Expect strong demand in H2 of FY18: Tata Motors

In an interview to CNBC-TV18, Ravi Pisharody, ED-CV, Tata Motors spoke about the latest happenings in his company and sector.

Below is the verbatim transcript of the interview.

Q: Give us an update on the migration to BS-IV and what kind of financial impact the company will see.

A: I cannot talk about the impact of margin because this is still being calculated. There should be no impact at all in Q1 of next year because the idea is, whatever liabilities had to be provided for the current year sales have to be provided in the current year.

Q: The reason why I ask you this is because there was a general misunderstanding that because dealers raise claims for discounts that they provide, probably would have been raised in the month of April -- perhaps the company would be seeing a financial impact in Q1 of FY18 but you are clarifying that impact would be only seen in Q4 of this fiscal year?

A: We have a very robust system because any month we have to make a provision for the discounts or schemes which were there in the previous month. So that is not always based on actual claims. It is based on a provision, this is the scheme which has been played out, this is the sort of deal or customers, so there is a provision which is made against which these claims were. So the claims -- we tried to push the dealers to settle the claims within 30 days but we do not wait for the claims to be settled to take the liability.

Q: We all knew that Q1 of fiscal year 18 was going to be a slightly subdued month because there was a lot of pre-buying that in either case was taking place as the market was preparing for the migration to BS-IV. Now account of this Supreme Court (SC) verdict and the frenzied activity as far as sales were concerned, how long do you think demand is going to be subdued across the commercial vehicle (CV) portfolio on account of these last two days of heavy discounting?

A: First of all even aside of discounting, we have a very unusual phenomenon in April. The sales will be more effective because the dealers are starting with no-sellable stock. It has probably never happened. The BS-III stock is there which I talked about that is not sellable.

So part of the portfolio is in stocks but part of this portfolio is not in stock. So in a sense one of the impacts on May will be the fact that the dealers’ opening stock is low and they will be largely dependent on fresh production which is happening.

Like I said buses and heavy commercial vehicles (HCVs) were already new production. The pre-buying impact is on M&HCV only. There is an impact but margins are always very strong. March is generally a very strong month. It is always the best month of the year. But this pre-buying is in M&HCV impact. Definitely we will see a very slow quarter for M&HCV and given that last year Q1 was good, the year-on-year (Y-o-Y) comparison will look pretty ugly.

However, comparatively Q2 will be good because last year Q2 was very weak. By this year Q2, goods and services tax (GST) would have settled down and all the uncertainties would have gone away. So in a sense for M&HC, I am still hoping at least the year will be flat but a lot will depend on the first six months which will be lower and how much of that can be made up in the second half of the year -- where environmentally we expect the demand to be strong.