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7 November 2015

2QFY16 Results Update | Sector: Automobiles

Tata Motors

Jinesh Gandhi ([email protected]); +91 22 3982 5416 Jay Shah ([email protected]); +91 22 3078 4701

BSE SENSEX S&P CNX CMP: INR396 TP: INR471 (+19%) Buy 26,265 7,954 Bloomberg TTMT IN

Equity Shares (m) 3,395.9 M.Cap. (INR b) / (USD b) 1,345/20.4 52-Week Range (INR) 606/279

1, 6, 12 Rel. Per (%) 21/-20/-19 Avg Val (INR m) 3,247 Free float (%) 65.7

Financials & Valuation (INR b) Y/E Mar 2015 2016E 2017E

Net Sales 2,628 2,685 3,097 EBITDA 421 383 446 Adj PAT 140 115 153 EPS (INR) 43.6 33.8 45.1 Gr.(%) (1.1) (22.4) 33.4 BV/Sh.(INR) 175 220 263 RoE (%) 23.1 17.5 18.7 RoCE (%) 24.2 16.2 16.8 P/E (x) 9.1 11.7 8.8 P/BV (X) 2.3 1.8 1.5

Estimate change (%) 16-22%

TP change (%) 4%

Rating change

Below est; , as JLR badly impacted by adverse mix, China weakness and launch expenses; S/A recovery continues; EPS Cut of 16-22% Consol revenues at ~INR613b (in-line). EBITDA at ~INR68.8b (v/s est INR90.3b)

implying EBITDA margin of 11.2% (est. 14.3%). Adj. PAT de-grew 83% to ~INR5.5b (v/s est ~INR31.8b).

JLR realization at GBP44k (v/s est GBP45k) declined 4% QoQ (-6% YoY) due to adverse market and product mix, resulting into revenues of GBP4.8b (v/s GBP5b). JLR EBITDA margins of 12.2% (v/s est 15.4%), impacted by adverse mix, higher marketing spend in China and launch expense. Further, GBP114m Fx loss and higher depreciation resulted in adj. PAT loss of GBP52m.

S/A realization at INR833k (+21% YoY, +13% QoQ, v/s INR798k) drove revenues to INR104b (v/s est. INR99.6b). EBITDA Margins at 6.8% (v/s est. 6.1%) driven by operating leverage. Net loss at ~INR1.6b (v/s est loss of ~INR4.8b).

Earnings call highlights: a) Maintains EBITDA margin guidance of 14%-16%, with improvement in 2HFY16 over 1HFY16. b) Commodity cost benefit will play out over period of time, due to hedging policy. c) China Evoque is witnessing slower due to market slowdown. d) China Discovery Sport is priced at 20% discount to imported model (production starting in Nov-15). e) Local production of XF in China to start by mid CY16. f) XE launched in China at CNY381k. XE might be localized in Phase-2 by end CY17/early CY18. g) Despite ~INR75b from rights issue, consol Net Auto Debt increased to INR165.3b (v/s ~INR67.6b in 2QFY15 v/s ~INR123.4b in 1QFY16), due to –ve FCF in JLR (GBP234m). Valuation & view: We cut consol EPS by ~22%/16% for FY16/17 to ~INR34/45, driven by cut in JLR (details inside). The stock trades at 11.7x/8.8x FY16/17E consolidated EPS. We maintain Buy on stock with TP of INR471 (SOTP based).

Investors are advised to refer through disclosures made at the end of the Research Report. Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

http://www.motilaloswal.com/Institutional-Equities

7 November 2015 2

Tata Motors

JLR: Adverse mix, China weakness and launch expenses hurts margins JLR’s (ex Chery JV) wholesale volumes up 6.9% YoY (0.5% QoQ) to 111,160 units,

driven by Jaguar volumes at 21,687 units up 22% YoY (2.3% QoQ) and LandRover volumes at 89,473 units up 3.8% YoY (flat QoQ).

JLR realization at GBP44k (v/s est GBP45k) declined 4% QoQ (-6% YoY) due to weak market mix (China volume mix at 13.5% down 90bp QoQ) and weak product mix for Jaguar (higher contribution from XE).

Net sales at GBP4.8b (v/s est. GBP4.9b) were flat YoY (-3.4% QoQ). JLR’s gross margins declined 230bp QoQ (flat YoY) to 39.6%, impacted by mix. JLR EBITDA margins of 12.2% (v/s est 15.4%), impacted by GBP40m Fx loss on

revaluation of payables in EUR (v/s GBP40m gain in 2QFY15 v/s GBP11m gain in 1QFY16), adverse mix (product and market), higher manufacturing and launch cost.

Further, Forex loss of GBP114m, higher depreciation and Tianjin port blast provisioning of GBP245m resulted in PAT loss of GBP91m (v/s est. GBP333m Profit, v/s GBP450m profit in 2QFY15, v/s GBP498m profit in 1QFY16).

Total Capex and Product development spend for the quarter was GBP775m. FCF was negative GBP234m, impacted by weak operating performance and

continued investments. The JV’s wholesale volumes were at 5,585 units (retails at 5,084 units). JLR’s

share in loss of Chery JV was at ~GBP1m for 2QFY16 (v/s GBP6m).

7 November 2015 3

Tata Motors

Exhibit 1: Share of China volumes moderate to 18% (incl JV)

Exhibit 2: Premium model share at 52% levels

Exhibit 3: JLR realizations declines YoY on adverse product and market mix (GBP/unit)

Source: Company, MOSL

Exhibit 4: JLR margins impacted by higher marketing spend, manufacturing and launch expense


JLR: 2HFY16 to witness recovery led by new launches and China recovery Recent launches (new Discovery Sport, Jaguar XE and new XF) and upcoming

launches (Evoque Convertible in 4Q, XE in US, and F-Pace) would drive volume recovery.

Extract from JLR’s presentation: These new products are expected to drive profitable volume growth in 2015/16 and position the company to deliver a solid second half. Although, as previously indicated, EBITDA margins for fiscal 2015/16 are expected to be lower than the high levels in 2014/15 reflecting model mix and launch costs associated with new products, launch and reporting effects of the China JV and more mixed economic conditions particularly in China.

JLR: Key takeaways from the call Maintains EBITDA margin guidance of 14%-16%. Margins to see improvement in

2HFY16 over 1HFY16. Commodity cost benefit will play out over period of time, due to hedging policy. Based on Oct-15 end Fx rate, Fx gain on revaluation of payables would be

GBP40m. China: Locally produced Evoque building momentum, but slower due to market

slowdown (October 2015 retails at 1,859 units). China locally produced Discovery Sport priced at 20% discount to imported model, with production starting in November 2015.

22 21 21 21 21

26 25 24

30 27 28

18 17 18

1Q13

2Q13

3Q13

4Q13

1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

3Q15

4Q15

1Q16

2Q16

Share of China vols (%)

56 55 53

54 52

55

61

57 60 59

63

59 56

52

1Q13

2Q13

3Q13

4Q13

1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

3Q15

4Q15

1Q16

2Q16

Share of premium models (%)*

* RR+ RR Sport+ Evoque+ F-Type

43,5

71

42,8

68

43,4

30

42,2

54

43,5

94

42,4

58

40,1

11

43,4

33

45,2

11

45,2

46

45,7

90

44,2

24

46,4

85

46,2

42

48,0

05

46,5

48

45,2

06

43,4

60

1QFY

122Q

FY12

3QFY

124Q

FY12

1QFY

132Q

FY13

3QFY

134Q

FY13

1QFY

142Q

FY14

3QFY

144Q

FY14

1QFY

152Q

FY15

3QFY

154Q

FY15

1QFY

162Q

FY16

362

420

639

605

529

458

531

820

647

809

1,01

7 92

0 1,

087

933

1,09

6 1,

016

821

589

13.4 14.4

17.0

14.6

14.5

13.9

14.0 16.2

15.8 17.5

19.1

17.2

20.3

19.4

18.6

17.4

16.4 12.2

1QFY

122Q

FY12

3QFY

124Q

FY12

1QFY

132Q

FY13

3QFY

134Q

FY13

1QFY

142Q

FY14

3QFY

144Q

FY14

1QFY

152Q

FY15

3QFY

154Q

FY15

1QFY

162Q

FY16

EBITDA (GBP m) EBITDA Margin (%)

7 November 2015 4

Tata Motors

Old XF is being phased out in China. JLR to launch imported model XF in China till local production starts by mid CY16.

XE launched in China at CNY381k. No plans to localize XE in phase-1, as priority is to localize engines by end CY16. XE might be localized in Phase-2 by end CY17/early CY18.

Net Cash: GBP469m (v/s GBP1.7b in 2QFY15 v/s GBP800m in 1QFY16). Despite ~INR75b from rights issue, consol Net Auto Debt increased to INR165.3b

(v/s ~INR67.6b in 2QFY15 v/s ~INR123.4b in 1QFY16), due to –ve FCF in JLR (GBP234m).

Standalone: 3rd quarter of EBITDA profit after 5 consecutive quarters of EBITDA losses

S/A volumes grew by flat YoY (+8.2% QoQ) to 126k units led by growth in PV volumes up 5% YoY (+8.1% QoQ) to ~35k units on back of recently launched Zest and Bolt and CV volumes down 2.3% YoY (+8.2% QoQ) backed by strong growth in M&HCV although LCVs continue to remain under pressure.

Within CVs, MHCV volumes went up by 32.3% YoY to 44,556 units, while LCV volumes declined ~21.8% YoY to 46,691 units.

LCV segment has also been badly impacted due to prolonged slowdown in economic activity coupled with cautious of financiers towards lending to this segment (customers being largely first time buyers) and lack of last mile loads are major factors.

M&HCV Industry witnessing strong demand conditions fuelled by replacement demand and moderate pre-buying ahead of regulation changes happening from October

Realization improved ~21% YoY (4.4% QoQ) to INR833k/unit (v/s est. INR798k per unit) driven by better mix, despite higher discounts.

Net sales at INR104b (v/s est. INR99.6b) up 20% YoY (135 QoQ). EBITDA at ~INR7b (v/s est ~INR6.2b). EBITDA margins were at 6.8% (v/s 4.7% in

1QFY16, v/s 2.8% in 4QFY15), on account of operating leverage benefit and reduction on absolute staff cost due to reduction in employees.

Other income at INR2.1b (v/s est. INR400m) on account of interest received on cash raised through rights issue.

Net loss of INR1.6b (v/s est. loss of INR4.8b) as against INR18.5b in 2QFY15 and PAT of ~INR2.7b in 1QFY16.

S/A Net Debt reduced QoQ by ~INR1.9b to INR140.7b (v/s ~INR172.3b in 2QFY15 v/s ~INR142.6b in 1QFY16), driven by rights issue proceeds of ~INR75b.

7 November 2015 5

Tata Motors

Exhibit 5: Trend in segment mix Segment 2QFY16 2QFY15 YoY (%) 1QFY16 QoQ (%) M&HCVs 44,556 33,684 32.3 37,100 20.1

Contribution (%) 35.3 26.6

31.8

LCVs 46,691 59,738 -21.8 47,205 -1.1 Contribution (%) 37.0 47.2

40.5

Total CVs 91,247 93,422 -2.3 84,305 8.2 Contribution (%) 72.4 73.8

72.4

Cars 29,759 25,468 16.8 27,085 9.9 Contribution (%) 23.6 20.1

23.2

UVs 5,053 7,731 -34.6 5,120 -1.3 Contribution (%) 4.0 6.1

4.4

Total Volumes 126,059 126,621 -0.4 116,510 8.2


7 November 2015 6

Tata Motors

Exhibit 6: Higher M&HCV share drive QoQ realizations


Exhibit 7: 3rd quarter recovery after 5 Quarters of EBITDA losses


Valuation and view Ex-China demand remains strong, JLR to gain share across geographies: FY16 is

year of transition for JLR as it would have 3 unprecedented events viz a) own engine plant for the 1st time, b) China manufacturing plant and c) entry into high volumes with Jaguar XE. Jaguar portfolio has potential to go up 3x in volumes led by XE and Crossover F-Pace (FY16). China JV has started in 4QFY15, starting with 3 models (XF, Evoque Discovery Sport). These 3 models currently contribute 45-50% of China volumes, and have potential to go up 2.5x by FY17 on local production. Volume momentum is expected to improve driven by rap-up in Discovery Sport, Jaguar XE and Evoque (in China JV).

China growth normalizing, but transitory issues receding: JLR's transitory issues, in the form of model phase-out and teething troubles in China JV, have impacted volumes by 5-8% since 3QFY15. We expect volume recovery from transitory issues from 3QFY16, driven by a) China Evoque ramp-up from 3QFY16, b) Discovery Sport launch in China in 3QFY16, c) New XF and XE in China from 4QFY16, and d) ramp-up of new launches in other markets. Despite China's volume growth moderation, it is still expected to outgrow other markets with 8-10% CAGR over CY14-20. JLR is expected to outperform in China, driven by strong product pipeline, dominance in the fast growing SUV segment and dealer network expansion.

JLR’s profitability has many levers: Pricing pressure due to moderating growth, adverse terms of trade and increasing share of compact luxury cars are driving normalization of profitability in China. We expect JLR’s profitability in China to normalize from ~25% in FY15 to ~15% by FY17, implying gross impact of ~400bp. JLR has several levers, both cyclical and structural, to dilute the impact of China margin normalization. Near-term EBITDA margin drivers (~100bp savings) include a) favorable commodity prices, b) operating leverage driven by recovery in volumes as transitory issues recede, and c) ramp-up in Chery JV. JLR has several structural drivers to margins (~50bp factored in) including a) full roll-out of modular strategy, b) operating leverage driven by ramp-up in Jaguar portfolio, and c) incremental production from low-cost countries.

CV cycle bottomed out, product lifecycle turning positive for PVs: CV business has bottomed out. We expect a recovery in MHCV volumes to continue in FY16,

588

6

13

577

5

73

555

558

521

564

5

94

586

5

96

649

7

01

691

7

17

774

7

98

833

7.5 13.2

(0.8) (2.0) (5.7)

(8.9) (9.6)

(1.6) 7.1 4.9 14.3

15.2

17.9

18.1

20.3

19.3

13.9 20.5

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q

FY12 FY13 FY14 FY15 FY16

Avg. Realization Growth YoY %

10,2

22

9,33

1 8,

972

15,6

13

7,74

4 7,

334

2,33

8 4,

021

2,06

5 1,

776

-3,3

78

-5,2

81

-2,1

46

-1,4

23

-4,6

40

2,99

3 4,

405

7,09

3

8.8 7.2 6.7 9.5

7.3 5.9 2.2 3.6

2.3 2.0

(4.3) (6.2) (2.8) (1.6)

(5.1)

2.8

4.7 6.8

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q

FY12 FY13 FY14 FY15 FY16

EBITDA (INR m) EBITDA Margin (%)

7 November 2015 7

Tata Motors

while LCV volumes are expected to recover in FY16 with a lag of 6-9 months. We estimate ~17% CAGR in CV volumes over FY15-17E. PV business, after witnessing no major launch since Nano launch in 2009, is gearing up for 2 launches every year till 2020. Its recent launch of Zest (compact sedan) and Bolt has received good response; this would further aid volume recovery for TTMT. We estimate ~18% PV volume CAGR over FY15-17E (~17% CAGR de-growth over FY12-15).

EBITDA Cut of 2-4%, EPS cut of 16-22% for FY16/17: We have cut our EBITDA estimate for FY16/17 by 4.3%/1.9% due to cut in JLR EBITDA margins partly diluted by higher JLR volumes and improvement in S/A EBITDA margins. However, our consol EPS has seen cut of 22%/16% for FY16/17 to ~INR34/45 due to a) higher depreciation expense (JLR), b) higher interest cost and c) forex loss below EBITDA in JLR.

Valuation & view: TTMT would benefit from a) ramp-up in Chery JV volumes, b) benefit of new launches viz Jaguar XE, Discovery Sport and upcoming F-Pace, c) benefit of modular platform strategy, and d) recovery in India business. The stock trades at 11.7x/8.8x FY16/17E consolidated EPS. We maintain Buy on stock with TP of INR471 (SOTP based).

Exhibit 8: Revised forecast (INR b) FY16E FY17E Key Assumptions Rev Old Chg (%) Rev Old Chg (%) Consolidated

Net Sales 2,685 2,668 0.6 3,097 3,150 -1.7 EBITDA 383 400 -4.3 446 455 -1.9 EBITDA Margins (%) 14.3 15.0 -70bp 14.4 14.4 0bp Net Profit 115 147 -21.9 153 183 -16.1 Cons EPS 33.8 43.3 -21.9 45.1 53.8 -16.1 JLR (IFRS)

Volumes ('000 units) 519 506 2.5 601 597 0.7 EBITDA 3,122 3,279 -4.8 3,472 3,556 -2.4 EBITDA Margins (%) 14.5 15.4 -90bp 14.6 14.7 -10bp Net Profit 1,310 1,597 -17.9 1,500 1,768 -15.2 Standalone

Volumes ('000 units) 527 540 -2.5 670 687 -2.5 EBITDA 27 27 -0.6 50 48 4.4 EBITDA Margins (%) 6.3 6.4 -10bp 9.0 8.7 30bp Net Profit (4.4) (4.9) -10.4 13.2 10.9 21.1


7 November 2015 8

Tata Motors

Exhibit 9: TATA MOTORS: Sum-of-the-parts valuation INR B Valuation Parameter Multiple (x) FY16E FY17E

SOTP Value Tata Motors - Standalone EV/EBITDA 8.0 218 402 JLR (Adj for R&D capitalization) EV/EBITDA 4.0 899 1,056 JLR - Chery JV EBITDA Share EV/EBITDA 4.0 27 101 HV Axles EV/EBITDA 4.0 6 7 HV Transmission EV/EBITDA 4.0 4 6 Tata Technologies EV/EBITDA 4.0 23 26 Tata Daewoo EV/EBITDA 4.0 13 14 Total EV 1,190 1,613 Less: Net Debt (Ex FCCB & TMFL) 177 126 Add: Other Investments Tata Motors Finance P/BV 0.75 20 15 Other Associates/JVs P/BV 0.75 9 20 Tata Sons 20% discount 78 78 Total Equity Value 1,119 1,600 Fair Value (INR/Sh) - Ord Sh Fully Diluted 330 471 Upside (%) -16.8 18.9 Fair Value (INR/Sh) - DVR @ 30% discount 230 329 Upside (%) -4.3 37.0


Exhibit 10: Valuations trading at historical average, reflecting improving fundamentals

Source: MOSL Source: MOSL

Exhibit 11: Comparative valuation CMP Rating TP P/E (x) EV/EBITDA (x) RoE (%) RoCE (%)

Auto OEM's (INR)* (INR) FY16E FY17E FY16E FY17E FY16E FY17E FY16E FY17E Bajaj Auto 2,423 Buy 3,118 18.4 14.5 11.3 9.3 33.2 36.1 47.6 48.3 Hero MotoCorp 2,633 Buy 2,862 16.7 14.7 10.7 9.6 43.3 40.5 60.4 55.3 TVS Motor 283 Buy 326 29.0 17.6 17.4 11.3 25.5 33.3 24.3 32.7 M&M 1,248 Neutral 1,281 19.3 15.5 14.8 12.9 16.0 15.9 17.6 17.9 Maruti Suzuki 4,523 Buy 5,098 26.4 18.8 12.9 10.1 18.5 21.9 25.8 29.5 Tata Motors 396 Buy 471 11.7 8.8 4.0 3.3 17.5 18.7 16.2 16.8 Ashok Leyland 88 Buy 100 23.6 12.5 11.3 7.0 19.3 30.4 20.3 31.1 Eicher Motors# 16,693 Buy 22,107 48.0 30.0 26.4 17.1 34.0 40.8 36.0 46.8 Auto Ancillaries Bharat Forge 865 Buy 1,033 24.2 18.8 12.8 10.8 22.2 24.3 23.3 26.2 Exide Industries 143 Buy 183 19.8 15.8 11.9 9.7 13.7 15.4 18.7 19.9 Amara Raja Batteries 887 Buy 1,032 29.6 21.5 17.6 13.3 25.3 25.3 34.8 33.5 BOSCH 19,392 Buy 23,013 48.1 35.0 31.8 23.9 16.2 19.4 23.8 27.4 # Nos. are on CY basis

7.8

11.2

8.0 10.3

0

8

16

24

32

Oct

-00

Dec

-01

Feb-

03

Apr-0

4

Jun-

05

Aug-

06

Sep-

07

Nov

-08

Jan-

10

Mar

-11

May

-12

Jun-

13

Aug-

14

Oct

-15

P/E (x) 15 Yrs Avg(x)5 Yrs Avg(x) 10 Yrs Avg(x)

Negative Earnings

Cycle

1.5 2.5 2.0

2.6

0.0

1.5

3.0

4.5

6.0

Oct

-00

Dec

-01

Feb-

03

Apr-0

4

Jun-

05

Aug-

06

Sep-

07

Nov

-08

Jan-

10

Mar

-11

May

-12

Jun-

13

Aug-

14

Oct

-15

P/B (x) 15 Yrs Avg(x)5 Yrs Avg(x) 10 Yrs Avg(x)

7 November 2015 9

Tata Motors

Tata Motors| Story in Charts: Structural JLR story meet cyclical recovery in S/A

Exhibit 12: Expect JLR (incl JV) volume CAGR of ~13% led by strong growth in FY16 on introduction of Jaguar XE

314,

433

372,

062

429,

861

470,

523

518,

667

601,

156

29.1

18.3 15.5

9.5

10.2

15.9

FY12 FY13 FY14 FY15 FY16E FY17E

JLR volumes (ex JV) Growth (%)


Exhibit 13: Margins to correct due to weak China demand and transition to Chery JV

1,98

9

2,33

1

3,39

3

4,13

1

3,12

2

3,47

2

4,04

8

14.7 14.8 17.5 18.9

14.5 14.6 15.5

FY12 FY13 FY14 FY15 FY16E FY17E FY18E

EBITDA (GBP m) EBITDA margin (%)


Exhibit 14: JLR’s to remain FCF positive despite high capex plans

2,500 2,429 3,422 3,627

2,858 3,760

-1,542 -2,609 -2,736 -2,641 -3,150 -3,035

958

-180

686 986

-292

725


CFO Capex FCF


Exhibit 15: S/A business to recover on economic recovery 5

36,2

67 4

44,9

10

342

,881

362

,948

432

,156

560

,453

11.6

-17.0 -22.9

5.9

19.1

29.7


Revenues (INR m) Growth (%)


Exhibit 16: S/A margins to improve on volume recovery

37,320 18,690

(4,821) (8,000)

27,291 50,256

7.0

4.2

-1.4

-2.2

6.3 9.0


EBITDA (INR m) EBITDA Margins (%)


Exhibit 17: EPS CAGR of 13% over FY15-18E

37.0 30.9 44.1 43.6 33.8 45.1

28.3

-16.3

42.6

-1.1

-22.4

33.4


EPS (INR) Growth (%)


7 November 2015 10

Tata Motors

Key operating metrics

Exhibit 18: Snapshot of Revenue model 000 units FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E JLR Jaguar 47 53 54 58 79 76 100 128

Growth (%) -16.0 11.8 2.0 7.0 37.2 -3.5 31.4 27.2 % of Total JLR Vols 24.4 21.8 17.2 15.5 18.4 16.3 20.6 24.2

Land Rover 147 191 260 314 351 394 418 473 Growth (%) 1.5 30.1 36.6 20.7 11.6 12.4 6.1 13.2 % of Total JLR Vols 75.6 78.2 82.8 84.5 81.6 83.7 85.7 89.7

Total Volumes 194 244 314 372 430 471 488 527 Growth (%) -3.4 25.6 29.1 18.3 15.5 9.5 3.7 8.1

ASP (GBP '000/unit) 34 41 43 42 45 46 44 45 Growth (%) 13.8 20.4 6.1 -1.3 6.3 3.0 -5.0 2.0

Net JLR Sales (GBP b) 7 10 14 16 19 22 22 24 Growth (%) 31.9 51.2 36.9 16.8 22.8 12.8 -1.5 10.3

DOMESTIC MH&CVs 168 214 221 153 122 143 173 226

Growth (%) 36.4 27.5 3.4 -31.1 -19.7 16.5 21.5 30.0 LCVs 234 295 364 429 299 222 201 261

Growth (%) 38.3 26.2 23.3 17.8 -30.3 -25.8 -9.4 30.0 Total CVs 402 509 585 581 421 365 374 487

Growth (%) 37.6 26.7 14.9 -0.7 -27.5 -13.5 2.7 30.0 Total PVs 266 328 338 229 145 138 152 184

Growth (%) 24.2 23.0 3.1 -32.2 -36.5 -5.3 10.7 20.5 Total Volumes 668 837 923 810 567 502 527 670

Growth (%) 31.9 25.2 10.3 -12.2 -30.1 -11.4 4.9 27.3 ASP (INR 000/unit) 533 574 581 549 605 723 821 836 Net S/A Sales (INR b) 356 480 536 445 343 363 432 560

Growth (%) 39.1 35.0 11.6 -17.0 -22.9 5.9 19.1 29.7


7 November 2015 11

Tata Motors

Financials and valuations

Income Statement (Consolidated) (INR Million) Y/E March 2010 2011 2012 2013 2014 2015 2016E 2017E Total Income 925,193 1,221,279 1,656,545 1,888,176 2,328,337 2,627,963 2,685,045 3,097,007 Change (%) 30.5 32.0 35.6 14.0 23.3 12.9 2.2 15.3 Expenditure 839,051 1,043,129 1,419,540 1,622,487 1,954,308 2,206,825 2,302,191 2,650,720 EBITDA 86,142 178,150 237,005 265,689 374,029 421,138 382,854 446,288 % of Net Sales 9.3 14.6 14.3 14.1 16.1 16.0 14.3 14.4 Depreciation 38,871 46,555 56,254 75,693 110,782 133,886 176,159 203,383 EBIT 47,270 131,595 180,751 189,996 263,248 287,252 206,695 242,905 Product Dev. Exp. 4,982 9,976 13,892 20,216 25,652 28,752 30,720 34,120 Interest 22,397 23,853 29,822 35,533 47,338 48,615 44,704 38,681 Other Income 416 4,295 6,618 8,115 8,286 8,987 11,155 10,746 PBT 35,226 104,372 135,339 136,335 188,690 217,026 145,549 180,849 Effective Rate (%) 28.6 11.7 -0.3 27.7 25.3 35.2 22.0 23.1 Adj. PAT 15,654 92,736 119,008 99,560 141,986 140,465 114,923 153,320 Change (%) -162.5 492.4 28.3 -16.3 42.6 -1.1 -18.2 33.4

Balance Sheet (Consolidated) (INR Million) Y/E March 2010 2011 2012 2013 2014 2015 2016E 2017E Share Capital 5,706 6,377 6,348 6,381 6,438 6,438 6,792 6,792 Reserves 76,359 185,338 320,638 369,992 649,597 556,181 741,560 887,947 Net Worth 82,065 191,715 326,985 376,373 656,035 562,619 748,352 894,739 Loans 351,924 303,622 471,490 557,223 549,545 692,115 699,031 685,947 Deferred Tax 11,536 14,638 -23,743 -24,094 -7,748 -13,900 -13,900 -13,900Capital Employed 447,660 512,440 777,803 913,206 1,202,038 1,245,167 1,438,903 1,573,478

Gross Fixed Assets 648,518 715,231 897,791 1,205,654 1,329,282 1,582,066 2,113,467 2,427,177 Less: Depreciation 344,135 396,987 495,125 570,818 688,154 744,241 920,400 1,123,783 Net Fixed Assets 304,383 318,245 402,667 634,836 641,128 837,825 1,193,067 1,303,394 Capital WIP 80,680 117,289 159,458 60,000 332,626 286,401 70,000 70,000 Goodwill 34,229 35,848 40,937 41,024 49,788 46,970 46,970 46,970 Investments 22,191 25,443 89,177 90,577 106,867 153,367 155,884 171,320

Curr.Assets 425,296 506,995 711,679 829,538 1,046,103 1,034,685 1,076,426 1,195,141 Inventory 113,120 140,705 182,160 209,690 272,709 292,723 294,252 347,883 Sundry Debtors 71,912 65,257 82,368 109,427 105,742 125,792 125,057 152,729 Cash & Bank Bal. 87,433 114,096 182,381 211,127 297,118 321,158 355,606 386,517 Loans & Advances 152,807 178,422 249,952 280,739 273,241 256,948 261,948 266,948 Current Liab. & Prov. 417,208 491,378 626,116 742,769 974,474 1,114,081 1,103,443 1,213,348 Sundry Creditors 221,875 279,031 366,863 447,801 573,157 574,073 625,285 704,251 Other Liabilities 118,898 112,776 130,835 134,250 199,707 328,305 257,470 271,518 Net Current Assets 8,088 15,616 85,564 86,769 71,629 -79,396 -27,017 -18,207Appl. of Funds 447,660 512,440 777,803 913,206 1,202,038 1,245,167 1,438,903 1,573,478 E: MOSL Estimates

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Tata Motors

Financials and valuations

Ratios (Consolidated)

Y/E March 2010 2011 2012 2013 2014 2015 2016E 2017E Basic (INR) EPS 5.5 29.1 37.5 31.2 44.1 43.6 33.8 45.1 EPS Fully Diluted 4.9 28.8 37.0 30.9 44.1 43.6 33.8 45.1 Normalized EPS ^ -4.2 16.5 20.9 11.3 17.8 14.1 -0.8 9.9 EPS Growth (%) -162.5 492.4 28.3 -16.3 42.6 -1.1 -22.4 33.4 Cash EPS 19.1 43.7 55.2 54.9 78.5 85.2 85.7 105.0 Book Value (Rs/Share) 28.8 60.1 103.0 118.0 203.8 174.8 220.4 263.5 DPS 1.2 4.0 4.0 2.0 2.0 0.0 1.0 3.0 Payout (Incl. Div. Tax) % 63.4 15.8 12.4 7.4 5.3 0.0 3.6 8.0 Valuation (x)

Consolidated P/E 9.0 9.1 11.7 8.8 Normalized P/E 22.3 28.2 -476.6 40.2 EV/EBITDA 3.8 3.5 4.0 3.3 EV/Sales 0.6 0.6 0.6 0.5 Price to Book Value 1.9 2.3 1.8 1.5 Dividend Yield (%) 0.5 0.0 0.3 0.8 Profitability Ratios (%)

RoE 19.1 48.4 45.9 28.3 27.5 23.1 17.5 18.7 RoCE 10.7 26.5 29.0 23.4 25.7 24.2 16.2 16.8 Turnover Ratios

Debtors (Days) 28 20 18 21 17 17 17 18 Inventory (Days) 45 42 40 41 43 41 40 41 Creditors (Days) 88 83 81 87 90 80 85 83 Asset Turnover (x) 2.1 2.4 2.1 2.1 1.9 2.1 1.9 2.0 Leverage Ratio

Debt/Equity (x) 4.3 1.6 1.4 1.5 0.8 1.2 0.9 0.8

Cash Flow Statement (Consolidated) Y/E March 2010 2011 2012 2013 2014 2015 2016E 2017E OP/(Loss) before Tax 25,711 92,736 135,165 98,926 139,910 139,863 114,923 153,320 Int/Div. Received 2,786 4,115 5,376 8,062 6,933 7,777 11,155 10,746 Depreciation 38,826 46,510 56,209 75,648 110,736 133,864 176,159 203,383 Direct Taxes Paid -12,292 -13,912 -17,679 -22,231 -43,083 -41,940 -32,055 -41,695 (Inc)/Dec in WC 26,009 -40,484 -22,801 -680 57,744 -36,718 -17,930 22,101 Other Items 17,647 29,639 24,401 64,617 88,983 136,570 1,087 1,271 CF from Op Activity 98,686 118,604 180,670 224,343 361,223 339,415 253,339 349,127 Extra-ordinary Items -2,631 -7,773 8,549 4,342 7,221 20,191 0 0 CF after EO Items 96,055 110,830 189,219 228,684 368,444 359,606 253,339 349,127 (Inc)/Dec in FA+CWIP -84,532 -81,128 -137,829 -187,203 -269,252 -315,396 -315,000 -313,711 (Pur)/Sale of Invest. 6,416 4,158 -72,976 -54,984 -36,611 -37,570 -2,517 -15,436 CF from Inv Activity -78,116 -76,970 -210,804 -242,188 -305,863 -352,966 -317,517 -329,147 Issue of Shares 15,889 32,550 1,386 7 1 0 74,901 5,344 Inc/(Dec) in Debt 41,279 -11,677 113,054 45,082 30,092 122,288 6,916 -13,084 Interest Paid -28,553 -24,691 -33,737 -46,560 -61,706 -63,070 -44,704 -38,681 Dividends Paid -3,496 -10,195 -15,031 -15,087 -7,220 -7,204 -4,092 -12,276 CF from Fin Activity 25,119 -14,013 65,672 -16,558 -38,832 52,014 33,021 -58,697 Inc/(Dec) in Cash 43,058 19,848 44,087 -30,061 23,749 58,655 -31,156 -38,718 Add: Beginning Bal. 22,241 67,920 104,244 153,550 142,531 152,629 211,283 180,127 Closing Balance 65,300 87,768 148,330 123,488 166,280 211,283 180,127 141,409 E: MOSL Estimates

7 November 2015 13

Tata Motors

Corporate profile: Tata Motors

Exhibit 20: Shareholding pattern (%) Sep-15 Jun-15 Sep-14

Promoter 33.0 34.4 34.3

DII 17.7 16.5 10.6

FII 40.9 41.9 47.8

Others 8.4 7.3 7.3

Note: FII Includes depository receipts

Exhibit 21: Top holders Holder Name % Holding

LIC of India 6.3 ICICI Prudential Life Insurance Company Ltd 2.0 Government of Singapore 1.2

Exhibit 22: Top management Name Designation

Mr. Ravindra Pisharody Executive Director (Commercial Vehicles)

Mr. Mayank Pareek President (Passenger Vehicle Business Unit)

Mr. C Ramakrishnan President and Chief Financial Officer

Dr. Timothy Leverton President and Head, Advanced and Product Engineering

Dr Ralf Speth CEO (JLR)

Exhibit 23: Directors Name Name

Cyrus P Mistry Nusli N Wadia*

Ratan N Tata Nasser Munjee*

Subodh Bhargava* Ralf Speth

Vinesh K Jairath* Ravindra Pisharody

R A Mashelkar* Satish B Borwankar

Falguni Nayar*

*Independent

Exhibit 24: Auditors

Name Type

Deloitte Haskins & Sells LLP Statutory Mani & Co Cost Auditor

Exhibit 25: MOSL forecast v/s consensus EPS

(INR) MOSL

forecast Consensus

forecast Variation

(%) FY16 33.8 43.5 -22.2 FY17 45.1 54.6 -17.4

Company description Tata Motors is the largest CV manufacturer in India with 55% market share in MHCV and 37% in LCVs. It also manufactures passenger cars and UVs. In FY09, it acquired Jaguar & Land Rover from Ford for USD2.5b.

Exhibit 19: Sensex rebased

250

350

450

550

650

Nov-14 Feb-15 May-15 Aug-15 Nov-15

Tata Motors Sensex - Rebased

7 November 2015 14

Tata Motors

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