Tata Motors aims to be a near zero debt company in 3 years: No plans to sell JLR

Tata Motors' net automotive debt stands at Rs 48,000 crore. Speaking at the company’s 75th annual general meeting, Chandrasekaran said that while carving out the passenger vehicle business is on track and should be completed it in the current financial year, there is no intention to sell that business or that of Jaguar Land Rover (JLR).

By:Updated: Aug 26, 2020 10:22 AM

Tata Motors stock

Tata Motors (TML) chairman N Chandrasekaran on Tuesday said that the company is targeting to be a near zero debt company in the next three years by reducing expenses and selling non-core assets. The company’s net automotive debt stands at Rs 48,000 crore. Speaking at the company’s 75th annual general meeting, Chandrasekaran said that while carving out the passenger vehicle business is on track and should be completed it in the current financial year, there is no intention to sell that business or that of Jaguar Land Rover (JLR). “We have already taken steps and have a target for TML Group to generate positive free cash flows from FY22 onwards. Overall investments of the group have reduced by 50% during this fiscal year, and we will continue to manage this tightly going forward. The TML Group will also look to unlock non-core investments,” he said.

However, given the significant losses made both in JLR and Tata Motors’ domestic business in the first quarter of the current financial year, Chandrasekaran said it would be difficult to reverse those in the remaining quarters, though efforts are on to minimise the losses. “The expectation about the remaining part of the year is that sales will be increasing both in Tata Motors commercial vehicle, passenger vehicle as well as in JLR for the rest of the year. We are seeing increasing trends,” he said. As part of cost saving exercise, the company plans to save costs of around £2.5 billion at the UK’s Jaguar Land Rover and about Rs 6,000 crore at the domestic business during FY21.

Addressing shareholders’ queries, the chairman said that there has been no discussions between JLR and UK governments in terms of funding. “Currently not looking at any funding from the UK government,” he said. PB Balaji, chief financial officer said during a presentation that JLR will become sustainably cash positive from FY22 onwards. He added that the company’s Charge plus programme at JLR on cost and cash savings was progressing well and the target is now being stepped up further to £6 billion over a two and half year period. Of this, £2 billion will be through cost and profits improvement and £4 billion will be investment reduction and working capital improvement. He said the capital expenditure for the current year is also being pruned significantly to £2.5 billion now.

On the India business, Balaji highlighted that challenges due to Covid-19 have been severe, however, a significant cost and cash savings plan is being put in place to deliver Rs 6,000 crore of savings in current financial year itself. Also, capex is being cut from Rs 4,500 crore in FY20 to Rs 1,500 crore this year, while the business is expected to be positive from this year onwards despite Covid. Balaji added that the PV business is being put into a separate subsidiary to derive long term value creation, and is hopeful that the new legal entity post the National Company Law Tribunal’s approval will be in force over the next 9 to 12 months. “This will ensure transparent capital allocation as well as focus for this business and at an appropriate time we will be able to get a right partner in this business,” he said. He added that the PV business aims to become cash positive from FY23 onwards.

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