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Tata Motors' aims at near-zero debt levels in 3 years, says N Chandrasekaran

Chandrasekaran, while addressing shareholders at Tata Motors' 75th annual general meeting, said the company would also look to unlock non-core investments in order to deleverage the business.

August 26, 2020 / 08:09 PM IST

Tata Motors (TML) Chairman N Chandrasekaran on August 25 said the company aims to reduce its total debt to near-zero levels in three years and generate free cash flows from FY22 onwards. Chandrasekaran, while addressing shareholders at Tata Motors' 75th annual general meeting, said the company would also look to unlock non-core investments in order to deleverage the business.

"In terms of path ahead, I would like to speak about five dimensions. Currently the Tata Motors Group has a net automotive debt of Rs 48,000 crore and we are deleveraging this business substantially.

"We have set a target to significantly bring down the debt and come to near-zero debt levels in the next three years," Chandrasekaran told shareholders.

The auto major has already initiated steps towards this and set a target to generate positive free cash flows from FY22 onwards, he added.

Outlining the initiatives to tighten the cost structures, Chandrasekaran said the group's overall investments have reduced by close to 50 percent this fiscal and it would continue to manage this very tightly going forward.

"The TML Group would also look to unlock any non-core investments we have," he added.

Commenting on Jaguar Land Rover (JLR), Chandrasekaran said the focus would be on sharpening the brand portfolio.

"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," he noted.

On Tata Motors' domestic passenger vehicle business, the group chairman said the company is getting good response for its products like Harrier, Nexon and Altroz, and would like to build on this momentum and create a very strong business going ahead.

"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," Chandrasekaran said.

Elaborating on other initiatives, he added that the company is investing in sales and service and both TML and JLR intend to lead in the space by harnessing digital technologies.

He said the company has entire electric mobility ecosystem in place ranging from charging infrastructure, battery cells, battery packs and electric motors to financing.

"We are committed to EV (electric vehicle) revolution in India and we will continue to expand our products as well as network and ecosystem footprint," Chandrasekaran said.

Commenting on the overall business environment, he noted that the entire global auto industry has grappled with multiple issues for the last 12 months.

"Mounting trade tensions, muted global growth and enhanced regulatory norms has changed the business environment in which we operate," Chandrasekaran said.

The onset of COVID-19 pandemic in the final quarter of the year ushered in a new reality for industries across the world, he added.

The Indian auto industry also faced an unprecedented year marked by significant headwinds as domestic auto sales declined 18 percent year-on-year in FY20, the chairman said.

Alongside the broad economic slowdown, regulatory changes like changed axle load norms and migration to BS-VI emission norms fuelled uncertainty for both consumers and suppliers, he noted.

These challenges were further enhanced in the final quarter due to a strict lockdown imposed by the government to curtail the spread of coronavirus pandemic, he said.

"Over the two financial years, Tata Motors focussed in refreshing its portfolio, improving structural efficiencies and streamlining internal processes...However in FY20, turnaround journey has been interrupted as demand deteriorated sharply," Chandrasekaran told shareholders.

Ongoing trade conflicts and COVID-19 situation also impacted JLR sales in FY20, leading to 12 percent year-on-year contraction in offtake, he said.

"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, compared with previous years," Chandrasekaran said.

The company's turnaround program in China resulted in six months of continued double-digit year-on-year growth, he added.

Last fiscal, TML's consolidated revenue stood at Rs 2,61,038 crore with a PBT (profit before tax) loss of Rs 10,580 crore.

On a standalone basis, the company posted revenue of Rs 43,928 crore with a PBT loss of Rs 7,127 crore, Chandrasekaran informed shareholders.

first published: Aug 25, 2020 06:41 pm