N Chandrasekaran
N Chandrasekaran

Tata Motors Ltd (TML) aims to reduce its total automotive debt to 'near-zero levels' in three years and generate free cash flows from FY22 onwards, company chairman N Chandrasekaran said on Tuesday.

However, the company's management had to face ire from several shareholders on various issues, including non-payment of dividend four years in a row.

Chandrasekaran, while addressing shareholders at Tata Motors' 75th annual general meeting, said the company would look to unlock non-core investments in order to deleverage business, but asserted that neither the passenger vehicles business nor Jaguar Land Rover (JLR) is being sold.

"Currently, the Tata Motors Group has a net automotive debt of Rs 48,000 crore and we are deleveraging this business substantially," he said. "We have set a target to significantly bring down the debt and come to near-zero debt levels in the next three years." The company has initiated steps towards this and and set a target to generate positive free cash flows from FY22 onwards, he added.

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

While capex of domestic business has been pruned to Rs 1,500 crore for this fiscal, that of JLR has been capped at 2.58 billion pounds.

Several shareholders expressed their anger on the company not paying dividend for fourth year in a row, especially during a milestone year when the company is celebrating its 75th anniversary.

Asserting that the company's shareholder wealth has been only depreciating over the years, some shareholders also questioned as to why many its executives were drawing huge salaries at a time when the company is incurring losses.

They also sought to know if the management executives have taken pay cuts considering the impact of COVID-19 pandemic.

Referring to dividends, Chandrasekaran said, "Many people raised the issue of dividend. I can tell you that I am equally pained that we have not delivered dividends for the last four years.

"This is of top priority to the company but unfortunately on the standalone level there has been no room for the last three-four years. This has been given the top most priority." On queries on whether the company plans to sell its PV (passenger vehicle) business, Chandrasekaran said, "I want to confirm absolutely there is no truth, even though some of the media people keep writing these articles that the PV unit is being sold. That is not truth at all." Stating that the completion of subsidiarisation of the PV business of Tata Motors depends on the NCLT process, he said, "We can't really give a definitve date, but personally I'd be happy it it gets done in this fiscal year." Commenting on JLR, he 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 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 strong business going ahead.

New products like Hornbill, Gravitas and Altroz EVare are on the anvil.

"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.

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

"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, adding that the company has so far sold around 250 electric buses and has an order book of over 1,000 such buses.

Commenting on 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 per cent 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, 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, 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...," Chandrasekaran said.

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

On the outlook, Chandrasekaran said the company expects sales of CVs, PVs and JLR to improve going forward as there is a "positive trend" although it is not a sharp one.

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