment which is the harbinger for growth in the economy de-grew by 23.3% in the year. The Company's sales in the M&HCVs segment were 1,42,764 vehicles. The depressed market scenario combined with new player entry resulted in very high competitive intensity. Several new products and variants across the traditional, Prima and Construck range focusing on 'best in class' performance, reliability and fuel efficiency, were introduced.
  • The year also marked the roll-out of the two millionth truck from the Company's manufacturing facility at Jamshedpur. The plant manufactures the Company's entire range of M&HCV trucks, including the Tata Prima, both for civilian and defence applications. Many first of its class heavy trucks designed and built specifically to offer best in class performance, reliability and fuel effciency were introduced viz - Tata LPT 3723 – the frst 5 axle rigid truck in the country in the 10 x 4 configuration, the Tata Prima 3138.K Tipper, the Tata Prima 4938.S tractor and the Tata Prima 230 HP – LX range consisting of Tata Prima LX 4923.S, Tata Prima LX4023.S and Tata LPK 3118 tipper. Launches of buses such as MCV buses for intercity (AC – 45 Seater) and staff transportation (Non AC – 41 Seater), LP/ LPO Starbus Ultra with best in class features and fuel efficiency tailored to suit Indian conditions with highest capacity school bus in ICV platform in India (56 seats).

In January 2013, Tata Motors became the first company in India to introduce warranty period of four years on heavy trucks. The Company also introduced a Telematics and Fleet Management Service, branded "Tata FleetMan" an intelligent vehicle and driver management solution.

Passenger Vehicles

The domestic passenger car industry was affected mainly by weak sentiments, high cost of ownership, high interest rates, fuel prices and reduction in discretionary spends. Overall growth in Domestic Passenger vehicle industry was flat in FY 2012-13, within which Utility Vehicles recorded a robust growth of 51.5% on the back of new launches catering not only to the traditional rugged SUV customers but also to the customer preferring the more car-like soft roader utility vehicles and cars segment de-grew by 6.9%.

During the year, the Company's Passenger Vehicles sales were lower by 31.1% at 2,29,325 vehicles, registering an 8.9% market share. The Company sold 1,80,520 cars and 48,805 utility vehicles and vans, lower by 34.6% and 14.4% respectively, over the previous year. The Company's sales in the mid-size segment suffered as competitive activity intensified with multiple new launches in this segment. The Company has taken various initiatives to improve its product refreshes/launch programmes, operational efficiency, dealer effectiveness, working capital management and restructuring customer facing functions.

The Company sold 2,294 vehicles of Jaguar Land Rover brands during FY 2012-13. Network for these brands continued to grow with 17 operational outlets across 15 cities in the Country by the year end. The plant in Pune expanded its capacity and commenced operations to roll out locally built Jaguar XF in India from November 2012.

Some of the highlights of this year's performance were:

  • Launches of the Vista D90; and refreshed Tata Indica eV2, the most efficient car in its class with a mileage of 25 kmpl, with new exteriors and additional convenience features.
  • Launched the Manza Club Class with first in class features like 6.5'' infotainment screen with voice enabled GPS guidance system, infinity roof, premium Italian leather seating system and plush interiors.
  • Launched the Tata Safari Storme with new interiors and improved performance - disc brake on all wheel and projector lens head lamp - first time in its class and Tata Aria Pure LX - a new variant with a bouquet of features, at a stunning price.
  • Launched the Nano MY13 with features like music system with Bluetooth/USB, glove box, refreshed interiors, etc., in an array of colours.
    The above launches of the Nano MY13, Manza, Vista D90 and the Safari Storme were in-line with the Company's objective of taking the brand to a higher level, while making it relevant for the younger buyer.
  • Showcased the Vista Extreme, a concept that combines the package efficiency of a hatch with the usability of the modern urban Utility Vehicle.
  • The Company continued to focus on building brand strengths, refreshing the products and enhancing sales and service experience. The Company also introduced a new look, stylish, tech savvy best in class flagship Passenger Vehicle showrooms, for superior customer experience at pilot dealership in Mumbai and Delhi and this initiative will now be replicated to other setups across the country.

A new leadership team in the Passenger Vehicle business was in place towards the latter half of the year with rich experience not only from the automotive but from other sectors as well. The Company is working on a customer-centric strategy for providing the best customer experience with focus on products, world class manufacturing practices, purchase experience and consistent quality of services. As a precursor to future launches, the Company would be shortly unveiling improved and enhanced vehicles across its key brands.

Exports

For Tata Motors, traditionally b markets in South Asia such as Bangladesh and Sri Lanka also were affected by internal conflict, political unrest and regulatory changes. As a result, export sales of the Company de-grew by 19.3% to 50,938 vehicles. With a view to expand its International Business, the Company re-entered the market of Saudi Arabia to re-establish its business in the Kingdom and launched its brand at the Jakarta Auto Show to address the Indonesian market - a key growth market. The Company introduced a host of new products on existing and new platforms in existing and new markets and showcased its vehicles in major auto shows in strategically important markets.

The Company continued to outperform competition in terms of exports of Commercial Vehicles and enjoyed a total exports share of 57% in FY 2012-13, exporting 44,109 Commercial Vehicles. The Company exported 6,829 Passenger Vehicles. Aria witnessed growth in shipments led by a b push into European markets. Indica grew due to b fleet and entry level customer demand and Manza grew albeit over a low base, in South Africa. Other UVs - Safari, Sumo and Grande, showed growth led by the revival of demand in Nepal and Sub-Saharan Africa. Nano and Indigo were the only significant under-performers due to economic and political upheavals in key markets - Sri Lanka and Nigeria.

Some of the highlights of this year's performance were:

  • Inaugurated its first 3S (Sales, Service and Spares) setup in Yangon, Myanmar.
  • Won a tender for supplying 449 vehicles to Kuwait Municipality, Prestigious order for supply of 715 Xenon's from the US Army.
  • Started Driver Training School in Bangladesh and Mechanic Training Centre in South Africa and Kenya.
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