N Chandrasekaran, chairman, and CEO of Tata Motors, on Tuesday, said that the company plans to reduce the total automotive debt to near-zero levels in the next three years. He also said of their aim to generate free cash flows from FY22 onwards. This was announced during the Tata Motors’ 75th annual general meeting.
Although this, several shareholders of the company expressed anger towards the companies management for various issues like non-payment of dividends four years in a row.
During the AGM Chandrasekaran, the chairman and CEO of the company while addressing the shareholders informed them that the company would look to unlock non-core investments to deleverage business. He also confirmed that neither the passenger vehicle business nor Jaguar Land Rover (JLR) is being sold by the company.
Chandrasekaran said that currently, the net automotive debt of Tata Motors stands at ₹ 48,000 crores. He also told them that the company is deleveraging this business substantially. He added, “We have set a target to significantly bring down the debt and come to near-zero debt levels in the next three years.”
The company stands firm in its aim to generate positive free cash flow from FY22. Chandrasekaran also said to them that along with the initiatives taken by the company to tighten the cost structures, the group has also reduced investments of the group close to 50 percent in this fiscal. He also said that the company would tightly manage it in the future.
The domestic business was trimmed to ₹ 15,00 crore in this fiscal year and JLR capped at 2.58 billion pounds.
The shareholders showed their anger on the fact that the company did not pay a dividend in the fourth year in a row, although the company is celebrating its 75th anniversary this year.
The company’s shareholder wealth has been falling over the years, some shareholders also questioned them that why the executives of the company are pocketing huge amounts of cash during a time when the company is continuously incurring a loss. They also asked whether the management executives of the company had taken pay cuts due to the COVID-19 pandemic.
On the issue of not paying dividends in their fourth year, the company chairman N. Chandrasekaran said, “I can tell you that I am equally pained that we have not delivered dividends for the last four years.”
He added, “This is of top priority to the company, but unfortunately on the standalone level there has been no room for the last three-four years. This has been given the topmost priority.”
As people asked about the company’s plan in the passenger vehicle business and whether they are thinking to sell the PV, Chandrasekaran said, “I want to confirm there is no truth, even though some of the media people keep writing these articles that the PV unit is being sold. That is not the truth at all.”
The full recovery of the subsidiarisation of the PV business of Tata Motors is fully dependent on the NCLT process. He said that although the company is unable to put forward a definitive date, he would “personally be happy if it gets done in this fiscal year”. He also informed us that they will improve and sharpen the brand portfolio of the JLR.
He said, “We are fully committed to both these brands (Jaguar and Land Rover)… We would look to sharpen the product portfolio in JLR and continue to invest in new disruptive areas to define the future.”
The company is getting a good response from its recent products like Harrier, Nexon, and Altroz, according to the chairman of the company. Regarding the domestic passenger vehicle business, he said they would like to build on this momentum and hopes to create strong business going ahead. New models like Hornbill, Gravitas, and Altroz EV are also in the lineup to be produced by the company.
He said, “In the CV (commercial vehicle) business, the company has a very strong portfolio and sales network. As the market recovers and as the economy recovers, we are well-positioned for success.”
He also informed that the Tata motors is fully committed to produce EV vehicles and be part of the EV revolution in the country and said that they will continue to extend products, network, and ecosystem footprint in the coming times. He also said that the company has so far sold around 250 electric buses and has an order book of over 1,000 such buses.
Chandrasekaran said, “Mounting trade tensions, muted global growth, and enhanced regulatory norms have changed the business environment in which we operate.” The noted that the global automotive industry has been tangled in various issues for the entirety of the past year. The COVID-19 pandemic added to their wounds and exposed the reality of the markets around the globe.
The chairman also said that the Indian auto industry saw an unprecedented collapse in recent times and told that the domestic auto sales compressed by 18 percent YoY in FY20.
He also said that regulatory changes like changed axle load norms and migration to BS-VI emission norms added to the already slowed down market and increased uncertainty for both consumers and suppliers. The strict lockdown forced by both central and several state governments across the country made the challenge harder.
These conflicts also added to the decline of JLR sales.
“A significant part of the volume decline occurred in the fourth quarter of FY19-20. JLR delivered revenues of 23 billion pounds with a PBT loss of 393 million pounds. JLR undertook a host of structural initiatives to drive efficiencies so that, despite the decrease in volumes, the business improved its profitability during the year and reduced its cash outflows…”, He said.
He also said that the company’s turnaround program in China resulted in six months of continued double-digit year-on-year growth.
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