Tata Motors, Ltd. ADR TTM
Q4 2013 Earnings Call Transcript
Transcript Call Date 05/29/2013

Vijay B. Somaiya - Head of IR and Treasury: Welcome to this interaction with the apex management of Tata Motors Limited on the financial results for the year 2012-'13. We have our Vice Chairman, Mr. Ravi Kant; Managing Director, India Operations, Mr. Karl Slym; CEO, Jaguar and Land Rover, Dr. Ralf Speth; Executive Director, Commercial Vehicles, Mr. Ravi Pisharody; President, Passenger Vehicle Business, Mr. Ranjit Yadav; CFO, Tata Motors, Mr. C. Ramakrishnan; CFO, Jaguar Land Rover, Kenneth Gregor; and the apex management of Tata Motors and Jaguar Land Rover.

We will begin this interaction with the presentation from Mr. C. Ramakrishnan to be followed with questions which you may have. Can I request Mr. C. Ramakrishnan to come on the stage and begin the interaction with the presentation?

C. Ramakrishnan - President and CFO: Thank you, Vijay. Good evening and welcome to all of you and I apologize for the delay in starting the proceedings. Our Managing Director, India Operations, Karl Slym is expected to join in the next few minutes.

We have the presentation following the declaration of our results consolidated as well as standalone for the financial year '12-'13.

To start with, at the global consolidated level, which includes Tata Motors India, Jaguar Land Rover and our overseas other companies like Daewoo and all our Indian subsidiaries, we report an annual turnover for the year, March 2013 of INR188,000 crores which up 14% from the previous year, INR165,000 crores. EBITDA margin remained almost steady at 14.1% compared to 14.3% in the previous year. Profit after-tax was, however, lower at INR9,800 crores compared to INR13,000 crores. Some of this in terms of detail, we will see in the following slides.

For the quarter we just ended, quarter four ending March 2013, the revenue was INR56,000 crores, up 10%. EBITDA margin was 14.9%, up from 14.1% and profit after-tax for the quarter was INR3,900 crores.

A short while ago, we announced our results at which time, the Board of Directors, we also announced the declaration of dividend, considering the overall performance particularly Jaguar Land Rover but also taking into account and having regard to the continued challenging operating environment in India, the Board of Directors have taken a prudent view and have declared a dividend of INR2 per ordinary share compared to INR4 for the previous year.

The consolidated balance sheet we remained strong. The net automotive debt to equity which excludes the Tata Motor Financing operations, the automotive debt-to-equity at a consolidated level remains strong and low at 0.24 to 1. Totally, we have spent about INR20,000 crores – INR21,000 crores on capital expenditure and product development, which is the investment for the future. We remain strong in terms of liquidity and cash balances, which stands at about INR29,000 crores, and we have contributed significantly to the net worth increase in this year.

Coming to Tata Motors standalone in greater detail, the picture here is different in terms of the year just ended. You've seen and we've shared with you the details of the Indian operations for the last few quarters, which has been under significant challenge from a macroeconomic and operating environment point of view.

Net revenue for the quarter was INR11,000 crores, down 32% from INR16,000 crores in the same period last year, with a drop in EBITDA margin to 3.6% compared to 9.5%, and a profit after tax – in the profit after tax line, we report a loss of INR312 crores compared to a profit INR565 crores in the same period last year.

For the full year, the net revenue stood at INR45,000 crores, down 18% compared to last year. EBITDA margin was 4.8%, again, down from 8.1% of last year, and profit after tax stood at positive INR302 crores compared to INR1,200 crores in the previous year. But I need to explain that the profit after tax this year also includes a dividend income that we have accounted particularly, notably from Jaguar Land Rover of GBP150 million during the course of the year in '12-'13.

Standalone balance sheet compared to the consolidated picture I presented you earlier, it's slightly at a greater stress, even though within a broad comfort zone. Debt-to-equity ratio for Tata Motors standalone operations is at 0.83 to 1, still below 1 to 1. In the India business we have invested close to about INR3,000 crores in capital expenditure and product development spend, which is an indication we had given from time to time to you that on an annual basis we will spend about INR3,000 crores. Inventory receivables and payables broadly in line in terms of where we expect them to be.

Going a little more into the details, Commercial Vehicles, our overall market share for the year stood at 59.5%, marginally up from about 58% plus in the previous year. Commercials Vehicles is obviously impacted by the slowdown in the economic activity, overall macroeconomic situation, sluggish infrastructure investments in the country and relatively high interest rates more or less throughout the year. This has particularly affected the medium and heavy vehicles segment, which is down nearly 30%, 40% for the industry year-on-year. The small commercial vehicle segment remains strong.

Overall, the competitive intensity has definitely sharpened in the commercial vehicle space. We introduced from the Company several new products and variants across the medium and heavy and other variants of the smaller vehicles. We also introduced several initiatives for better customer support and better customer relationship.

Passenger vehicles, our volumes declined 31% year-on-year; 229,000 vehicles compared to 333,000 in the previous year.

It has been a challenging year for the passenger vehicle industry as a whole, following many years of significant growth, the industry remained overall industry remained flattish during the financial year and during the last quarter, actually the industry posted a decline of about 13% in the last quarter.

Within this flattish performance in the passenger vehicles, the SUV segment showed some sharp and impressive growth and not in the other segments.

There are pressures in marketing costs, competitive intensity which we felt and all our industry colleagues also felt, our market share was about 8.9%, lower compared to the 13% we had in the previous year. We have managed our inventory pipeline particularly with the dealers which had gone slightly during the year. That inventory correction has taken place. And we will continue to focus on building the brand strength over time, introduce refreshed products and enhance the sales and service experience of the customers in our showrooms.

In terms of the international business from the India operation, our exports, we saw a decline of about 20% from 63,000 vehicles to about 50,000 vehicles, both cars and commercial vehicles. These exports were supported by specific markets like Nepal, Thailand and South Africa and (EMEA) region. Our larger markets, Sri Lanka and Bangladesh, continued to decline which resulted in overall decline in the total numbers.

In terms of some of the other highlights on the operations, we achieved highest ever sale of the Ace family at over 325,000 during this year, and cumulatively since launch Tata Ace family has crossed 1 million mark, which is a significant milestone for the commercial vehicle industry.

We expanded the market share in the light commercial vehicle range by 200 basis points to 62%. Our Jamshedpur plant which has been the mother plant and our first plant rolled out its 2 millionth truck during this year. We've introduced new products in the heavy truck segment.

We also launched in our passenger vehicles stylish, technologically savvy, and best-in-class flagship passenger vehicle showrooms in Mumbai and Delhi for superior customer experience.

We've launched new Safari Storme, Manza Club class, an Vista D90, which have been received relatively well in the market.

Turning to Jaguar Land Rover, it's been a very satisfying and very pleasing performance overall. For the full year, the turnover was GBP15.7 billion, up 17% compared to last year. EBITDA margin for the year was at 15.2%, and profit after tax was lower. Particularly, if you recall, in the last year on 31 March, 2012, we took credit in terms of accounting adjustment for deferred tax asset, which is not available; it was a one-time effect last year.

For the last quarter, January-March quarter, net revenue was GBP5 billion, up 22% compared to the last year. EBITDA margin came in strong at 16.9%, close to 17%, up from 14.6% in the previous year, and the profit after tax follows the same explanation I gave a short while ago.

Continued strong revenue and EBITDA performance supported by volume growth, richer markets, and richer product mix. Partially, the EBITDA margin was offset by the increasing depreciation and amortization charge on the P&L account below EBITDA and exchange devaluation in our loans. PBT is also affected down to the PAT during the deferred tax credit accounting we did in FY '12. For the year, Jaguar Land Rover has a net free cash flow after spending on products and CapEx a free cash flow of about GBP595 million after a product and CapEx spend of about GBP2 billion.

In terms of balance sheet, a strong balance sheet. Gross cash and liquid funds stood at about GBP2.8 billion on the balance sheet in terms of cash and liquid funds. In addition, we have undrawn unutilized committed lines of credit of close to about GBP900 million adding to tremendous strength in the balance sheet for future requirements for Jaguar Land Rover. The gross debt was GBP2.1 billion. Therefore, if you set off each other, at a net debt basis, JLR is negative. Capital expenditure and product development I mentioned earlier was about GBP2 billion and positive free cash flow after that spend of about GBP600 million.

Overall, volumes in Jaguar Land Rover grew by about 18%. And in terms of market mix, for the year, financial year '13, China region accounted for about 21.4%, up from 17% last year; North America stood at 17.5%, almost at the same level of last year at 18%; U.K. was 18.3%, last year was 19.7%; Europe came in at 21.2%, compared to nearly 23% last year and other markets.

In terms of some of the highlights in Jaguar Land Rover performance, I've already talked about year-on-year growth and EBITDA margins, et cetera. During the year in July 2012, Jaguar Land Rover declared the first dividend since acquisition for Tata Motors, the equity dividend of about GBP150 million. In terms of product launches, the all-new Range Rover received several awards and recognitions and have been received extremely well in creating excitement in the marketplace. So has Jaguar F-TYPE in terms of awards, recognition and the market recognition.

A brief snapshot in terms of our other overseas subsidiaries, Tata Motor Finance net revenue up to INR2,800 crores, operating margin at 16% and profit after-tax INR309 crores, up from INR240 crores in the same period for the last year. Our IT engine, design and engineering subsidiary company, Tata Technologies, again a significant improvement in the performance, INR2,000 crores turnover compared to INR1,600 crores and profit after-tax INR300 crores compared to INR200 crores in this previous year. Tata Daewoo however had to recognize and make a one-time provision for some of the court cases, which has been desired against the Company. It's not a Tata Daewoo phenomenon; it's a phenomenon that affects the overall industry in Korea. We'll have to provide for that under Korean GAAP. So as to the Korean GAAP numbers in view of this, Tata Daewoo has reported loss for this year.

TML Drivelines, which earlier was heavy axles and heavy transmissions which we have merged to form TML Drivelines and supports our medium and heavy commercial vehicle, showed a decline in performance, reflecting the overall trend in the commercial vehicle truck sector. The profit after tax was INR79 crores, down from INR190 crores in the same period last year.

Looking forward, as far as Tata Motors is concerned, the external environment and the overall economic operating environment in the country continues to remain stressed, and this will impact overall demand continuing to be under pressure in the near future.

We expect the small commercial vehicle segment demand would remain strong. Competitive intensity will result in increasing marketing cost across products and ranges. From the Company point of view, we believe we have a strong understanding of the domestic market as reflecting in many of the segment-creating products and successful welcome in the marketplace that we have demonstrated over the past. We have a very wide – the widest and a compelling product portfolio. We have a strong brand pull in terms of the overarching Tata brand and our product brands and customer support; one of the widest distributions in the Indian market and huge economies of scale in our businesses.

We do have these strong points. We will continue to upgrade our products, value-added services and solutions for our end customers.

In the passenger vehicle, there apart from the competitive intensity and lower overall industry growth we have also underperformed from the Company point of view. Various initiatives are under aggressive implementation in terms of timelines and targets to achieve significant performance improvement. We will focus on regular product refresh. We will focus on enhancing significantly the customer experience and engagement, both for sales and after sales. We will focus on improving the distribution presence as well as effectiveness and internally we will continue to focus on cost effectiveness and quality enhancement initiatives.

Future product headlines, Prima range, Ultra range of LCVs, Ace variants, Nano variants, refreshment in the car models across our portfolio. We will also focus on extending our export footprint from India.

Jaguar Land Rover, looking forward, as in the recent past, Jaguar Land Rover will continue to focus on product development, investment in new products, refreshment of the existing products, and new technologies and as well as build capacities to meet the growing volumes. We will expect to increase the momentum on account of the new Range Rover launch, Jaguar XF Sportbrake and other new derivatives and successfully launch the F-TYPE and the New Range Rover Sport and other variants this year.

We will focus on profitable volume growth, managing our costs and improving efficiencies. We have planned future investment in new products, technologies, and manufacturing capacities. As I mentioned earlier, the product development spend and CapEx spend is likely to be increased further, and as we have shared with you earlier, it's likely to be around GBP2.75 billion in the current year March '14.

We will focus in the medium-term on strong operating cash flows to support the product development expenditure and CapEx. As I mentioned earlier, we have a strong balance sheet that we can draw upon for any future requirements incrementally and we will focus on expanding the manufacturing footprint in China through our JV which is underway.

I'll end this presentation. With the management team here and my colleagues we'll be happy to take any question you may have. Thank you.

Vijay B. Somaiya - Head of IR and Treasury: We will begin the question-and-answer session. May I request you to identify yourself before asking a question? To ensure that everyone gets an opportunity to ask a question, may I request if the questions initially be restricted to one question per table and we can rotate the questions across the tables. Can we have the first question please?

Transcript Call Date 05/29/2013

Unidentified Analyst: In the quarter, you reported very strong margins, especially on the JLR front; is this a sustainable margin? And if you can throw some light on that, if there is one-time expenses or income included in the current quarter's number?

C. Ramakrishnan - President and CFO: I want to refrain from predicting the margins for the future. We would hope to maintain strong performance. As I said earlier, we will focus on improving our product volumes, growth and the profitable growth. The margin for Q4 is definitely on the higher side. There have been benefits on account of exchange rates, et cetera. The overall profitability in Jaguar Land Rover is helped or affected by multiple factors; foreign currency movements, market mix, regional mix, product mix, et cetera. Our target would be to maintain a healthy profit margin going forward. I don't want to get into a precise number forecast. I missed the second part of the question. Can you repeat that, please?

Unidentified Analyst: Any one-time income or expenses included in this number?

C. Ramakrishnan - President and CFO: There have been some write-offs and exchange valuation, et cetera, but nothing very significant. The exchange valuation has been there in the quarter. Maybe off; this thing we will share the details with you and the details in any case will be available in what we publish on the website. Ralf, would you like to add anything?

Unidentified Analyst: There has been a lot of concern around China and kind of slowdown in China from general macroeconomic standpoint. Can you give some color on how are you seeing demand in China and how do you expect that to trend for the rest of the year?

Ralf Speth - CEO, Jaguar Land Rover: So, the demand for Jaguar Land Rover in China is very strong. We grew by 48% last year. So you can see that we are in high demand. We have a very solid product portfolio. So, China is now the single biggest market, close to Europe. Europe is still the biggest region. And there's, let's say, a certain spotty approach that China will overtake Europe this year. Overall the economy slowed down, yes, but there is still a healthy growth in the market and we delivered 79,000 units to China. The overall market is roundabout 15 million cars. So, there is a lot of headroom and a lot of opportunity to improve our performance in China.

Hitesh Goel - Kotak Equities: This is Hitesh from Kotak. I just wanted to know what are the product plans of JLR. I mean, the launches on F-TYPE when it will hit different markets and also Range Rover Sport, if you can share that. And also, some sense on how the incentive levels are moving in especially China on the products, especially Evoque, if you can give some sense?

Ralf Speth - CEO, Jaguar Land Rover: Evoque is in very high demand. It's a very solid profit with a very good product substance and a very good drivability, high quality (indiscernible). And therefore, the product is in high demand. Last year we sold more than 130,000 units and I guess we can achieve these kind of volumes also this year. Overall, we are going to launch this year eight new products. The F-TYPE, the stunning F-TYPE is a sports car which has unbelievable drivability will be one car, but all of the other ones, for instance, the all new Range Rover, all aluminum product is a very convincing products and therefore, based on the strong products we are convinced that we can continue our success story.

Kapil Singh - Nomura: This is Kapil from Nomura. Just wanted to check your growth expectations for various markets for Jaguar and Land Rover; if you can share some thoughts on the luxury car industry in particular?

Ralf Speth - CEO, Jaguar Land Rover: Overall, around the world, we see a totally different picture. Europe is definitely at the moment in a certain critical situation, but you should know that despite the crisis we could increase our volume last year by 18%. Now, this year, it looks like that it becomes even a little bit tougher. On the other hand, we see a light on the horizon coming up in the U.S. where the overall volume forecasts are going up. China stabilized and is growing further and also the overseas markets are seeing high demand or higher demand. Now, South America is becoming also stronger, but also Russia is on this kind of recovery path. Overall, around the world, we are cautiously optimistic, but it's also quite clear, we cannot predict economy, we cannot predict future and there might be the very famous black swan around the corner; nobody knows about it. But if it continues, I guess then we can get a solid economy, we can look also in the solid future.

Aashiesh Agarwaal - Edelweiss Securities: This is Aashiesh Agarwaal from Edelweiss. Sir, we had a couple of questions pertaining to emissions. If you could help us understand, there was this Emissions Environmental Protection Agency of U.S., they had issued some emission norms, which apparently is effective model year 2012 onwards. If you could help us understand where our products are specifically in terms of emission vis-a-vis those regulations and your sense on the China emissions? I have a couple of more questions on it. I'll come back on that.

Ralf Speth - CEO, Jaguar Land Rover: In terms of emissions, and if you calculate it the other way round, in terms of fuel consumption, whatever you take at the end of the day we have to fulfill the requirements. There are totally different schemes in the market, whether you go to U.S., and even in U.S. you have different ones in between the states; California, for instance. Or you go to China or the rest of the world. And we have set up a program that we really fulfilled all this kind of emission. And one issue – one product, for instance, will be that we are introducing as the world's first an SUV diesel hybrid this year and that will give you the evidence that we are really on track.

Aashiesh Agarwaal - Edelweiss Securities: So, if I can just take this further to understand, currently where do we stand vis-a-vis where we are supposed to be in terms of emission based on our footprint? This I was speaking with specific reference to U.S. So, based on our footprint and the weighted average footprint that we have for the entire fleet, where would our emissions be and where is it required to be? Because my sense is that we are falling a little short over there, if you could just throw some light on that, and how do we intend to take it forward? I understand that part of our strategy is regarding downsizing the engine and having lower number of cylinders. So, the Jaguar 2 liter; if you could also help us understand where is Jaguar 2 liter model vis-a-vis – in terms of what it is emitting vis-a-vis what it is supposed to emit?

Ralf Speth - CEO, Jaguar Land Rover: At the moment, please be assured that we fulfill all these kind of requirements of we are where we should be. And to give you another example, that's not only the engine, but it's the overall (drive strength), and as you know, we're also introducing the world's first 9-speed gearbox in an SUV. So, you will see we're absolutely on track from a technology point of view. Also, in terms of future, in the near future I don't see any problem fulfilling these kind of requirements, neither in the U.S. nor in China.

Ashish Nigam - Antique: This is (Ashish Nigam) from Antique. Sir, the Range Rover Sport launch in March was the fairly extravagant launch. So, how much in your view does that adversely impact margins by this quarter?

Ralf Speth - CEO, Jaguar Land Rover: Yes, the launch is always something different. But we are exactly on our track to fulfill our own forecasts. That means the vehicle is launching in a very good way. But we don't speak up. We want to have quality, quality, quality first and whenever we have got the quality, we also will ramp up the volume. Whenever we have got quality volume will come on its own.

Ashish Nigam - Antique: And just a follow-up on that. Your margins have increased by 300 basis points almost quarter-on-quarter. So, how much is it possible to quantify how much was currency and how much was product mix?

Ralf Speth - CEO, Jaguar Land Rover: No. I only can echo the word of CR. We already highlighted that yes we are very eager to have healthy margin and at the moment really not capable to deliver you this kind of split you want to have of the margin, but maybe you can do it afterwards with the experts. (As they are working), they can do it.

Madhukar - Bank of America: This is (Madhukar) from Bank of America. Sir, out of your CapEx plans for this year, I just want to share what the strategy is in terms of capacity expansion versus investing on new products? And my second quick question is, Chinese media has been speculating recently on an ultra-luxury tax, what impact do you think it will have on the Range Rover in China?

Ralf Speth - CEO, Jaguar Land Rover: Overall, we are investing, as you have seen, roundabout GBP2.7 billion in the product creation process; in people, in products, but also in facilities. It's a very healthy and very aggressive plan in order to deliver future products, in order to become an even more stable business in the future. In that context, as I mentioned earlier, we're launching (probably) this year eight new products and you have seen some of them already, furthermore will come in the future. Overall, for the next five years, we are up for delivering more than 40 new products, which is a quite healthy development.

Mahantesh Sabarad - Fortune Financial Services: This is Mahantesh from Fortune. Firstly, a question on your local business. You had launched this car buyback guarantee; any color on that, what's the progress on that? That's number one. Number two, I have a separate question actually for – from the finance point of view, there was a GBP118 million Forex MTM loss recognized in the JLR (or) IFRS accounts. How will that play out in the next, let's say, a quarter or two? We've already had one month gone by since the results were declared.

Unidentified Company Speaker: So I'll try and answer the first question which is on the Manza buyback guarantee. This has been very well received in the market. This highlights our quality initiatives which we have done and puts our commit out there where we assured that the quality we now bring to the marketplace will underwrite the resale value. So this is an assurance which we're giving to our consumers out there, that as we go forward, the quality of our products are significantly better, and that's the attempt from our side and it's been very well received by the consumers. I'll hand this over to CR for the second aspect.

Mahantesh Sabarad - Fortune Financial Services: Before you hand it over to CR, just a follow-up, why not on the Vista, why not on the Aria, this guarantee scheme? What's the financial impact of this Manza guarantee scheme that you have?

Unidentified Company Speaker: So, you will see a number of initiatives come from us as we go forward. The Manza buyback is the start of a journey, whereby we will assure our consumers about better quality coming out from our factories. The financial impact is not significant; it's already factored into our calculations.

C. Ramakrishnan - President and CFO: (Indiscernible) help me with the answer for the second question; I couldn't quite get it?

Vijay B. Somaiya - Head of IR and Treasury: Would you mind repeating the second question?

Mahantesh Sabarad - Fortune Financial Services: There was a GBP118 million Forex derivative loss; I don't know what the components of that loss, but how will this play out over the next two quarters, because obviously it's going to fluctuate with the currencies, and we have already been one month from the result date, so there would have been impact out of that GBP118 million into the accounts already. What is that?

Kenneth Gregor - CFO, Jaguar Land Rover: Yeah, just to be specific, as you rightly point out, within the result for the full year to March 13, there's an GBP108 million of foreign exchange revaluation. The biggest elements of that are the revaluation of our dollar-denominated debt, so we have a fair amount of that. We have euro payables and we also have some foreign exchange currency options in dollars and then euros and those get revalued through the balance sheet each quarter. This particular quarter, sterling weakened from roundabout $1.60 at the end of – pound to dollar at the end of December 2012 towards closer to $1.56. Sterling to the dollar at the end of March 2013 and that caused the negative revaluation that you see here. It's fair to say, it's non-cash item in the quarter in which it arises. If you've followed results over the past four to eight quarters since we've had the dollar denominated debt and since the business has been recovered, you'd have seen that we actually get positive and negative readouts each quarter with this particular moment not being unusual. So, revaluation can go positive as well as negative. So, I think we call those out separately in the results so you can see it. And I think as analyst side suggest, you have to take it in your stride.

Mahantesh Sabarad - Fortune Financial Services: What would have happened in the one month that we are through in this quarter, what does that GBP118 million become?

Kenneth Gregor - CFO, Jaguar Land Rover: CR is just suggesting to me from a one month perspective is, what I'm trying to say is each quarter you could expect and each month you can expect as exchange rates fluctuate, you'll see fluctuations up and down. So, fluctuations up and down that happen in the month are not cash related. You should look at this as being related primarily to that long-term dollar-denominated debt that have on the balance sheet and that matures over periods of four to nine years from now.

Aditya - JPMorgan: This is (Aditya) from JPMorgan. Just wanted to check on the India car business. A large part of the inventory correction is over sales. So we have been destocking at the dealer's end as well. How do we see our car business ramping up from here, any new platforms you can talk about?

Unidentified Company Speaker: So you rightly pointed out that our wholesales in the last quarter have been significantly lower than our retail sales. So that is one of the reactions we have done to correct in the marketplace with our dealers and the channel – our situation, so that the business remains viable and flexible as we go forward. So, to a large extent, this is being done. We are now at the position where we can react very strongly to market opportunities as they come up. In fact, by the end of next month, we would be announcing a series of launches and a lot of people would be invited for that as well. So we will be launching a number of refreshes and new variants which will start our next level of activities in the Indian market.

Aditya - JPMorgan: Just another question probably with the currency weakness we're seeing in the JPY, and similarly, currencies in general are weakening, do you expect any sort of pricing pressure in key markets like the U.S.?

Ralf Speth - CEO, Jaguar Land Rover: No, we don't see this at the moment. So, it's not calculated in.

Unidentified Analyst: I had a follow-up question. Basically it's related to your new Range Rover Sport. The pricing on the new Range Rover Sport is not as significant as the new Range Rover, right, you had taken a significant price pressure on the Range Rover, but that was not the case for Range Rover Sport. Can you explain are you looking for more volumes in that segment; what is the strategy behind that?

Ralf Speth - CEO, Jaguar Land Rover: The Range Rover is a very special car for very special customers and (delivers) unbelievable product substance. And so, it's a Range Rover Sport, for our very special segment. We assume that we really can achieve higher volumes and can deliver an unbelievable; not only good-looking, but also from a technology point of view, on an all-aluminum basis, the product substance and the drivability have very special product in the market and therefore we're really optimistic to also get a high demand from all our potential customers around the world.

Unidentified Analyst: And finally, on Evoque and Range Rover, can you share what is the waiting period or the orders in hand currently, if you can share that?

Ralf Speth - CEO, Jaguar Land Rover: It depends on the variants. It depends on the specification. Yes, you have to wait a little bit, but I am happy to take your order and we will try to make it as quickly as possible.

B. Srinivas Rao - Deutsche Equities: Sir, Srinivas here from Deutsche. Over the last four years, the resurrection, if I may say, of JLR, has been quite stunning, what probably we have not seen in recent automotive history in terms of a marquee. Dr. Speth, you've been with BMW in the past when it tried to kind of get there. I would like to actually know from you in the next five years, what are the biggest challenges with JLR? Particularly, the bigger players are kind of carpet-bombing with all products and all derivatives in the next five years. I mean, we have seen very aggressive product launch schedules and volume ambitions by the big majors. In that context, what is the next big challenge for JLR actually?

Ralf Speth - CEO, Jaguar Land Rover: So, overall, we are trying to do our homework and to deliver solid product really to our customers. Now, the most critical element in that context is definitely overall the economy, if something, as I mentioned earlier, (the things won't) comes out of the corner. Then I guess we, but not only we, but the complete industry is a season of a challenge. If we can continue in a more solid economy then I am also quite sure the Jaguar Land Rover can deliver a solid performance and we go for sustainable and profitable growth.

B. Srinivas Rao - Deutsche Equities: So, my second question is, you – I mean, though the norms for niche manufacturers is not yet kind of out, particularly for the European, so to say, EU, for the mass market companies it's down by 25% further by 2020. We have heard statements from CEOs that it would be very difficult to achieve that with only the conventional ICD Indian technology. The JLR at least my personal perception is probably a bit behind in terms of the newer drivetrain technologies. Is that; A, a concern; and B, should we expect you to spend more in things like hybrid systems or electric system, electrical dry prints?

Ralf Speth - CEO, Jaguar Land Rover: Overall, the definition of a niche market play is still a 300,000 units in Europe. So, that's at the moment fixed until may be Brussels thinks about the totally new regulation and the totally new scheme. You will see more hybrids coming, and as I mentioned, we are going to introduce the world's first SUV diesel hybrid. Personally, I'm at this very moment, as you know, and as I more or less highlighted since years that I am not a big fan of the poor electric vehicle because at the end of the day, we want to do something with these kind of initiatives for the environment but also for the society and post criterias are not fulfilled with poor electric vehicles right at the moment. And I hope that also the government bodies think about it, calculate it through, calculate it on a lifetime basis and then introduce this kind of (technology) whenever they are mature. At the moment, the better technology at the moment is not mature enough.

Unidentified Analyst: I had a question on your depreciation and amortization for Jaguar and Land Rover. There's been a steep increase for this quarter, so just wanted to check if this is like – there is some one-off element there as well or should this be taken as a steady run rate?

C. Ramakrishnan - President and CFO: As we had explained in the past in our interactions, the depreciation amortization line item in Jaguar Land Rover P&L will keep increasing. In the recent past, we have significantly stepped up our capital expenditure and product development expenditure and this will get amortized through the P&L at an increasing pace going forward. That's the effect of what we're investing for the future and the exciting pace of new products that Jaguar Land Rover has launched and is planning to launch. I can't recall any material one-off items in that line item this year; nothing very significant or material to highlight.

Unidentified Analyst: Sir, just had a couple of follow-ups more.

Ralf Speth - CEO, Jaguar Land Rover: Just give me a second, please. I just want to add, if you really want to see the real performance of Jaguar Land Rover, look at the EBITDA line. Then you see the performance, and the performance also increased not too badly.

Unidentified Analyst: Sir, on the – we've seen some steep decline in raw material cost to sales. So, just wanted to check, apart from the factors we've talked about, has there been some decline in raw material cost per se as well, and what is the outlook for the same going forward?

C. Ramakrishnan - President and CFO: I would say, we don't see a – there has been no significant movement one way or the other. They've been fairly steady. There have been benefits in terms of productivity and operating efficiency improvements.

Kenneth Gregor - CFO, Jaguar Land Rover: What you do see in the quarter – quarter four – you do see the benefits of the richer product and market mix in the quarter, the new Range Rover contributing to that, and China contributing a slightly larger proportion of sales. And therefore, what happens you see that is when you divide all the cost by 100, the proportion of raw material, which is basically the material cost of the car has moved favorably because of that improvement in product and market mix.

Unidentified Analyst: And just finally, we've seen INR150 crore share of profit of associates for this quarter compared to INR6 crores last year, so just wanted to understand where is it coming from.

C. Ramakrishnan - President and CFO: That's the adjustment from minority interest you're talking about?

Unidentified Analyst: It's how…

C. Ramakrishnan - President and CFO: It's primarily the improved performance of our Fiat joint venture.

Unidentified Analyst: What is the holding you have there, sir?

C. Ramakrishnan - President and CFO: It's a 50-50 joint venture between us and Fiat.

Unidentified Analyst: So, we've made INR300 crores profit in that?

C. Ramakrishnan - President and CFO: It's one of the main items there.

Unidentified Analyst: Okay.

C. Ramakrishnan - President and CFO: That's right. The joint venture has performed definitely better on the bottom line this year.

Chirag Shah - Axis Capital: (Chirag from Axis Capital). First on the India business, given the improvement in RM to sales, is it attributable to product mix improvement, lower discounts or commodity prices? Largely, what will be the primary factors on it?

Vijay B. Somaiya - Head of IR and Treasury: If you don't mind can you repeat the question?

Chirag Shah - Axis Capital: If I look at quarter-on-quarter, there is a good improvement in RM to sales ratio it has declined, because it aided the margins improvement by 70 basis points. Is it attributable to better product mix sequentially or lower discounts or it's more to do with raw material cost basis.

C. Ramakrishnan - President and CFO: Frankly, it's a combination of all. As Ken mentioned a short while ago for Jaguar Land Rover, if you take one line item and compare it's both in terms of containment of marketing, fixed and variable marketing expenses, better realization on account of improvement in the product prices we had done succeedingly over each quarter and it will be a combination of all this.

Chirag Shah - Axis Capital: Even for India business, raw material has been stable, raw material prices, is that right (indiscernible)?

C. Ramakrishnan - President and CFO: Yeah, sure.

Chirag Shah - Axis Capital: In follow-up question you mentioned on JLR we're looking at introducing late new products. Can you elaborate? You have highlighted a few of them. Is it possible to highlight others?

Ralf Speth - CEO, Jaguar Land Rover: We talked about the Range Rover Sport which is really all aluminum vehicle and number one, there is a very high performance and very good product substance. We are going to launch F-TYPE of Jaguar and we will also over the rest of the year step-by-step introduce the one or the other and whenever it's approximate, whenever we can talk more about it, we'll really try to come back. I hope we also can surprise you and you know that we have the Frankfurt Motor Show this year, and we have to have some vehicles for the Frankfurt Motor Show, so we shouldn't talk about it now.

Chirag Shah - Axis Capital: Last question, I wanted to understand your strategy on Germany, over the last 12, 15 months, and we have seen some good growth coming in Germany for you on a low base. Is it more to do with more dealers being appointed and sales being recorded to dealers and what are your ambitions on the German market over next three to five years?

Ralf Speth - CEO, Jaguar Land Rover: So, well, in Germany, it's like, my tough market, not only that, the main premium car manufacturers are located in Germany but also you'll see that the economy at the moment is becoming more and more critical because at the end of the day, Germany has maybe to bail out one or the other country in Europe and that will also have certain implications for our customer group. Nevertheless, we're strong as I mentioned earlier in Europe and the main country is Germany. We grew by 18%. We have our European sales team based in Germany and they are doing a very good job so that the new products, especially for instance, the XF Sportbrake and they all will drive XF – they all will drive XJ, we can deliver growth.

Vishal: Sir, this is Vishal from – just a quick follow-up. On the Land Rover side in Germany, what products are doing well because even that is witnessing 20% growth if I look at that, over last three, four quarters now?

Ralf Speth - CEO, Jaguar Land Rover: If I understand your question about, because it was a – it's an issue with a – that I caught it in the right way, all products are doing well in Germany. Even the Defender is highly sought after, and it's a very good product contributor in Germany. Is it the question? Was it question you're talking about?

Vishal: Thank you very much.

Vishal Saraf - SBI Mutual Fund: This is Vishal from SBI Mutual Fund. Sir, given that this year we have already seen possibly large part of the CapEx being done both for Range Rover Sport given that they're both on the same platform, thus we have already seen significant capacity expansion for Evoque. So, going ahead, are we already past the peak in terms of investment, and given that we have already increased the guidance next year for both capacity creation and R&D, can you help us understand some more on where this expenditure is likely to be incurred?

Ralf Speth - CEO, Jaguar Land Rover: In terms of Range Rover and Range Rover Sport, quite clear. The peak is more or less over. Nevertheless, there's always a new peak, because we are investing even more in the future and we never want to stand still.

Vishal Saraf - SBI Mutual Fund: So, can you help us understand more of where this 2.8 billion we are talking of will go, some more color into some of the projects on some other details?

Ralf Speth - CEO, Jaguar Land Rover: You principally asked me now what the complete product portfolio and the product plan for the future. Please understand that we only talk about these concrete projects; whenever we are closer, that we also can tell you more about the project that we also then at the end of the day, we can deliver and also sell the product.

Vishal Saraf - SBI Mutual Fund: Even on the capacity side you'll not be able to help us understand what new capacities are being added over next, say, 12 to 18 months, in terms of physical assets?

C. Ramakrishnan - President and CFO: If I can slightly give a different version of the answer, we talked about that overall spend in the region of about GBP2.7 billion; approximately half and half between product development CapEx and assets, investments – CapEx that we traditionally talk about. The product development will be mostly on design engineering and development of the products, and the other half CapEx would, of course, include, I would say roughly half in terms of manufacturing, both capacities and capability and improving the versatility in the plants as well as the investment in the engine plant, and half of that half would be on assets, CapEx, required for the new products. I hope that helps.

B. Srinivas Rao - Deutsche Equities: Sir, on the India business, you've talked about the CapEx guidance generally about INR3,000 crores odd. Capacity expansion; we would be assuming is quite low for – or rather barring LCVs, there is unlikely to see any capacity requirements. Is it safe to assume that a large part of that CapEx is for product developments for the passenger vehicle platforms? That would be my first question – over the next three years. So, basically, what I'm asking is, are you going to spend about $1 billion on passenger car R&D over the next three years?

C. Ramakrishnan - President and CFO: We had provided guidance earlier that annually our CapEx will be in the range of about INR3,000 crores and we're short by INR9 crores this year; it was about INR2,991 crores or so. Our guidance continues to be in that region, INR3,000 crores plus, minus each year depending on the timing and phasing of the various plans. We have a very large product portfolio and a very wide portfolio ranging from Prima trucks to Ace and Magic and ranging from Safari, Sumo to Nano, with newer products that we're definitely looking at. Some of these like Tata Ace and its family in particular also require investment from time to time in capacity expansion. The wide product portfolio that we have requires constant refresh. The newer platforms both on the LCV and Prima and commercial vehicles as well as the Ace are versatile platforms, capable of multiple versions. I had shared with you earlier; some of these platforms could grow upwards of 100 plus variants potential based on the demand. So we have to plan for these. And given the competitive intensity and the maturity of the market, we have to increase the intensity and the pace in which we introduce refreshes and create constant excitement in the market. I would expect going forward, the spend proportion between commercial vehicle and passenger car. A year earlier, I had mentioned 50-50. I think it would be placed at more on the passenger vehicle front slightly higher, and maybe lower in the case of commercial vehicles, because our investment in – basic investment in Prima and the new platform; LCVs, are behind us, it will be more a question of exploiting those platforms. So the spent percentage on passenger vehicle related requirements would be slightly higher. Karl, would you like to add?

Pramod Amthe - CIMB Securities: This is Pramod from CIMB. You made a large provision for the pension liability for JLR employees through the reserves. I wanted to know, this is as on what date and what is the current status or current gap if you evaluate the same for the current period? And three, when is the next due date for this evaluation?

C. Ramakrishnan - President and CFO: I'll give the answer in two parts. Really from an accounting point of view, the funding deficit recognized in this fiscal year is a little over GBP600 million, as you rightly said, into the reserves and adjusted in the net worth of the Company as of March 2013. This is as per the IFRS accounting standards. As far as the funding deficit in terms of our discussion and agreement with the pension trustees are concerned, the discussions are on at a fairly advanced stage, near conclusion stage, but we'll not be able to comment on that at this point of time. If you go back a few years ago, we had mentioned that the funding deficit agreed with trustees were about GBP400 million to be funded over a longer term period; about seven or eight years at that time. Since then, the actuarial factors affecting the deficit have moved differently, the longevity has increased, the discount rates and the inflation rates have moved differently. So, we expect the deficit to be funded into the fund will be significantly higher than what we had last time. But the funding plan would similarly be over in a seven or eight-year period. In the next few months we should be able to conclude that.

Pramod Amthe - CIMB Securities: If I can ask one question – (indiscernible) last question, just on the CapEx and product development chain, beyond FY '14, how should one look at? Is it right to assume that the CapEx portion could actually come down from 1.25 billion given your investment schedules are meeting what you're looking at? So the lumpy impact would move away in FY '15? And on the product development side, is it right to assume this GBP1.2 billion to GBP1.3 billion of R&D spend you're indicating could be stable in that sense?

C. Ramakrishnan - President and CFO: We have at this point of time indicated for the current fiscal year, '13-'14 year, the product development spend will be in the region of about GBP2.75 billion. Looking at the plants and the potential more than looking in terms of spend, I think we should also look at it as an opportunity for growth and opportunity for encashing the value available in the market. If I look at it from that point of view, I think it would be safer to assume that the spend will remain at that level at least for the next two, three years.

Vijay B. Somaiya - Head of IR and Treasury: Thank you, ladies and gentlemen. I would request you to join us for tea. Thank you.