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Tata Motors Limited (NYSE:TTM)

Q1 2013 Earnings Call

August 09, 2012 7:30 am ET

Executives

C. Ramakrishnan - Chief Financial Officer and Member of Ethics & Compliance Committee

Vijay Somaiya

Namrata Divekar

Analysts

Jamshed Dadabhoy - Citigroup Inc, Research Division

Binay Singh - Morgan Stanley, Research Division

Kapil Singh - Nomura Securities Co. Ltd., Research Division

Govindarajan Chellappa - Jefferies & Company, Inc., Research Division

Mahantesh Sabarad - Fortune Financial Services (India) Ltd.

Srinivas Rao - Deutsche Bank AG, Research Division

Jinesh K. Gandhi - Motilal Oswal Securities Ltd., Research Division

Hitesh Goel - Kotak Securities Ltd., Research Division

Sanjay Doshi

Chirag Shah - Enam Securities Pvt. Ltd., Research Division

Sonal Gupta - UBS Investment Bank, Research Division

Operator

Ladies and gentlemen, good day, and welcome to the Tata Motors Q1 FY '13 Earnings Conference Call, hosted by Citi Investment Research. [Operator Instructions] I would now like to hand over the conference to Mr. Jamshed Dadabhoy, from Citi Investment Research. Thank you, and over to you, sir.

Jamshed Dadabhoy - Citigroup Inc, Research Division

Yes. Thanks, Selma. Hi, and good evening, ladies and gentlemen. I'm Jamshed Dadabhoy from Citigroup. We'd like to welcome investors to Tata Motors 1Q FY '13 results call. This evening, we have with us Mr. C. Ramakrishnan, CFO of Tata Motors. Joining him are Mr. Vijay Somaiya, Head of Treasury and Investor Relations and the IR team. I'll request Mr. Ramakrishnan to give us a brief overview for the quarter and then we'll dive into Q&A. [Operator Instructions]. Okay. Thank you, and please go ahead, sir.

C. Ramakrishnan

Thank you, Jamshed. Thank you for hosting the call. And thanks to everybody on the line for joining us on the first quarter results call for Tata Motors' consolidated results. As we announced a short while ago, you may already have the presentation, so I'm not indebted to go through the presentation. But just to cover some highlights, Tata Motors' consolidated net revenue for the quarter was INR 43,000 crores, up 30% compared to INR 33,000 crores in the same quarter last year. Consolidated EBITDA margins came in at 14.4% compared to 13.4% a year ago. Profit after tax was INR 2,245 crores compared to INR 2,000 crores in the same quarter last year. The Tata Motors' standalone performance was subdued. Net revenue was INR 10,500 crores compared to INR 11,600 crores in the same period last year, a drop in revenue of about 9%. EBITDA was INR 774 crores, at 7.3%, compared to 8.8% in the same quarter last year, a reduction in EBITDA of about 1.5 percentage points. And profit after tax was INR 205 crores compared to INR 400 crores in the same period last year. Jaguar Land Rover had a very good performance once again this quarter. GBP 3.6 billion revenue compared to GBP 2.7 billion in the same quarter last year, net revenue up 35%. EBITDA margins came in at 14.5% compared to 13.4% in the same quarter last year. EBITDA was GBP 527 million compared to GBP 362 million. If you recall, we had made accounting adjustments for tax provision, deferred tax asset credit last quarter. And therefore, the tax accounting provision in the quarter remained high, came in high. And therefore, profit after tax marginally increased to [ph] GBP 236 million, compared to GBP 220 million in the same quarter last year. As far as the standalone Tata Motors' business is concerned, lower volumes, lower net revenue and the profitability was further impacted by weak macroeconomic factors and the competitiveness in the passenger car industry market. As far as Jaguar Land Rover is concerned, significant growth in markets like China and other emerging markets and growth aided by volume of the Evoque contributed mainly to the very good performance of Jaguar Land Rover in the quarter. Cash and bank balances at the consolidated level remained at about INR 30,000 crores, slightly increased, in fact, quarter-on-quarter. Capital expenditure in Jaguar Land Rover was about GBP 400 million plus for the quarter and post capital expenditure in prior durable expenses, Jaguar Land Rover had net operating free cash flow generation of about GBP 110 million for the quarter. Post April to June quarter, in August, Jaguar Land Rover also declared a maiden dividend of GBP 150 million to the parent. This will be accounted in the parent Tata Motors, both in the current quarter and [ph] Q2. It's a maiden dividend post of our acquisition of Jaguar Land Rover, and we are very pleased with it. With this, I'll stop and maybe hand it over back to Jamshed to take us through the question-and-answer session.

Question-and-Answer Session

Operator

[Operator Instructions] We have the first question from the line of Binay Singh from Morgan Stanley.

Binay Singh - Morgan Stanley, Research Division

My question is, there seems to be a huge difference between your profit and tax rate as per IFRS and Indian GAAP in JLR. Could you throw some light on the specific driver's for the difference? And how should we look at your tax rate, sort of a sustainable tax rate going ahead given China's share is going up?

C. Ramakrishnan

In general, the tax rate, in general, will be driven in this quarter and also in the future quarters by the deferred tax accounting that we introduced in the last quarter, that is Q4 of last year. As the recognized deferred tax asset in the last quarter, from now on, between the 2 lines, that is provisioned for current tax and provisioned for deferred tax in JLR, if you add up the 2, the JLR taxation, as far as the P&L provision is concerned, will be at the marginal rate in U.K. In addition to that, JLR taxation would also be there for their overseas entity profits, which are reclaimed from time to time in the past. However, the tax outflow for JLR in U.K. will not be dead [ph] because of the past tax credits. Your second question was relating to?

Binay Singh - Morgan Stanley, Research Division

So what will be the effective tax rate then going ahead? Unlike for example, as per IFRS, we're almost seeing a 29% tax rate in this quarter?

C. Ramakrishnan

The -- if you take the deferred tax line and the current tax provision, both together, the tax rate in JLR would be in the region of 20% to 25%, but just almost the marginal rate in U.K. But that does not mean it will be the tax outflow. Cash outflow will not be there.

Binay Singh - Morgan Stanley, Research Division

Okay. And the second question is that even the net income reported as per IFRS and Indian GAAP on JLR's has a sort of a huge difference. Could you throw some light as to what were the driver for that?

C. Ramakrishnan

The main differences will be, apart from the -- what we had talked about in the earlier quarter. The main difference will be in the exchange fluctuation accounting.

Binay Singh - Morgan Stanley, Research Division

Okay. Which is basically all ForEx gains, I think, in the Indian GAAP?

C. Ramakrishnan

Yes. The foreign exchange accounting, if you do it, the consolidation on the base of Indian GAAP for JLR, you will have a different amortization under the new accounting standards introduced last year in India, which is not available under IFRS.

Binay Singh - Morgan Stanley, Research Division

Right. So in a way, there will be no ForEx gain in the Indian GAAP?

C. Ramakrishnan

Yes.

Operator

We have the next question from the line of Kapil Singh from Nomura.

Kapil Singh - Nomura Securities Co. Ltd., Research Division

Moving on to standalone results, I just wanted to check. There has been a good improvement in raw material cost to sales sequentially. If you could just throw some light on what have been the drivers for that and how do you see that going forward?

C. Ramakrishnan

I think on the cost side, we expect the confidence in the raw material cost to remain benign or subdued in the current, at least in the near future, in the coming quarters. In addition, as you know, we do have ongoing aggressive cost reduction plans in all of our products, including material cost reduction. So I would say, a generally subdued trend in terms of cost increases, with less pressure on the cost and plus our own internal efforts have contributed to this.

Kapil Singh - Nomura Securities Co. Ltd., Research Division

Sir, we have seen around 300 bps decline in raw material cost to sales. So if you can just help us understand that as well on a sequential basis?

C. Ramakrishnan

Primarily driven by what I said, but since you are taking all our percentages, it also can be contributed to the model mix. So it's a function of subdued levels in terms of component pricing -- component prices. And we also took a price increase on 1st April. So if you take a factor of the price increases but steady on the cost side, our own cost reduction efforts and model mix, thus, a ratio change can happen.

Unknown Analyst

Okay. Sir, by model mix you mean the LCVs [ph] proportion going up as well?

C. Ramakrishnan

Partly and maybe even within the passenger cars and commercial vehicles.

Kapil Singh - Nomura Securities Co. Ltd., Research Division

Okay. And sir, also on the MHCV side, the -- especially on the goods, MHCV has seen a decline in volumes, steep decline. So what is the outlook going forward? And if you could just give us an idea of the inventory levels as well with the dealers and the company?

C. Ramakrishnan

As you know in the quarter, we have been correcting our production to demand on a couple of occasions, including taking shutdown in our factories. So we have been maintaining a capital watch on the inventory levels. We haven't seen any alarming trends on the inventory level. They are reasonably at the control level, I would say, for the company around 30 days and similarly, 4 to 6 weeks for our dealers, which is not very different from the average we would like to see. As far as the demand outlook for the MHCV is concerned, it has been a challenging quarter, several factors including the macroeconomic outlook and the subdued activity on the infrastructure side. There have been some price increases also, our own price increase and earlier in March, contributed by the excise duty increases. I think the freight rates also have been somewhat weak. There are a variety of these factors. I think going forward, I will say, it will remain -- we will see some headwinds in this segment. As we have said in the last quarter also, we do see some headwinds, possibly if the monsoon, like already happened, infrastructure spending and the initiatives are triggered, maybe we will see some revival going forward in the coming quarters, but we would remain somewhat subdued in our outlook.

Kapil Singh - Nomura Securities Co. Ltd., Research Division

Right. And sir, lastly just a small question on JLR. We have seen a ForEx loss of GBP 67 million. If you could just help us understand that, what is the nature of this loss? Where is it coming from?

C. Ramakrishnan

The GBP 67 million that you are referring to is the mark-to-market valuation losses on some of the hedges we had taken.

Kapil Singh - Nomura Securities Co. Ltd., Research Division

This is for the period beyond the current quarter or it includes the current quarter as well?

C. Ramakrishnan

Mark-to-market, beyond the current quarter.

Kapil Singh - Nomura Securities Co. Ltd., Research Division

Okay. And for the current quarter, we take it in the revenues itself?

C. Ramakrishnan

That's right.

Operator

We have the next question from the line of Kamud Kumar [ph] from IDC [ph] Securities.

Unknown Analyst

Sir, I just wanted to understand as to considering that China did so well for this quarter in terms of 22% rate of volumes, which would mean that even in terms of revenue and profit, it would be for a substantially higher share. And so just wondering, margins considering all that and also given the fact that the capitalization rate has gone up on a sequential basis, 120 bps. Is it right to assume that the profitability in other markets, x of China, are coming under pressure?

C. Ramakrishnan

Profitability, I would say, in other markets, I think I have mentioned in the last annual call also. We do see some pressure on the margins and the profit. The variable marketing expenses in many of the markets are slowly catching up. We have seen 1.5 years of -- about the variable marketing expenses remaining very, very low. I'm seeing more from a general market perspective, not necessarily Jaguar Land Rover specific, but we do see that going up. I think there'll be some pressure on the margins. I would remain somewhat cautious about margin outlook.

Unknown Analyst

Because actually, except capitalization, operating margin of JLR are down 130 bps sequentially, so I'm just wondering, is it like -- and you had also, in the -- on the JLR call last quarter, generally guided that margins for the year should be around the fourth quarter level of 14.9% as per IFRS. So would we still stand by that or you see some downward pressure to that margin assumption or margin guidance, rather?

C. Ramakrishnan

First of all, I don't think in the last call we talked about the number in terms of our guidance for the margins going forward. That's not something that we normally do.

Unknown Analyst

Well, in terms of range. Sorry, in terms of range, broadly remaining around the same level. That's what was discussed.

C. Ramakrishnan

I think we've talked more in terms of our expectation and our -- for plans. They would definitely hope to maintain that, but I would think due to a combination of model mix, maybe geographical mix, again foreign exchange is an uncertainty that you and I can't be predicting at this point of time. I would remain cautiously optimistic on the margin side.

Unknown Analyst

Okay. And finally on CapEx, if you can just share us to any changes to the number, what we're guiding even from beyond FY '13 prospect or even for FY '14. Well, it's going to be GBP 2 billion or there could be a further revision to that?

C. Ramakrishnan

It will be in that region. It will be difficult to put a precise number to that. It will be in the region of GBP 2 billion. Depending on the sequencing or cascading of the programs, it may be 100 or whatever higher or lower. It's difficult to create beyond that. But we do see opportunities from time to time because there are opportunities which we think we are -- which is what we're ready to pursue either from the product point of view or new segment or market or any other opportunities. We will pursue that even it means a little investment.

Unknown Analyst

Okay. And sir, finally on the domestic...

C. Ramakrishnan

At this point of time, my guidance would remain as -- in the region of GBP 2 billion.

Unknown Analyst

GBP 2 billion. And finally, on the domestic passenger car franchise. We've seen steady decline in our market share excluding -- I know I think our market share is, I think, in that all-time low almost. So I'm just wondering what are the strategy there going forward in the next 1 year of in terms of recovering that market share, which has gone away, considering the fact that we have a predominantly decent portfolio which -- and these are right now, is in demand quite a bit for other players. So what exactly -- or rather, by when would you see your market share starting to look up?

C. Ramakrishnan

Unfortunately, I can't give you a time line, that by so-and-so month I expect it to be improving. I think I had shared with you from time to time the effort that we are putting in on the product refresh side, on the product side, on the quality and the variety that we need to bring into the marketplace. And also, in the various marketing efforts and dealer effectiveness and dealer expansion strategies that I have shared from time to time. We will say in the coming quarters, we expect to do much better than we have done in this current quarter.

Operator

We have the next question from the line of Govind Chellappa from Jefferies.

Govindarajan Chellappa - Jefferies & Company, Inc., Research Division

A quick question on Land Rover. If you see your model-wide sales, all models -- I mean, Range Rover, which wasn't there last year, has obviously contributed, but almost all the other models have declined year-on-year. Now how much of this is because of cannibalization? How much of this is because of a new model introduction? And is there any capacity constraint?

C. Ramakrishnan

Govind, I can't give you a one-line answer for that. I think there have been different explanations for different things. For example, Evoque and Freelander come from the same -- share the same facility in one location. So we have had to have some consciously pulling back of Freelander in order to accommodate a larger number of Evoques, that the balancing act continues in the current year. As far as Range Rover is concerned, it's a different set of circumstances. The new Range Rover is coming in towards later part of this year. We need to run down on the current Range Rover. So -- but your point is right, that minus Evoque, the other volumes have seen a drop, but a different set of circumstances.

Govindarajan Chellappa - Jefferies & Company, Inc., Research Division

Okay. And then -- and for models that do not see issues like this, like Defender, Discovery and the Range Rover Sport, that I would assume...

C. Ramakrishnan

Have also been somewhat subdued.

Govindarajan Chellappa - Jefferies & Company, Inc., Research Division

And that would be -- only be demand issues?

C. Ramakrishnan

Yes, particularly in the market in which they do have large volumes. Some of the markets have been down. Actually, Europe, U.K., et cetera.

Govindarajan Chellappa - Jefferies & Company, Inc., Research Division

A quick question on the dividend from JLR. Is there any tax implication for that? I mean, would they be -- have to pay any tax in either any of the markets?

C. Ramakrishnan

JLR doesn't have to pay any tax on the dividend distribution. There is no dividend distribution tax in U.K. like we have in India. But in India, when we receive it, if we receive it as dividend. We'll have to pay tax.

Govindarajan Chellappa - Jefferies & Company, Inc., Research Division

Okay. And lastly, can you just run us through any -- have you seen any kind of pricing issues for JLR in China? Have you seen any signs of discounting or -- are dealers coming to you and asking for any price cuts also?

C. Ramakrishnan

Not surely price cuts or discounts in that sense. I'm not sure that I can specifically talk on China, but I'm not aware of any pricing pressure or discount pressure in China or other markets. But what you do hear is less and less stories of premium being charged or people willing to pay an additional premium for getting a vehicle out of turn, et cetera. Those are stories you hear less and less, but not necessarily something that I would convey as an alarming story in terms of discounts or pricing pressures.

Govindarajan Chellappa - Jefferies & Company, Inc., Research Division

Okay. I mean, I interpret that as you're saying that it hasn't hit though your margins yet. It probably has hit dealer margins but not yours?

C. Ramakrishnan

Or maybe it is hitting some of the larger volume competition and may be -- may not be felt in our brands.

Operator

We have the next question from the line of Mahantesh Sabarad from Fortune Equity.

Mahantesh Sabarad - Fortune Financial Services (India) Ltd.

How much of percents capital you still hold in Singapore subsidiary as Tata Motors standalone? That's INR 2,200 crores I believe, that's the annual report number that I recall? And you have moved it from...

C. Ramakrishnan

I don't know whether you have heard the answer? The investment of Tata Motors in the Singapore subsidiary in preferred capital is $250 million as of 30th June.

Mahantesh Sabarad - Fortune Financial Services (India) Ltd.

So you moved that $250 million into -- from noncurrent to current. What was the purpose?

C. Ramakrishnan

The current had been changed from noncurrent because as JLR is -- as in many of this business [ph] capital was created as a means of funding from Tata Motors to JLR when JLR needed the money during 2008, 2009. As JLR performance improved substantially and as they have much greater capability to repay the money, which was additionally lent to them from time to time. Naturally, the character of the investments have become current because they were intended as temporary facilities for JLR, and we are taking it back.

Mahantesh Sabarad - Fortune Financial Services (India) Ltd.

Will it mean that you can sell it to potential third-party investors?

C. Ramakrishnan

No, that's not the intent.

Mahantesh Sabarad - Fortune Financial Services (India) Ltd.

Okay. And very quickly, in terms of your margin performance on JLR, basing [ph] back to what Govind asked, Ranger Rover and other Land Rover products, volumes have actually fallen. And Evoque has actually, in a way, gained -- surged in volumes. So can we say that while Evoque is taking up the volumes, it's also in a way substituting the margins in a like-to-like manner?

C. Ramakrishnan

I'm not sure I understood when you say like-to-like manner, what you mean?

Mahantesh Sabarad - Fortune Financial Services (India) Ltd.

Are the margins similar across all your Land Rover products?

C. Ramakrishnan

No. For any -- whether it is Jaguar Land Rover or Tata Motors or any other manufacturer, one can never say margins will be identical across different models. Margins, of course, will vary from model to model. The Range Rover, Range Rover Sports will have good margins. Evoque will be lower. So margins will be different for different products.

Mahantesh Sabarad - Fortune Financial Services (India) Ltd.

Okay. And it's also a function of what you have mentioned as variable marketing expenses, which you said that is catching up in various countries. So particularly in China, how is that catching up in terms of variable marketing spends that you have?

C. Ramakrishnan

In our case, we haven't seen any significant increase in that. That's what I said. While we see headwinds in the market just in terms of variable marketing expenses, we haven't found any impact of that on our products so far. But I don't think Jaguar Land Rover can remain isolated from the marketplace for long. If the trend continues, we'll have to do that, we'll have to do that.

Operator

The next question is from the line of Srinivas Rao from Deutsche Bank.

Srinivas Rao - Deutsche Bank AG, Research Division

Two questions. Your retail volumes are kind of running ahead of your wholesale sell-ins for this quarter. Is there a kind of a conscious decision to conduct -- reduce the inventory levels? That's number one. Secondly, I know your peers, such as BMW and Daimler, have kind of commented that the European market has weakened more than what they had anticipated at the beginning of the year. Would your assessment be similar to that?

C. Ramakrishnan

In our case, your first question on retail versus wholesale in the inventories. I think the inventories have tended to remain somewhat steady. We haven't seen any particular trend or necessity to either cut it down or to increase it. I think they remained steady. I don't have any particular unusual trend or plus or minus that I have to convey at this point of time. As far as your second question is concerned, was about...

Vijay Somaiya

European market.

C. Ramakrishnan

European market, I would say they are tracking our budget and our expectations. Maybe our expectations were set lower in terms of how we expected the market to be. We were expecting the market to be down this year and so it has. But I wouldn't say they are down further from our expectations. I think they're in line with our expectations. Maybe the only explanation is maybe our expectations are relatively more conservative.

Srinivas Rao - Deutsche Bank AG, Research Division

Sure. And sir, finally, just to clarify what someone asked in the beginning of the call. Are your -- is tax rate in Jaguar Land Rover would be closer to this U.K. profit [ph] tax that is about 30% for the rest of the year. Is that correct?

C. Ramakrishnan

If you take the total accounting provision, yes.

Srinivas Rao - Deutsche Bank AG, Research Division

Okay. So that it would be the case, right? So it will be -- yes, okay.

C. Ramakrishnan

And doesn't necessarily mean that is a tax outflow in cash.

Operator

The next question is from the line of Jinesh Gandhi from Motilal Oswal.

Jinesh K. Gandhi - Motilal Oswal Securities Ltd., Research Division

My question is on JLR. Can you give us some outlook on the volume side as against last year, it was about 320,000. Do we still maintain our further guidance of about 370,000, 380,000 for this financial year?

C. Ramakrishnan

Just to correct the so-called guidance, I think the last time the question was asked about capacities and so on, what capacity can you do? What is the potential you have? In response to that, I mentioned in the last quarter, that is January to March, we did about 100,000 in the quarter, January to March, if you take the 3 months. And if you prorate it, we should be able to do, in the four quarters, we should be able to do 370,000, 380,000 and maybe even stretch beyond that. That's more in response to your capacity question. I don't see any need to revise that answer.

Jinesh K. Gandhi - Motilal Oswal Securities Ltd., Research Division

Understood. And what would be our gross automotive consolidated debt?

C. Ramakrishnan

The net automotive debt consolidated level was INR 10,000 crores.

Jinesh K. Gandhi - Motilal Oswal Securities Ltd., Research Division

INR 10,000 crores, okay. And sir, coming to domestic market...

C. Ramakrishnan

I'm sorry, your question was gross debt or net debt?

Jinesh K. Gandhi - Motilal Oswal Securities Ltd., Research Division

Gross or nevertheless, so we have about INR 28,000, INR 29,000 crores of cash?

C. Ramakrishnan

Yes.

Jamshed Dadabhoy - Citigroup Inc, Research Division

Right. And sir, coming to domestic market, have you taken any price increases in current quarter, second quarter?

C. Ramakrishnan

July, no. The price increase we took was in April.

Jinesh K. Gandhi - Motilal Oswal Securities Ltd., Research Division

Okay, nothing in July. And how are the discounts on the MHCV side? Have they increased further, vis-a-vis fourth quarter or they are steady?

C. Ramakrishnan

Sorry?

Jinesh K. Gandhi - Motilal Oswal Securities Ltd., Research Division

The discounting on MHCV?

C. Ramakrishnan

Yes, we have seen that discounting or pricing pressure in the marketplace.

Jinesh K. Gandhi - Motilal Oswal Securities Ltd., Research Division

Okay. So therefore, they're increased in the second quarter or they are stable in 1Q level?

C. Ramakrishnan

I would say slightly higher in the first quarter. Normally, one would see that in any year. The pricing pressure and demand pressure is felt in the first quarter, stabilizes in the second and that the third and fourth quarters tend to be very good from a market demand point of view. So I would expect in the second quarter, the trend will be similar to the first quarter.

Jinesh K. Gandhi - Motilal Oswal Securities Ltd., Research Division

Okay, okay. And sir, last question on dividend that you'll receive from JLR. You will be paying normal tax, 30%, or it would be at lower rate?

C. Ramakrishnan

It will be the tax applicable for the dividends.

Jinesh K. Gandhi - Motilal Oswal Securities Ltd., Research Division

And that could be, sir?

C. Ramakrishnan

15%, yes.

Operator

We have the next question from the line of Hitesh Goel from Kotak Equities.

Hitesh Goel - Kotak Securities Ltd., Research Division

Sir, my question, I just wanted to clarify. The net consol auto model debt, you said is around INR 10,000 crores, right?

C. Ramakrishnan

Yes.

Hitesh Goel - Kotak Securities Ltd., Research Division

And sir, it has increased around INR 2,000 crores on a Q-on-Q basis. Is it due to working capital requirement on a standalone operation or there have been increase on the Tata Motors Finance debt as well?

C. Ramakrishnan

No, this is net automotive debt and, therefore, does not include Tata Motors Finance. This is on primarily working capital play.

Hitesh Goel - Kotak Securities Ltd., Research Division

So INR 2,000 crores increase in the standalone operation levels?

C. Ramakrishnan

Yes.

Operator

The next question is from the line of Sanjay Doshi from Reliance Mutual Fund.

Sanjay Doshi

So on this dividend that JLR has declared, I just wanted to understand, does it mean it has enough cash flows to fund itself and therefore, this extra has been given as a dividend? Or is not one-time?

C. Ramakrishnan

Well, the dividend is something, which JLR board will decide from time to time. It will, of course, be a function of their financial performance, profitability, their own outlook and of course, a question of the money they will need to invest back into the business. Considering all that, JLR felt it's appropriate to consider GBP 150 million dividend at this point of time. I think that reflects their confidence and the ability to be able to reinvest into the business, support the capital expenditure and other plans they have and be able to generate additional cash, which can be paid as dividends.

Sanjay Doshi

Right, sir. And so, over a period of time, sir, then when we have enough from JLR coming by way. Should we assume that, that will be then a pass-through for the Tata Motors shareholders?

C. Ramakrishnan

Tata Motors, they already paid last year. For example, for March 12, the dividend declaration by the board was taking into account the consolidated profit.

Sanjay Doshi

Right, but when the cash comes in? Okay, okay, sir.

C. Ramakrishnan

You can get a price [ph] as Tata Motors stockholder.

Operator

The next question is from the line of Chirag Shah from Enam.

Chirag Shah - Enam Securities Pvt. Ltd., Research Division

So just one question I have on -- or trends on the small commercial vehicles. If I look at the numbers, there is some visible slowdown in certain segments. Can you throw some more light over there?

C. Ramakrishnan

In some segments, in small commercial vehicles?

C. Ramakrishnan

Yes, if we look at even up to 3.5-tonne segment or you went up to say, 8 [ph] segment, there is a slight slowdown, which is visible and it is the higher tonnage segment, which is actually driving volume? So up to 1-tonne segment is we are getting under -- I understand that there is some slowdown, which is visible. And there is some shift that is happening for 2- to 3.5-tonne segment. And overall indication, there is slight slowdown, which is visible.

C. Ramakrishnan

I'm afraid I can't agree with that, but I need to check the numbers. I don't have that breakup in terms of tonnage-wise within small commercial vehicles, et cetera. We'll have to hold this for a different occasion.

Chirag Shah - Enam Securities Pvt. Ltd., Research Division

Fair enough, sir. And sir, just a follow-up question on this dividend distribution. Can we -- or from JLR, is it -- would it right be to assume that there is enough policy headwind in place to look at paying Tata Motors' annual dividend? Every year, is there a policy in place now?

C. Ramakrishnan

No, you can't assume that. Dividend of some JLR will be a decision of JLR board. As I said earlier, I don't know how to elaborate it further. It's something that JLR board will consider from time to time. It will be considered based on their profitability, their cash generation, liquidity, as well their need to invest back into the business, and the outlook. Considering all these, if there's a surplus, they may consider dividend from time to time. But I can't say that is a -- it's a policy, come what may, this is what will happen. It will be incorrect to assume that.

Chirag Shah - Enam Securities Pvt. Ltd., Research Division

Fair enough. And sir, one request, if you can, in the presentation, if you can also include the breakup between Jaguar and Land Rover volumes? You used to share it earlier, but it somehow has been discontinued.

Namrata Divekar

Chirag, it's there in the business review on the website.

Chirag Shah - Enam Securities Pvt. Ltd., Research Division

No, I'm looking at breakup between Jaguar and Land Rover. It's not the -- in terms of geography mix or, you know that breakup you used to share earlier?

Namrata Divekar

All the details are there, Chirag. Can you have a look at that?

C. Ramakrishnan

It is not in the PowerPoint presentation that I made, but it is there in the website as additional data available.

Operator

Next question is from the line of Sonal Gupta from UBS.

Sonal Gupta - UBS Investment Bank, Research Division

Sir, just a couple of questions. One was, I mean, this was regarding the CapEx that you announced last quarter, that JLR will have an annual CapEx of GBP 2 billion versus GBP 1.5 billion earlier. So I mean, could you just elaborate on what -- I mean, will it be possible to elaborate on what new projects you are additionally pursuing versus the previous one that is really leading to this in uptick?

C. Ramakrishnan

It will be difficult to outline an account for the increase from GBP 1.5 billion to GBP 2 billion. But in general, I would say, as we step back, when we made the capital expenditure plan or when we made the plans, which is where we talked, we will be spending about GBP 1.5 billion annually going forward. That plan was put together maybe a couple of years ago. Since then, the volume outlook for JLR has been much, much stronger. I think our own product programs and intent for occupying some other segments also has become more aggressive. But the combination of volume necessitates the investment in capacities, augmenting our capacities and the sectors of the Evoque and the potential we see now. The China opportunity also has become much more of a reality, and a slightly a larger program than we thought once. We have added the engine initiative, engine manufacturing, engine development initiative at 2 factories, 1 in U.K., 1 in India. A combination of all these, the improved volume performance and our outlook, a further expansion of our product plans and a further geographical expansion. These have contributed to the increase, but I won't be able to say this contributed so much, this contributed so much, from GBP 1.5 billion to GBP 2 billion. But I think all of our plans have become more aggressive.

Sonal Gupta - UBS Investment Bank, Research Division

Okay, sir, fine. And sir, just the other question on raw material cost side for JLR. Are we seeing any -- I mean, when do we see? I understand these contract are more on an annual basis. So do you expect some benefits to flow through given that I mean, in dollar terms, the commodity prices have been weakening. So for JLR, do you see some benefit on that front really?

C. Ramakrishnan

I would remain somewhat sanguine about the benefit apart from saying I don't expect the pressure or concern on the front. I wouldn't be too quick to see some immense benefits coming out of that, but I think they will remain under control.

Sonal Gupta - UBS Investment Bank, Research Division

Right, sir. And just another question was on -- I mean, there is a plan to launch a smaller Jag in 2014, FY '15 sort of time frame. So would you need to expand more capacity in the U.K. to -- once you're closer to the launch?

C. Ramakrishnan

Yes, I think capacity, they will also continue to invest in capacities in U.K., which is part of the increase that we've talked about in our CapEx spending programs. Yes, we will have to -- but as the new products come in, as we occupy newer segments and as you aspire for higher volume growth through new segments and new products, you will have that took correspondingly investment capacities.

Sonal Gupta - UBS Investment Bank, Research Division

But do you see a need for any greenfield investments or do you -- and because currently, I understand you can go up to like 450,000 units per annum for JLR potentially. So do you need any more greenfield investments of...

C. Ramakrishnan

No, I think we can manage in our 3 existing locations. As you rightly said, in the existing locations, we have the potential to go somewhere around 450,000 to 500,000. By the time in the next 2, 3 years, if the China joint venture approval is received and we invest in China, some of the production for China market, for example, will also happen out of China. So I don't see -- we don't have any plans for a greenfield car manufacturing in U.K.

Operator

Thank you. That was the last question from the participants. I would now like to hand the floor back to Mr. Jamshed Dadabhoy for closing comments. Over to you, sir.

Jamshed Dadabhoy - Citigroup Inc, Research Division

All right. Thank you, everyone, for your participation. Have a good evening. Thank you, Mr. Ramakrishnan. Thank you, Mr. Somaiya. Thanks, Namrata. Have a good evening, everyone. Bye-bye.

C. Ramakrishnan

Thank you very much, Jamshed, and thanks for everybody for joining us. Thank you, bye.

Operator

On behalf of Citi Investment Research, that concludes this conference call. Thank you for joining us. You may now disconnect your lines. Thank you.

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