The sustained surge in demand, improvement in the supply of semiconductors, timely introduction of new products and strict cost-cutting measures will help Tata Motors bring down its debt to zero as committed before, reiterated Chairman N Chandrasekaran at the company’s 76th annual general meeting.
“The company declared a goal to go zero debt by FY24. Last year due to internal cash flows and tight management we were able to reduce the debt by over Rs 7,500 crore. And we are very much on our path and stay committed to meet our target of FY24,” Chandrasekaran told shareholders.
Though Tata Motors managed to reduce its net automotive debt at the consolidated level in FY21, the same ballooned up to Rs 61,300 crore by end of Q1FY22. This was mainly because of the impact of working capital change during the quarter which stood at Rs 16,500 crore.
At the 75th AGM, Chandrasekaran declared that Tata Motors would become a zero debt company in the ensuing three years, which was warmly welcomed by the investors. The Mumbai-headquartered company has kicked off a ‘Reimagine’ programme at Jaguar Land Rover under which it is cutting down production capacity by one-fourth and bringing down other costs.
At the stand-alone level, the company is aggressively pushing its passenger vehicle business where it aims to have 15 percent market share. Its current market share stands at 9 percent, which is the best in eight years. In the commercial vehicle segment, Tata Motors intends to retain its market leadership while pushing new products in the expected revival in demand conditions.
“As the impact of the pandemic recedes with more people getting vaccinated, we expect demand to remain strong with consumer preference shifting towards personal mobility. The supply situation however is expected to be adversely impacted for the next few months due to disruptions due to Covid lockdowns in India and semiconductor shortage worldwide. This will impact production volumes, sales, and margins in the near term. We expect the situation to improve in the second half of FY22,” Chandrasekaran added.
Shortage of semiconductors may see Jaguar Land Rover report 50 percent lower wholesale volumes by the end of the September 2021 quarter coupled with a negative EBIT margin.
The two British luxury automotive brands expect a production loss of nearly 100,000 units in the first half of this year (April to September) due to the chip shortage. Supplies of the crucial component are not expected to revive at least for the next 3-4 months.
JLR however has an order backlog of 110,000 units, a significant portion of it coming from the new Defender. The company is forced to give priority to high margin products for production.
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