Company Quick10K Filing
Tata Motors
20-F 2020-03-31 Filed 2020-08-13
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20-F 2012-03-31 Filed 2012-07-31
20-F 2011-03-31 Filed 2011-07-28
20-F 2010-03-31 Filed 2010-09-30

TTM 20F Annual Report

Part I
Item 1. Identity of Directors, Senior Management and Advisers.
Item 2. Offer Statistics and Expected Timetable.
Item 3. Key Information.
Item 4. Information on The Company.
Item 4A. Unresolved Staff Comments
Item 5. Operating and Financial Review and Prospects
Item 6. Directors, Senior Management and Employees.
Item 7. Major Shareholders and Related Party Transactions.
Item 8. Financial Information.
Item 9. The Offer and Listing
Item 10. Additional Information.
Item 11. Quantitative and Qualitative Disclosures About Market Risk
Item 12. Description of Securities Other Than Equity Securities.
Part II
Item 13. Defaults, Dividend Arrearages and Delinquencies.
Item 14. Material Modifications To The Rights of Security Holders and Use of Proceeds.
Item 15: Controls and Procedures.
Item 16A. Audit Committee Financial Expert.
Item 16B. Code of Ethics.
Item 16C. Principal Accountant Fees and Services.
Item 16D. Exemptions From The Listing Standards for Audit Committees.
Item 16E. Purchases of Equity Securities By The Issuer and Affiliated Purchasers.
Item 16F. Change in Registrant's Certifying Accountant.
Item 16G. Corporate Governance.
Item 17. Financial Statements.
Item 18. Financial Statements.
Item 19. Exhibits.
EX-7.1 dex71.htm
EX-8.1 dex81.htm
EX-12.1 dex121.htm
EX-12.2 dex122.htm
EX-12.3 dex123.htm
EX-13 dex13.htm

Tata Motors Earnings 2011-03-31

Balance SheetIncome StatementCash Flow

20-F 1 d20f.htm FORM 20-F Form 20-F
Table of Contents

As filed with the Securities and Exchange Commission on July 28, 2011

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 20-F

 

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

 

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal year ended March 31, 2011

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

 

¨ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

Commission file number: 001-32294

 

 

LOGO

TATA MOTORS LIMITED

(Exact name of Registrant as specified in its charter)

Not applicable

(Translation of Registrant’s name into English)

 

  Bombay House
  24, Homi Mody Street
Republic of India   Mumbai 400 001, India
(Jurisdiction of incorporation or organization)   (Address of principal executive offices)

H.K. Sethna

Tel.: +91 22 6665 7219

Facsimile: +91 22 6665 7260

Address:

Bombay House

24, Homi Mody Street

Mumbai 400 001, India

(Name, telephone, facsimile number and address of company contact person)


Table of Contents

Securities registered or to be registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Name of each exchange on which registered

Ordinary Shares, par value Rs. 10 per share *   The New York Stock Exchange, Inc

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report. — 538,272,284 Ordinary Shares and 96,341,706 ‘A’ Ordinary Shares, including 109,417,979 Ordinary Shares represented by 109,417,979 American Depositary Shares outstanding as of March 31, 2011.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    x  Yes    ¨  No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    ¨  Yes    x  No

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    ¨  Yes    ¨  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  x            Accelerated filer  ¨            Non-accelerated filer  ¨

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.

 

U.S. GAAP  ¨

  

International Financial Reporting Standards as issued

by the International Accounting Standards Board x

   Other  ¨

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17  ¨    Item 18  ¨

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    x  No

 

* Not for trading, but only in connection with listed American Depositary Shares, each representing one share of common stock.

 

 

 


Table of Contents

In this annual report

 

   

References to “we”, “our” and “us” are to Tata Motors Limited and its consolidated subsidiaries, except as the context otherwise requires;

 

   

References to “dollar”, “US dollar” and “US$” are to the lawful currency of the United States of America; references to “rupees” and “Rs.” are to the lawful currency of India; references to “JPY” are to the lawful currency of Japan; and references to “GBP” are to the lawful currency of the United Kingdom; and “Euro” are to the lawful currency of States of European union; references to “Russian Ruble” are to the lawful currency of Russia; and references to “RMB” are to the lawful currency of China;

 

   

References to “US GAAP” are to accounting principles generally accepted in the United States, and references to “Indian GAAP” are to accounting principles generally accepted in India and references to “IFRS” are to International Financial Reporting Standards and its interpretations as issued by International Accounting Standards Board;

 

   

References to an “ADS” are to an American Depositary Share, each of which represents one of our Ordinary Shares of Rs. 10/- each, and references to an “ADR” are to an American Depositary Receipt evidencing one or more ADSs;

 

   

References to light commercial vehicles, or LCVs, medium commercial vehicles, or MCVs, and heavy commercial vehicles, or HCVs, refer to vehicles that have gross vehicle weight, or GVW, of up to 7.5 metric tonnes, between 7.5 and 16.2 metric tonnes, and over 16.2 metric tonnes, respectively;

 

   

References to passenger cars are to vehicles that have a seating capacity of up to six persons, excluding the driver, and that are further classified into the following market segments: mini-cars — which have a length of up to 3,400 mm; compact cars — which have a length between 3,401mm and 4,000 mm; mid-size cars — which have length of between 4,001mm and 4,500mm; executive cars — which have a length between 4,501mm and 4,700 mm; and premium and luxury cars — which have a length between 4,701mm and 5,000mm, and above 5,001mm, respectively;

 

   

References to utility vehicles, or UVs, and multi-purpose vehicles, or MPVs, are to vehicles that have a seating capacity of seven to twelve persons, excluding the driver, and van-type vehicles that have a seating capacity of seven to twelve persons, excluding the driver, respectively;

 

   

References to premium cars and SUVs are to a defined list of premium competitor cars and SUVs for our Jaguar Land Rover business;

 

   

Unless otherwise stated, comparative and empirical Indian industry data in this annual report have been derived from published reports of the Society of Indian Automobile Manufacturers, or SIAM; while international industry data have been derived from published reports of IHS Global Insight;

 

   

References to a particular “Fiscal” year, such as “Fiscal 2011”, are to our Fiscal year ended on March 31 of that year;

 

   

Figures in tables may not add up to totals due to rounding;

 

   

“Millimeters” or “mm” are equal to 1/1000 of a meter. A meter is equal to approximately 39.37 inches and a millimeter is equal to approximately 0.039 inch;

 

   

“Kilograms” or “kg” are each equal to approximately 2.2 pounds, and “metric tonnes” are equal to 1,000 kilograms or approximately 2,200 pounds;

 

   

“Liters” are equivalent to 61.02 cubic inches of volume, or approximately 1.057 U.S. quarts of liquid measure; and

 

   

“Revenues” refers to Total Revenue net of excise duty unless stated otherwise.

Special Note Regarding Forward-looking Statements

All statements contained in this annual report that are not statements of historical fact constitute “forward-looking statements”. Generally, these statements can be identified by the use of forward-looking terms such as “anticipate”, “believe”, “can”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “seek”, “will” and “would” or similar words. However, these words are not the exclusive means of identifying forward-looking statements. All statements regarding our expected financial condition and results of operations, business, plans and prospects are forward-looking statements. These forward-looking statements include statements as to our business strategy, our revenue and profitability, planned projects and other matters discussed in this annual report regarding matters that are not historical fact. These forward-looking statements and any other projections contained in this annual report (whether made by us or any third party) involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements or other projections. Although we are a reporting company and will have ongoing disclosure obligations under U.S. federal securities laws, we are not undertaking to publicly update or revise any statements in this annual report, whether as a result of new information, future events or otherwise.

 

i


Table of Contents

The risks and factors that could cause our actual results, performances and achievements to be materially different from the forward-looking statements set out in Item 3.D and elsewhere in this annual report include, among others:

 

   

general political, social and economic conditions, and the competitive environment in India, United States, United Kingdom and Rest of Europe and other markets in which we operate and sell our products;

 

   

fluctuations in the currency exchange rate against the functional currency of the respective consolidated entities;

 

   

accidents and natural disasters;

 

   

terms on which we finance our working capital and capital and product development expenditures and investment requirements;

 

   

implementation of new projects, including mergers and acquisitions, planned by management;

 

   

contractual arrangements with suppliers;

 

   

government policies including those specifically regarding the automotive industry, including industrial licensing, environmental regulations, safety regulations, import restrictions and duties, excise duties, sales taxes, value added taxes, product range restrictions, diesel and gasoline prices and road network enhancement projects;

 

   

significant movements in the prices of key inputs such as steel, aluminum, rubber and plastics; and

 

   

other factors beyond our control.

 

ii


Table of Contents

TABLE OF CONTENTS

 

Part I

     1   

Item 1.

      Identity of Directors, Senior Management and Advisers.      1   

Item 2.

      Offer Statistics and Expected Timetable.      1   

Item 3.

      Key Information.      1   
   A.    Selected Financial Data.      3   
   B.    Capitalization and Indebtedness.      3   
   C.    Reasons for the Offer and Use of Proceeds.      3   
   D.    Risk Factors.      3   

Item 4.

      Information on the Company.      13   
   A.    History and Development of the Company.      13   
   B.    Business Overview.      16   
   C.    Organizational Structure.      38   
   D.    Property, Plants and Equipment.      41   

Item 4A.

      Unresolved Staff Comments.      45   

Item 5.

      Operating and Financial Review and Prospects.      45   
   A.    Operating Results.      45   
   B.    Liquidity and Capital Resources.      56   
   C.    Research and Development, Patents and Licenses, etc.      67   
   D.    Trend Information.      67   
   E.    Off-balance Sheet Arrangements.      67   
   F.    Tabular Disclosure of Contractual Obligations.      67   

Item 6.

      Directors, Senior Management and Employees.      67   
   A.    Directors and Senior Management.      72   
   B.    Compensation.      73   
   C.    Board Practices.      75   
   D.    Employees.      77   
   E.    Share Ownership.      77   

Item 7.

      Major Shareholders and Related Party Transactions.      77   
   A.    Major Shareholders.      78   
   B.    Related Party Transactions. Business Relationships.      78   
   C.    Interests of Experts and Counsel.      78   

Item 8.

      Financial Information.      78   
   A.    Consolidated Statements and Other Financial Information. Financial Statements.      78   
   B.    Significant Changes.      79   

Item 9.

      The Offer and Listing.      79   
   A.    Offer and Listing Details.      79   
   B.    Plan of Distribution.      79   
   C.    Markets.      80   
   D.    Selling shareholders.      81   
   E.    Dilution.      81   
   F.    Expenses of the issue.      82   

Item 10.

      Additional Information.      82   
   A.    Share Capital.      82   
   B.    Memorandum and Articles of Association      83   
   C.    Material Contracts.      88   
   D.    Exchange Controls.      89   
   E.    Taxation.      92   
   F.    Dividends and Paying Agents.      96   
   G.    Statement by Experts.      96   
   H.    Documents on Display.      96   
   I.    Subsidiary Information.      96   

Item 11.

      Quantitative and Qualitative Disclosures about Market Risk.      96   

Item 12.

      Description of Securities Other than Equity Securities.      96   

 

 

iii


Table of Contents

Part II

     97   

Item 13.

     Defaults, Dividend Arrearages and Delinquencies.      97   

Item 14.

     Material Modifications to the Rights of Security Holders and Use of Proceeds.      97   

Item 15.

     Controls and Procedures.      98   

Item 16A.

     Audit Committee Financial Expert.      98   

Item 16B.

     Code of Ethics.      99   

Item 16C.

     Principal Accountant Fees and Services.      99   

Item 16D.

     Exemptions from the Listing Standards for Audit Committees.      100   

Item 16E.

     Purchases of Equity Securities by the Issuer and Affiliated Purchasers.      100   

Item 16F.

     Change in Registrant’s Certifying Accountant.      100   

Item 16G.

     Corporate Governance.      100   

Part III

       

Item 17.

     Financial Statements.      100   

Item 18.

     Financial Statements.      100   

Item 19.

     EXHIBITS      101   

 

iv


Table of Contents

PART I

 

Item 1. Identity of Directors, Senior Management and Advisers.

Not applicable.

 

Item 2. Offer Statistics and Expected Timetable.

Not applicable.

 

Item 3. Key Information.

A. Selected Financial Data.

The following table sets forth selected financial data including selected historical financial information as of and for each of the Fiscal years ended March 31, 2011, 2010, 2009 and 2008 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, or IFRS.

The selected IFRS consolidated financial data as of March 31, 2011 and 2010 and for each of the Fiscal years ended March 31, 2011, 2010 and 2009 are derived from our audited IFRS consolidated financial statements included in this annual report together with the report of Deloitte Haskins & Sells, independent auditors, who have reported that they carried out their audit in accordance with standards of the Public Company Accounting Oversight Board (United States). The selected IFRS consolidated financial data as of March 31, 2008 and for Fiscal year ended March 31, 2008 are derived from our audited IFRS consolidated financial statement not included in this annual report.

Selected IFRS financial data for the year ended March 31,2007 has not been included in this Annual Report on Form 20-F because IFRS financial statements for such period have not previously been prepared and could not be without unreasonable effort and expense. We changed our basis of accounting to IFRS during the year ended March 31, 2009 and, in connection therewith, our consolidated financial statements for the year ended March 31, 2008 were restated to conform to IFRS. Prior to adoption of IFRS, we prepared financial statements in accordance with accounting principles generally accepted in the United States of America for purposes of our SEC reporting.

You should read our selected financial data in conjunction with Item 5 “— Operating and Financial Review and Prospects”

Selected Financial Data Prepared in Accordance with IFRS

 

    For each of the years ended March 31,  
    2011     2011     2010     2009     2008  
    (In US$ millions,
except share and
per share
amounts)
    (in Rs. millions, except share and per share amount)  

Revenues

    27,130.9        1,209,902.6        904,465.9        702,636.0        352,688.2   

Finance revenues

    498.5        22,231.5        21,796.9        20,170.3        17,566.6   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

    27,629.4        1,232,134.1        926,262.8        722,806.3        370,254.8   

Change in inventories of finished goods and work-in-progress

    (423.2     (18,874.7     (9,343.9     15,793.3        (202.2

Purchase of products for sale

    2,713.3        121,000.6        96,839.1        71,260.2        24,056.8   

Raw materials and consumables

    15,564.5        694,097.9        531,209.4        401,679.9        223,388.8   

Employee cost

    2,068.6        92,249.6        87,944.9        75,199.7        28,763.6   

Depreciation and amortization

    974.2        43,445.7        36,636.6        28,039.8        8,275.5   

Other expenses

    5,210.0        232,341.7        180,807.7        175,613.6        57,920.9   

Expenditure capitalized

    (1,287.9     (57,433.1     (46,046.7     (45,310.9     (9,799.6

Gain on sale of controlling equity interest in subsidiary

    —          —          (27,565.5     (1,404.7     (148.0

Other (income) / loss (net)

    184.3        8,218.0        418.6        (14,294.8     (7,530.0

Excess of fair value of net assets acquired over cost of acquisition

    —          —          —          (6,569.6     —     

Foreign exchange (gain)/loss (net)

    (69.3     (3,090.0     (16,045.3     48,142.8        (1,902.4

Interest income

    (82.3     (3,669.5     (2,570.1     (3,097.2     (1,653.1

Interest expense (net)

    826.4        36,853.5        40,396.0        34,222.3        16,463.5   

Share of (profit)/loss of equity accounted investees

    10.3        458.4        1,229.3        3,464.0        (52.1
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income /(loss) before tax

    1,940.5        86,536.0        52,352.7        (59,932.1     32,673.1   

Income tax expense

    (286.7     (12,787.3     (14,771.6     (841.8     (9,470.1
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income /(loss) after tax

    1,653.8        73,748.7        37,581.1        (60,773.9     23,203.0   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income/(loss) attributable to equity holders

    1,646.0        73,401.8        38,028.7        (60,142.3     21,976.6   

Net income/(loss) attributable to non-controlling interest

    7.8        346.9        (447.6     (631.6     1,226.4   

 

1


Table of Contents

Dividends per share

  US$ 0.3      Rs. 15.0      Rs. 6.0      Rs. 15      Rs. 15   

Dividends per share ‘A’ Ordinary Shares

  US$ 0.3      Rs. 15.5      Rs. 6.5      Rs —        Rs —     

Weighted average equity shares outstanding:

         

Basic

    517,760,138        517,760,138        463,736,463        413,053,469        385,438,663   

Diluted

    518,174,445        518,174,445        463,886,434        413,053,469        422,152,823   

Weighted average ‘A’ equity shares outstanding:

         

Basic

    79,333,840        79,333,840        64,176,028        27,428,499        —     

Diluted

    79,433,370        79,433,370        64,276,164        27,428,499        —     

Earnings per share:

         

Basic

  US$ 2.8      Rs. 122.9      Rs 72.0      Rs. (136.5   Rs. 57.0   

Diluted

  US$ 2.8      Rs. 122.7      Rs. 71.9      Rs. (136.5   Rs. 50.3   

Earnings per share of ‘A’ Ordinary Shares:

         

Basic

  US$ 2.8      Rs. 123.4      Rs. 72.5      Rs. (136.5     —     

Diluted

  US$ 2.8      Rs. 123.2      Rs. 72.4      Rs. (136.5     —     

 

     As of March 31,  
     2011      2011      2010      2009      2008  
     (in US $ millions,
except number
of shares)
     (in Rs. millions, except number of shares)  

Balance Sheet Data

              

Total Assets

     23,131.2         1,031,526.9         908,410.2         782,629.4         474,135.7   

Long term debt, net of current portion

     4,517.8         201,471.3         198,897.4         116,185.9         108,028.1   

Total shareholders equity

     4,737.3         211,259.3         102,222.8         38,725.8         124,316.5   

Number of Equity shares outstanding

              

-Ordinary Shares

     53,82,72,284         53,82,72,284         506,381,170         449,832,659         385,503,954   

-‘A’ Ordinary Shares

     9,63,41,706         9,63,41,706         64,176,374         64,175,655         —     

Exchange Rate Information

For convenience, some of the financial amounts presented in this annual report have been translated from rupee amounts into dollar amounts at the rate of Rs.44.5950 = US $1.00, based on the fixing rate in the City of Mumbai on March 31, 2011 for cable transfers in Indian rupees as published by the Foreign Exchange Dealers’ Association of India or FEDAI, the date of our most recent balance sheet included in this annual report. However, such translations do not imply that the rupee amounts have been could have been or could be converted into US dollars at that or any other rate.

The following table sets forth, for the Fiscal years ended March 31, 2011, 2010, 2009, 2008 and 2007 information with respect to the exchange rate between the rupee and the dollar (in rupees per US dollar) as published by Bloomberg L.P.

 

Fiscal year ended March 31,

   Period End      Period
Average
     High      Low  

2011

     44.59         44.98         45.25         44.59   

2010

     44.92         47.42         50.64         44.92   

2009

     50.73         45.82         51.97         39.77   

2008

     40.12         40.26         43.15         39.27   

2007

     43.48         45.24         46.88         43.04   

The following table sets forth information with respect to the exchange rate between the rupee and the dollar (in rupees per US dollar) for the previous six months as published by Bloomberg L.P.

 

2


Table of Contents

Month

   Period End      Period
Average
     High      Low  

January 2011

     45.91         45.41         45.91         44.71   

February 2011

     45.27         45.44         45.77         44.99   

March 2011

     44.59         44.98         45.25         44.59   

April 2011

     44.22         44.36         44.52         44.08   

May 2011

     45.06         44.93         45.33         44.33   

June 2011

     44.70         44.84         45.04         44.68   

Source: Bloomberg L.P

As of July 27, 2011, the value of the rupee against the US dollar was Rs.44.08 per US$1.00, as published by Bloomberg L.P

B. Capitalization and Indebtedness.

Not applicable.

C. Reasons for the Offer and Use of Proceeds.

Not applicable.

D. Risk Factors.

This section describes the risks that we currently believe may materially affect our business. The factors below should be considered in connection with any forward-looking statements in this annual report and the cautionary statements on page i. The risks below are not the only ones we face — some risks may be unknown to us, and some risks that we do not currently believe to be material could later turn out to be material. Although we will be making all reasonable efforts to mitigate or minimize these risks, one or more of a combination of these risks could materially impact our business, revenues, sales, and net assets, results of operations, liquidity and capital resources.

Risk associated with Our Business and the Automotive Industry.

Deterioration in global economic conditions could have a significant adverse impact on our sales and results of operations.

The impact of the recent global financial crisis and sovereign debt crisis in the United States and the Euro zone continues to be a cause of concern despite concerted efforts to contain the adverse effect of these events on global recovery.

We have automotive operations in South Korea, Spain and Thailand. The Indian automotive industry is affected substantially by the general economic conditions in India and around the world. The demand for automobiles in the Indian market is influenced by factors including the growth rate of the Indian economy, easy availability of credit, and increase in disposable income among Indian consumers, interest rates, freight rates and fuel prices. During the global financial crisis, the Reserve Bank of India (RBI) had eased its monetary policy stance to stimulate economic activity. Subsequently, as the Indian economy started recovering from the downturn, inflation pressures increased substantially and despite several interest rate hikes, inflation continues to be high. The trends of higher inflation, muted industrial growth and rising interest rates are expected to pose downside risks to overall growth. The automotive industry in general is cyclical and economic slowdowns in the past have affected the manufacturing sector including the automotive and related industries. Deterioration in key economic factors such as growth rate, interest rates and inflation as well as reduced availability of financing for vehicles at competitive rates may adversely affect our automotive sales in India and results of operations.

Our Jaguar and Land Rover operations have significant presence in the UK, North America and Continental Europe and has operations in many major countries across the globe. The global economic downtown significantly impacted the global automotive markets, particularly in the United States and Europe, where our Jaguar Land Rover operations have significant sales exposure. Our strategy with respect to our Jaguar Land Rover operations, which includes new product launches and expansion into growing markets such as China, Russia and Brazil, may not be sufficient to mitigate the decrease in demand for our products in established markets and this could have a significant adverse impact on our financial performance. In response to the recent economic slowdown, we further intensified efforts to review and realign our cost structure such as reducing manpower costs and other fixed costs. Further, our Jaguar Land Rover business is exploring opportunities to reduce cost base through increased sourcing of materials from low cost countries, reduction in number of suppliers, reduction in number of platforms, reduction in engineering change costs, increased use of off-shoring and several other initiatives. Although consumer sentiments have improved in many developed markets since late 2009, if industry demand softens because of a major debt crisis, negative economic growth in key markets or other factors, our results of operations and financial condition could be substantially and adversely affected.

 

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Restrictive covenants in our financing agreements may limit our operations and financial flexibility and adversely impact our future results and financial condition.

Some of our financing agreements and debt arrangements set limits on and/or require us to obtain lender consents before, among other things, pledging assets as security. In addition, certain financial covenants may limit our ability to borrow additional funds or to incur additional liens. In the past, we have been able to obtain required lender consents for such activities. However, there can be no assurance that we will be able to obtain such consents in the future. If our financial or growth plans require such consents and such consents are not obtained, we may be forced to forego or alter our plans, which could adversely affect our results of operations and financial condition.

In the event that we breach these covenants, the outstanding amounts due under such financing agreements could become due and payable immediately. A default under one of these financing agreements may also result in cross-defaults under other financing agreements and result in the outstanding amounts under such other financing agreements becoming due and payable immediately. Defaults under one or more of our financing agreements could have a material adverse effect on our results of operations and financial condition.

Because of the acquisition of Jaguar Land Rover, our historical financial statements may not be comparable.

On June 2, 2008, we completed the acquisition of Jaguar Land Rover from the Ford Motor Company, or Ford. Therefore, our financial statements for the Fiscal years ended March 31, 2009, 2010 and 2011 include the results of Jaguar Land Rover for the period commencing from June 2, 2008 to March 31, 2009, for the Fiscal year ended March 31, 2010 and for the Fiscal year ended March 31, 2011, respectively. Our historical consolidated financial statements for the Fiscal years ended on and before March 31, 2008 do not include the results of Jaguar Land Rover, and neither pro forma nor historical consolidated financial statements showing our combined results of operations and financial condition, including Jaguar Land Rover, have been prepared or are being provided in this annual report.

This may make it difficult to compare our past performance and financial condition or to estimate our consolidated performance in the future. Moreover, the global disruption of the automotive industry during the 2009 financial crisis, including in Jaguar Land Rover’s markets, makes past performance of the business not necessarily indicative of future demand, trends or results.

Exchange rate and interest rate fluctuations could adversely affect our results of operations.

Our operations are subject to risk arising from fluctuations in exchange rates with reference to countries in which we operate. These risks primarily stem from the relative movements of the GBP, the US dollar, the Euro, the Chinese Renminbi, the Russian Ruble and the Indian Rupee.

We import capital equipment, raw materials and components from, and also sell our vehicles in various countries. These transactions are denominated primarily in US dollars and Euros. Moreover, we have outstanding foreign currency denominated debt and are sensitive to fluctuations in foreign currency exchange rates. We have experienced and expect to continue to experience foreign exchange losses and gains on obligations denominated in foreign currencies in respect of our borrowings and foreign currency assets and liabilities due to currency fluctuations. Our Jaguar Land Rover operations have significant exposure considering our vehicle sales in the US, Europe and China. In addition, Jaguar Land Rover sources a significant portion of input material from European suppliers. A weakening of the GBP against the US dollar as well as a weakening of the Euro against the GBP, especially in the latter part of the Fiscal year, had a favourable impact on our Jaguar Land Rover operations. Similarly appreciation of the Indian Rupee against the US dollar also favourably impacted our borrowing cost and consequently, our results of operations.

Although we engage in currency hedging in order to decrease our foreign exchange exposure, a weakening of the Indian Rupee against the US dollar or other major foreign currencies may have an adverse effect on our cost of borrowing and consequently may increase our financing costs, which could have a significant adverse impact on our results of operations.

We also have interest-bearing assets (including cash balances) and interest-bearing liabilities, which earn interest at variable rates. We are therefore exposed to changes in interest rates in the various markets in which we borrow.

Financial instability in other countries could disrupt our business and cause the trading price of our Shares and ADSs to decrease.

 

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The Indian automotive market and the Indian economy are influenced by economic and market conditions in other countries. Although economic conditions are different in each country, investors’ reactions to economic developments in one country can have adverse effects on the securities of companies and the economy as a whole, in other countries, including India. A loss of investor confidence in the financial systems of other emerging markets may cause volatility in Indian financial markets and indirectly, in the Indian economy in general. Any worldwide financial instability could also have a negative impact on the Indian economy, including the movement of exchange rates and interest rates in India. In the event of recovery of global economy is slower than expected, or if there is any significant financial disruption, this could have an adverse effect on our cost of funding, loan portfolio, business, prospects, results of operations, financial condition and the trading price of our shares and ADSs.

Intensifying competition could materially and adversely affect our sales and results of operations.

The global automotive industry is highly competitive and competition is likely to further intensify in view of the continuing globalization and consolidation in the worldwide automotive industry. Competition is especially likely to increase in the premium automotive categories as each market participant intensifies its efforts to retain its position in established markets while also developing a presence in emerging markets, such as China. The factors affecting competition include product quality and features, innovation and product development time, ability to control costs, pricing, reliability, safety, fuel economy, customer service and financing terms. There can be no assurance that we will be able to compete successfully in the global automotive industry in the future.

We also face strong competition in the Indian market from domestic as well as foreign automobile manufacturers. Improving infrastructure and robust growth prospects compared to other mature markets are attracting a number of international companies to India either through joint ventures with local partners or through independently owned operations in India. International competitors bring with them decades of international experience, global scale, advanced technology and significant financial resources. Consequently, domestic competition is likely to further intensify in the future. There can be no assurance that we will be able to implement our future strategies in a way that will mitigate the effects of increased competition in the Indian automotive industry.

Our future success depends on our ability to satisfy changing customer demands by offering innovative products in a timely manner and maintaining such products’ competitiveness.

Our competitors can gain significant advantages if they are able to offer products satisfying customer needs earlier than we are able to and this could adversely impact our sales and results of operations. Unanticipated delays or cost overruns in implementing new product launches, expansion plans or capacity enhancements could adversely impact our results of operations.

Customer preferences especially in many of the developed markets seem to be moving in favour of more fuel efficient vehicles. Further, in many countries there has been significant pressure on the automotive industry to reduce carbon dioxide emissions. In many markets these preferences are driven by increased government regulation and rising fuel prices. Our operations may be significantly impacted if there is a delay in developing fuel efficient products that reflect changing customer preferences, especially in the premium automotive category. There can be no assurance that the market acceptance of our future products will meet our expectations, in which case we may be unable to realize the intended economic benefits of our investments and our results of operations may be adversely affected.

We are subject to risks associated with product liability, warranty and recall.

We are subject to risks and costs associated with product liability, warranties and recalls, should we supply defective products, parts, or related after-sales services, including by generating negative publicity, which may adversely affect our business, results of operations and financial condition. Such events could also require us to expend considerable resources in correcting these problems and could adversely affect demand for our products. We may also be subject to class actions or other large scale product liability or other lawsuits in various jurisdictions where we have a significant presence.

We are subject to risk associated with our automobile financing business.

We are subject to risks associated with our automobile financing business. Any defaults by our customers or inability to repay instalments as due, could adversely affect our business, results of operations and cash flows. In addition, any downgrades in our credit ratings may increase our borrowing costs and restrict our access to the debt markets. Over time, and particularly in the event of any credit rating downgrades, market volatility, market disruption, regulatory changes or otherwise, we may need to reduce the amount of financing receivables we originate, which could adversely affect our ability to support the sale of our vehicles.

 

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Underperformance of our distribution channels and supply chains may adversely affect our sales and results of operations.

Our products are sold and serviced through a network of authorized dealers and service centers across our domestic market, and a network of distributors and local dealers in international markets. We monitor the performance of our dealers and distributors and provide them with support to enable them to perform to our expectations. There can be no assurance, however, that our expectations will be met. Any under-performance by our dealers or distributors could adversely affect our sales and results of operations. We rely on third parties to supply us with the raw materials, parts and components used in the manufacture of our products. Furthermore, for some of these parts and components, we are dependent on a single source. Our ability to procure supplies in a cost effective and timely manner is subject to various factors, some of which are not within our control. While we manage our supply chain as part of our vendor management process, any significant problems with our supply chain in the future could affect our results of operations in an adverse manner.

Adverse economic conditions, decline in automobile demand, lack of access to sufficient financing arrangements could have a negative financial impact on our suppliers and distributors in turn impairing timely availability of components to us, while impairments to the financial condition of our distributors may impact our performance in some markets. In addition, if one or more of the other global automotive manufacturers were to become insolvent, this would have an adverse impact on the supply chains and may further affect our results of operations in an adverse manner.

In respect of our Jaguar Land Rover operations, as part of a separation agreement from Ford, we have entered into supply agreements with Ford and certain other third parties for critical components. Any disruption of such transitional services could have a material adverse impact on our operations and financial condition.

Increases in the cost, or disruptions in the supply, of vehicle parts manufactured in Japan resulting from recent natural disasters could materially harm our business

The recent earthquake and tsunami in Japan and their aftermath have created significant economic uncertainty in that country, the effects of which are largely not yet assessable. Since the earthquake, we have observed a significant drop in commercial activity in Japan, and we believe economic activity in the country may be generally disrupted for a substantial period of time. Some of our vehicles use raw materials, pre-products and vehicle parts that are sourced from Japan, including microchips. The recent natural disasters in that country have caused some Japanese suppliers to halt, delay or reduce production, which could reduce or disrupt the supply of such raw materials, pre-products and vehicle parts and / or result in an increase in their cost. Substantial increases in the costs; or a significant delay or sustained interruption in the supply; of key inputs sourced from Japan could adversely affect our ability to maintain our current and expected levels of production, and therefore negatively affect our revenues and increase our operating expenses.

Increases in input prices may have a material adverse impact on our result of operations.

In Fiscal 2011 and 2010, consumption of raw materials, components and aggregates and purchase of products for sale constituted approximately 64.62% and 66.80% respectively, of total revenues. Prices of commodity items used in manufacturing automobiles, including steel, aluminium, copper, zinc, rubber, platinum, palladium and rhodium have become increasingly volatile over the past two years. Further, with many economies coming out of recession, prices of commodity items such as steel, non-ferrous, precious metals, rubber and petroleum product are expected to rise significantly. While we continue to pursue cost reduction initiatives, an increase in price of input materials could severely impact our profitability to the extent such increase cannot be absorbed by the market through price increases and/or could have a negative impact on the demand. In addition, because of intense price competition and our high level of fixed costs, we may not be able to adequately address changes in commodity prices even if they are foreseeable. Increases in fuel costs also pose a significant challenge to automobile manufacturers worldwide, including us, especially in the commercial and premium vehicle segments where increased fuel prices have an impact on demand.

The performance of our subsidiaries and affiliates may adversely affect our results of operations.

We have made and may continue to make capital commitments to our subsidiaries and affiliates, and if the business or operations of these subsidiaries and affiliates deteriorates, the value of our investments may be adversely affected.

The significant reliance of Jaguar Land Rover on key mature markets increases the risk of negative impact of adverse change in customer demand in those countries

Jaguar Land Rover, which contributes approximately 60% of our revenues, has a significant presence in the United Kingdom, North American and continental European markets. The global economic downturn significantly impacted the automotive industry in these markets in Fiscal 2009.

 

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Even though sales of passenger cars were aided by government-sponsored car-scrap incentives, these incentives primarily benefited the compact and micro-compact car segments and had virtually no slowing effect on the sales declines in the premium car or all-terrain vehicle segments in which we operate. Although demand in these markets has recovered strongly, any decline in demand for our vehicles in these major markets may in the future significantly impair our business, financial position and results of operations. In addition, our strategy, which includes new product launches and expansion into growing markets, such as China, India, Russia and Brazil, may not be sufficient to mitigate a decrease in demand for our products in mature markets in the future, which could have a significant adverse impact on our financial performance.

We are subject to risks associated with growing our business through mergers and acquisitions.

We believe that our acquisitions provide us opportunities to grow significantly in the global automobile markets by offering premium brands and products. Our acquisitions have provided us with access to technology and additional capabilities while also offering potential synergies. However, the scale, scope and nature of the integration required in connection with our acquisitions present significant challenges, and we may be unable to integrate the relevant subsidiaries, divisions and facilities effectively within our expected schedule. An acquisition may not meet our expectations and the realization of the anticipated benefits may be blocked, delayed or reduced as a result of numerous factors, some of which are outside our control.

We will continue to evaluate growth opportunities through suitable mergers and acquisitions in the future. Growth through mergers and acquisitions involves business risks, including unforeseen contingent risks or latent business liabilities that may only become apparent after the merger or acquisition is completed. The key success factors will be seamless integration and effective management of the merged/acquired entity, retention of key personnel, and generating cash flow from synergies in engineering and sourcing, joint sales and marketing efforts, and management of a larger business. If any of these factors fails to materialize or if we are unable to manage any of the associated risks successfully, our results of operations could be adversely affected.

Our business is seasonal in nature and a substantial decrease in our sales during certain quarters could have a material adverse impact on our financial performance.

The sales volumes and prices for our vehicles are influenced by the cyclicality and seasonality of demand for these products. In the Indian market, demand for our vehicles generally peaks between January and March, although there is a decrease in demand in February just before release of the Indian fiscal budget. Demand is usually lean from April to July and picks up again in the festival season from September onwards, with a decline in December due to year-end. The automotive industry has been cyclical in the past and we expect this cyclicality to continue.

Our Jaguar Land Rover business is impacted by the bi-annual registration of vehicles in the United Kingdom where the vehicle registration number changes every six months, which in turn has an impact on the resale value of vehicles. This leads to an increase in sales during the period when the aforementioned change occurs. Most other markets such as the United States are driven by introduction of new model year products which typically occurs in the autumn of each year. Furthermore, western European markets tend to be impacted by the summer and winter holidays. The resulting sales profile influences operating results on a quarter-to-quarter basis.

We rely on licensing arrangements with Tata Sons Limited to use the “Tata” brand. Any improper use of the associated trademarks by our licensor or any other third parties could materially and adversely affect our business, financial condition and results of operations.

Our rights to our trade names and trademarks are a crucial factor in marketing our products. Establishment of the “Tata” word mark and logo mark in and outside India is material to our operations. We have licensed the use of the “Tata” brand from Tata Sons Limited. If Tata Sons, or any of their subsidiaries or affiliated entities, or any third party uses the trade name “Tata” in ways that adversely affect such trade name or trademark, our reputation could suffer damage, which in turn could have a material adverse effect on our business, financial condition and results of operations.

Inability to protect or preserve our intellectual property could materially and adversely affect our business, financial condition and results of operations.

With respect to our Jaguar Land Rover business, we own or otherwise have rights in respect of a number of patents relating to the products we manufacture, which have been obtained over a period of years. In connection with the design and engineering of new vehicles and the enhancement of existing models, we seek to regularly develop new technical designs for use in our vehicles. We also use technical designs which are the intellectual property of third parties with such third parties’ consent.

 

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These patents and trademarks have been of value in the growth of our business and may continue to be of value in the future. Although we do not regard any of our businesses as being dependent upon any single patent or related group of patents, an inability to protect this intellectual property generally, or the illegal breach of some or a large group of our intellectual property rights, would have a materially adverse effect on our operations, business and / or financial condition. We may also be affected by restrictions on the use of intellectual property rights held by third parties and we may be held legally liable for the infringement of the intellectual property rights of others in our products.

We may be adversely affected by labor unrest.

All of our permanent employees, other than officers and managers, in India and most of our permanent employees in South Korea, Spain and the United Kingdom, including certain officers and managers, in relation to our automotive business, are members of labor unions and are covered by our wage agreements, where applicable with those labor unions.

In general, we consider our labor relations with all of our employees to be good. However, in the future we may be subject to labor unrest, which may delay or disrupt our operations in the affected regions, including the acquisition of raw materials and parts, the manufacture, sales and distribution of products and the provision of services. If work stoppages or lock-outs at our facilities or at the facilities of our major vendors occur or continue for a long period of time, our business, financial condition and results of operations may be adversely affected

Any inability to manage our growing international business may adversely affect our results of operations.

Our growth strategy relies on the expansion of our operations by introducing certain automotive products in other parts of the world, including Europe, China, Russia, Brazil and other parts of Asia. The costs associated with entering and establishing ourselves in new markets, and expanding such operations, may be higher than expected, and we may face significant competition in those regions. In addition, our international business is subject to many actual and potential risks, including language barriers, cultural differences and other difficulties in staffing and managing overseas operations, inherent difficulties and delays in contract enforcement and the collection of receivables under the legal systems of some foreign countries, the risk of non-tariff barriers, other restrictions on foreign trade or investment sanctions, and the burdens of complying with a wide variety of foreign laws and regulations.

If we are unable to manage risks related to our expansion and growth in other parts of the world, our business, results of operations and financial condition could be adversely affected.

Future pension obligations may prove more costly than currently anticipated and the market value of assets in our pension plans could decline.

We provide post retirement and pension benefits to our employees some of which are defined benefit plans.

Our pension liabilities are generally funded and the pension plan assets are particularly significant in respect of the Jaguar and Land Rover pension plans. All new employees in our Jaguar Land Rover operations from April 19, 2010, have joined in a new defined contribution pension plan.

Lower return on pension fund assets, changes in market conditions, changes in interest rates, changes in inflation rates, and adverse changes in other critical actuarial assumptions, may impact the pension liabilities and consequently increase funding requirements, which will adversely affect our financial condition and results of operations.

Our insurance coverage may not be adequate to protect us against all potential losses to which we may be subject, and this may have a material adverse effect on our business.

While we believe that the insurance coverage that we maintain is reasonably adequate to cover all normal risks associated with the operation of our business, there can be no assurance that any claim under our insurance policies will be honored fully or timely. Accordingly, to the extent that we suffer loss or damage that is not covered by insurance or which exceeds our insurance coverage, our financial condition may be affected.

 

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Political and Regulatory Risks.

India’s obligations under the World Trade Organization Agreement.

India’s obligations under its World Trade Organization agreement could reduce the present level of tariffs on imports of components and vehicles. Reductions of import tariffs could result in increased competition, which in turn could adversely affect our sales and results of operations.

New or changing laws, regulations and government policies regarding increased fuel economy, reduced greenhouse gas and other emissions, vehicle safety and taxes may have significant impact on our business.

As an automobile company, we are subject to extensive governmental regulations regarding vehicle emission levels, noise, safety and levels of pollutants generated by our production facilities. These regulations are likely to become more stringent and compliance costs may significantly impact our future results of operations. In particular, the U.S. and Europe have stringent regulations relating to vehicular emissions. The proposed tightening of vehicle emissions regulations by the European Union will require significant costs for compliance. While we are pursuing various technologies in order to meet the required standards in the various countries in which we sell our vehicles, the costs for compliance with these required standards can be significant to our operations and may adversely impact our results of operations.

Imposition of any additional taxes and levies designed to limit the use of automobiles could adversely affect the demand for our products and our results of operations. Changes in corporate and other taxation policies as well as changes in export and other incentives given by the various governments could also adversely affect our results of operations. For example, we are availing ourselves of excise duty exemptions for manufacturing facilities in the State of Uttarakhand and other incentives in certain states of India either through subsidies or loans from such states where we have manufacturing operations. The Government of India had proposed a comprehensive national goods and services tax, or GST, regime that will combine taxes and levies by the central and state governments into one unified rate structure. The same was to be effective from April 1, 2011, but its implementation has been deferred till April 1, 2012.While both the Government of India and other state governments of India have publicly announced that all committed incentives will be protected following the implementation of the GST, given the limited availability of information in the public domain concerning the GST, we are unable to provide any assurance as to this or any other aspect of the tax regime following implementation of the GST. The implementation of this rationalized tax structure might be affected by any disagreement between certain state governments, which could create uncertainty.

The Direct Tax Code Bill 2010, or DTC, proposes to replace the existing Income Tax Act, 1961 and other direct tax laws, with a view to simplify and rationalize the tax provisions into one unified code. The DTC bill is proposed to come into effect from April 1, 2012 .The various proposals included in DTC bill are subject to review by Indian parliament and as such impact if any, is not quantifiable at this stage.

Regulations in the areas of investments, taxes and levies may also have an impact on Indian securities, including our Shares and ADSs. In this regard it is important to note that DTC bill would likely have a significant impact on the current tax regime, including in respect of our Shares and ADSs. For more information, see Item 4.B “– Business Overview – Government Regulations – Indian Taxes – Goods and Services Tax” of this annual report.

We may be adversely impacted by political instability, wars, terrorism, multinational conflicts, natural disasters, fuel shortages/prices, epidemics and labor strikes.

Our products are exported to a number of geographical markets and we plan to expand our international operations further in the future. Consequently, we are subject to various risks associated with conducting our business outside our domestic markets and our operations may be subject to political instability in those markets, wars, terrorism, regional and/or multinational conflicts, natural disasters, fuel shortages, epidemics and labor strikes. Any significant or prolonged disruptions or delays in our operations related to these risks could adversely impact our results of operations.

Compliance with new and changing corporate governance and public disclosure requirements adds uncertainty to our compliance policies and increases our costs of compliance.

We are subject to a complex and changing regime of laws, regulations and standards relating to accounting, corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and Securities and Exchange Commission, or SEC, regulations, SEBI regulations, New York Stock Exchange, or NYSE, listing rules and Indian stock market listing regulations. New or changed laws, regulations and standards may lack specificity and are subject to varying interpretations. Their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs of compliance as a result of ongoing revisions to such governance standards. We are committed to maintaining high standards of corporate governance and public disclosure. However, our efforts to comply with evolving laws, regulations and standards in this regard have resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of management resources and time.

 

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In addition, new laws, regulations and standards regarding corporate governance may make it more difficult for us to obtain director and officer liability insurance. Further, our board members, managing director and chief executive officer as well as our chief financial officer could face an increased risk of personal liability in connection with the performance of their duties. As a result, we may face difficulties attracting and retaining qualified board members and senior management, which could harm our business. If we fail to comply with new or changed laws, regulations or differing standards, our business and reputation may be harmed.

Risks associated with Investments in an Indian Company.

Political changes in the Government of India could delay and/or affect the further liberalization of the Indian economy and adversely affect economic conditions in India generally and our business in particular.

Our business could be significantly influenced by economic policies adopted by the Indian Government. Since 1991, successive Indian Governments have pursued policies of economic liberalization and financial sector reforms.

The Indian Government has at various times announced its general intention to continue India’s current economic and financial liberalization and deregulation policies. However, protests against privatizations, which have occurred in the past, could slow the pace of liberalization and deregulation. The rate of economic liberalization could change, and specific laws and policies affecting foreign investment, currency exchange rates and other matters affecting investment in India could change as well. While we expect any new government to continue the liberalization of India’s economic and financial sectors and deregulation policies, there can be no assurance that such policies will be continued.

The Indian Government has traditionally exercised and continues to exercise influence over many aspects of the economy. Our business and the market price and liquidity of our ADSs and Shares may be affected by interest rates, changes in policy, taxation, social and civil unrest and other political, economic or other developments in or affecting India.

A change in the Indian Government’s policies in the future could adversely affect business and economic conditions in India and could also adversely affect our financial condition and results of operations. A significant change in India’s economic liberalization and deregulation policies could disrupt business and economic conditions in India generally, and specifically those of our Company, as a substantial portion of our assets are located in India.

Terrorist attacks, civil disturbances, regional conflicts and other acts of violence, particularly in India, may disrupt or otherwise adversely affect the markets in which we operate, our business and our profitability.

India has from time to time experienced social and civil unrest and hostilities, including terrorist attacks and riots and armed conflict with neighboring countries. Events of this nature in the future could influence the Indian economy and could have a material adverse effect on the market for securities of Indian companies, including our ADSs and Shares, and on the market for our vehicles.

Rights of shareholders under Indian law may be more limited than under the laws of other jurisdictions.

Our Articles of Association, which include regulations applicable to our Board of Directors, and Indian law, govern our corporate affairs. Legal principles relating to these matters and the validity of corporate procedures, directors’ fiduciary duties and liabilities, and shareholders’ rights may differ from those that would apply to a company incorporated in another jurisdiction. Shareholders’ rights under Indian law may not be as extensive as shareholders’ rights under the laws of other countries or jurisdictions, including the United States. You may also have more difficulty in asserting your rights as a shareholder of our Company than you would as a shareholder of a corporation organized in another jurisdiction.

The market value of your investment may fluctuate due to the volatility of the Indian securities market.

The Indian stock exchanges have, in the past, experienced substantial fluctuations in the prices of their listed securities. The Indian stock exchanges, including the Bombay Stock Exchange Limited, or BSE, have experienced problems that, if they continue or recur, could affect the market price and liquidity of the securities of Indian companies, including our Shares. These problems in the past included temporary exchange closures, broker defaults, settlement delays and strikes by brokers. In addition, the governing bodies of the Indian stock exchanges have from time to time imposed restrictions on trading in certain securities, limitations on price movements and margin requirements.

 

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Furthermore, from time to time disputes have occurred between listed companies and stock exchanges and other regulatory bodies, which in some cases may have had a negative effect on market sentiment.

There may be a differing level of regulation and monitoring of the Indian securities markets and the activities of investors, brokers and other participants, than in the United States. The Securities and Exchange Board of India, or SEBI, received statutory powers in 1992 to assist it in carrying out its responsibility for improving disclosure and other regulatory standards for the Indian securities markets. Subsequently, SEBI has prescribed regulations and guidelines in relation to disclosure requirements, insider dealing and other matters relevant to the Indian securities market. There may, however, be less publicly available information about Indian companies than is regularly made available by public companies in the United States.

Investors may have difficulty enforcing judgments against us or our management.

We are a limited liability company incorporated under the laws of India. 11 out of our 13 Directors and executive officers named in this annual report are residents of India or a substantial portion of our assets and the assets of these directors and executive officers are located in India. As a result, investors may find it difficult to (i) effect service of process upon us or these directors and executive officers in jurisdictions outside of India, (ii) enforce court judgments obtained outside of India, including those based upon the civil liability provisions of the U.S. federal securities laws, against us or these directors and executive officers, (iii) enforce, in an Indian court, court judgments obtained outside of India, including those based upon the civil liability provisions of the U.S. federal securities laws, against us or these directors and executive officers, and (iv) obtain expeditious adjudication of an original action in an Indian court to enforce liabilities, including those based upon the civil liability provisions of the U.S. federal securities laws, against us or these directors and executive officers.

India is not a party to any international treaty in relation to the recognition or enforcement of foreign judgments. Recognition and enforcement of foreign judgments is provided under Section 13 of the Code of Civil Procedure, or the Civil Procedure Code.

Section 13 and Section 44A of the Civil Procedure Code provide that a foreign judgment shall be conclusive as to any matter thereby directly adjudicated upon except (i) where it has not been pronounced by a court of competent jurisdiction, (ii) where it has not been given on the merits of the case, (iii) where it appears on the face of the proceedings to be founded on an incorrect view of international law or a refusal to recognize the law of India in cases where Indian law is applicable, (iv) where the proceedings in which the judgment was obtained were opposed to natural justice, (v) where it has been obtained by fraud or (vi) where it sustains a claim founded on a breach of any law in force in India.

Section 44A of the Civil Procedure Code provides that where a foreign judgment has been rendered by a superior court in any country or territory outside India which the Government has by notification declared to be a reciprocating territory, it may be enforced in India by proceedings in execution as if the judgment had been rendered by the relevant court in India. However, Section 44A of the Civil Procedure Code is applicable only to monetary decrees not being in the nature of any amounts payable in respect of taxes or other charges of a like nature or in respect of a fine or other penalty.

The United States has not been declared by the Government of India to be a reciprocating territory for the purpose of Section 44A of the Civil Procedure Code. Accordingly, a judgment of a court in the United States may be enforced only by a suit upon the judgment and not by proceedings in execution. The suit must be brought in India within three years from the date of the judgment in the same manner as any other suit filed to enforce a civil liability in India. It is unlikely that a court in India would award damages on the same basis as a foreign court if an action is brought in India. Furthermore, it is unlikely that an Indian court would enforce foreign judgments if it viewed the amount of damages awarded as excessive or inconsistent with public policy. A party seeking to enforce a foreign judgment in India is required to obtain approval from the RBI to execute such a judgment or to repatriate outside India any amount recovered

Risks associated with our Shares and ADSs.

Fluctuations in the exchange rate between the rupee and the US dollar may have a material adverse effect on the market value of our ADSs and Shares, independent of our operating results.

 

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Fluctuations in the exchange rate between the rupee and the US dollar will affect, among others things, the US dollar equivalents of the price of the Shares in rupees as quoted on the Indian stock exchanges and, as a result, may affect the market price of the ADSs. Such fluctuations will also affect the US dollar equivalent of any cash dividends in rupees received on the Shares represented by the ADSs and the dollar equivalent of the proceeds in rupees of a sale of Shares in India.

The exchange rate between the rupee and the US dollar has changed substantially in the last two decades and may substantially fluctuate in the future. The value of the rupee against the US dollar was Rs.44.08 = US$1.00 as of July 27, 2011.

 

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Holders of ADSs have fewer rights than shareholders and must act through the depositary to exercise those rights.

Although holders of ADSs have a right to receive any dividends declared in respect of shares underlying the ADSs, they cannot exercise voting or other direct rights as a shareholder with respect to the shares underlying the ADSs evidenced by ADRs. Citibank, N.A. as depositary is the registered shareholder of the deposited shares underlying our ADSs, and therefore only Citibank, N.A. can exercise the rights of shareholders in connection with the deposited shares. Only if requested by us, will the depositary notify holders of ADSs of upcoming votes and arrange to deliver our voting materials to holders of ADSs. The depositary will try, in so far as practicable, subject to Indian laws and the provisions of our Articles of Association, to vote or have its agents vote the deposited securities as instructed by the holders of ADSs. If the depositary receives voting instructions in time from a holder of ADSs which fail to specify the manner in which the depositary is to vote the shares underlying such holder’s ADSs, such holder will be deemed to have instructed the depositary to vote in favor of the items set forth in such voting instructions. If the depositary has not received timely instructions from a holder of ADSs, the holder shall be deemed to have instructed the depositary to give a discretionary proxy to a person designated by us, subject to the conditions set forth in the deposit agreement. If requested by us, the depositary is required to represent all shares underlying ADSs, regardless whether timely instructions have been received from the holders of such ADSs, for the sole purpose of establishing a quorum at a meeting of shareholders. Additionally, in your capacity as an ADS holder, you will not be able to bring a derivative action, examine our accounting books and records, or exercise appraisal rights. Registered holders of our Shares withdrawn from the depositary arrangements will be entitled to vote and exercise other direct shareholder rights in accordance with Indian law. However, a holder may not know about a meeting sufficiently in advance to withdraw the underlying shares in time. Furthermore, a holder of ADSs may not receive voting materials, if we do not instruct the depositary to distribute such materials, or may not receive such voting materials in time to instruct the depositary to vote.

Further, pursuant to Indian regulations, we are required to offer our shareholders preemptive rights to subscribe for a proportionate number of shares to maintain their existing ownership percentages prior to the issue of new shares. These rights may be waived by a resolution passed by at least 75% of our shareholders present and voting at a general meeting. Holders of ADSs may be unable to exercise preemptive rights for subscribing to these new Shares unless a registration statement under the Securities Act is effective or an exemption from the registration requirements is available to us. Our decision to file a registration statement would be based on the costs, timing, potential liabilities and the perceived benefits associated with any such registration statement and we do not commit that we would file such a registration statement. If any issue of securities is made to our shareholders in the future, such securities may also be issued to the depositary, which may sell such securities in the Indian securities market for the benefit of the holders of ADSs. There can be no assurance as to the value, if any, the depositary would receive upon the sale of these rights/securities. To the extent that holders of ADSs are unable to exercise preemptive rights, their proportionate interest in our Company would be reduced.

As a result of Indian Government regulation of foreign ownership the price of the ADSs could decline.

Foreign ownership of Indian securities is regulated and is partially restricted. In addition, there are restrictions on the deposit of Shares into our ADS facilities. ADSs issued by companies in certain emerging markets, including India, may trade at a discount to the underlying equity shares, in part because of the restrictions on foreign ownership of the underlying equity shares and in part because ADSs are sometimes perceived to offer less liquidity than underlying shares which can be traded freely in local markets by both local and international investors. See Item 10.D “— Exchange Controls”. The ADSs could trade at a discount to the market price of the underlying shares.

 

Item 4. Information on the Company.

A. History and Development of the Company.

We were incorporated on September 1, 1945 as a public limited liability company under the Indian Companies Act VII of 1913 as Tata Locomotive and Engineering Company Limited. Our name was changed to Tata Engineering and Locomotive Company Limited on September 24, 1960, and to Tata Motors Limited on July 29, 2003. We commenced operations as a steam locomotive manufacturer. This business was discontinued in 1971. Since 1954, we have been manufacturing automotive vehicles. The automotive vehicle business commenced with the manufacture of commercial vehicles under financial and technical collaboration with Daimler-Benz AG (now Daimler AG) of Germany. This agreement ended in 1969. We produced only commercial vehicles until 1991, when we started producing passenger vehicles as well. Together with our consolidated subsidiaries and equity accounted affiliates we form the Tata Motors Group. Please see Item 4.C for details of our subsidiaries and affiliates.

In September 2004, we became the first company from India’s engineering sector to be listed on the New York Stock Exchange.

 

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We offer a broad portfolio of automotive products, ranging from sub — 1 ton to 49 ton gross vehicle weight, or GVW, trucks (including pickup trucks) to small, medium, and large buses and coaches to passenger cars, including the world’s most affordable car — the Tata Nano, premium luxury cars and SUVs. By volume, we are the world’s fourth largest truck manufacturer and the third largest bus manufacturer in above 8 ton category.

We have a substantial presence in India and also have global operations in connection with production and sale of Jaguar and Land Rover premium brand passenger vehicles. We are the largest automobile manufacturer by revenue in India, the largest commercial vehicle manufacturer in terms of revenue in India and among the top three passenger vehicle manufacturers in terms of units sold in India during Fiscal 2011. We estimate that around five million vehicles produced by us are currently being operated in India.

We operate five principal automotive manufacturing facilities in India: at Jamshedpur in the State of Jharkhand, at Pune in the state of Maharashtra, at Lucknow in the state of Uttar Pradesh, at Pantnagar in the state of Uttarakhand and at Sanand in the state of Gujarat. We also operate three principal automotive facilities in the United Kingdom through our Jaguar Land Rover business: at Solihull in the West Midlands, Castle Bromwich in the West Midlands and Halewood in Liverpool.

We have expanded our international operations through mergers and acquisitions and in India we have made strategic alliances involving non-Indian companies.

 

   

In 2004, we acquired the Daewoo Commercial Vehicles Company (renamed as Tata Daewoo Commercial Vehicle Company Limited, or TDCV), which is South Korea’s second largest truck maker in terms of revenue. Together with TDCV we have developed our next generation trucks called the ‘Prima’ range of trucks (earlier referred to as the World Truck).

 

   

In Fiscal 2005, we acquired a 21% stake in Hispano Carrocera S.A. (renamed as Tata Hispano Motors Carrocera S.A.), or Hispano, a well-known Spanish bus and coach manufacturer. During Fiscal 2010 we acquired the remaining 79% shares in Hispano.

 

   

We have also been distributing and marketing Fiat branded cars in India since March 2006. We have a joint venture agreement with Fiat Group Automobiles S.p.A., Italy, located at Ranjangaon in Maharashtra to manufacture passenger cars, engines and transmissions for the Indian and overseas markets. Established in April 2008, the plant currently manufactures the Fiat Linea, the Fiat Punto, the Tata Manza as well as components like engines and transmissions.

 

   

In May 2006, we entered into a joint venture agreement with Brazil-based Marcopolo S.A., or Marcopolo, a global leader in building bodies for buses and coaches, to manufacture and assemble fully-built buses and coaches in India, wherein we have a 51% ownership, the balance being held by Marcopolo. The joint venture commenced production during Fiscal 2009.

 

   

In December 2006, we entered into a joint venture agreement with Thonburi Automotive Assembly Plant Co. Ltd Thailand, or Thonburi, to manufacture pickup trucks in Thailand. As of March 31, 2011, we own 86.78% of the joint venture, while Thonburi owns the remaining 13.22%. Subsequent to March 31, 2011, our holding increased to 90.82%. The joint venture, which began vehicle production in March 2008, enabled us to access the Thailand market, which is a major market for pickup trucks, as well as other potential markets in that region.

 

   

For some of our products, we are also expanding our international export operations, which have been continuing since 1961. Our vehicles are being marketed in several countries in Europe, Africa, the Middle East, South East Asia and South Asia. During fiscal 2008, Tata Motors (SA) Proprietary Limited, or TMSA, a joint venture company in which we hold 60% with the remaining 40% being held by Tata Africa Holdings (SA) (Pty.) Limited, was formed for the manufacture and assembly operations of our LCVs and M&HCVs in South Africa. We have set up an assembly plant in South Africa at Rosslyn and commenced operations in July, 2011.

 

   

In June 2008, we acquired the Jaguar Land Rover business from Ford Motor Company. Jaguar Land Rover is a global automotive business, which designs, manufactures and sells Jaguar luxury performance cars and Land Rover premium all-terrain vehicles. The Jaguar Land Rover business has internationally recognized brands, a strong product portfolio of award winning luxury performance cars and premium all-terrain vehicles, brand specific global distribution networks and strong research and development capabilities. We acquired three major manufacturing facilities located in Halewood, Solihull and Castle Bromwich and two advanced design and engineering facilities located at Whitley and Gaydon, all in the United Kingdom together with national sales companies in several countries.

 

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We believe that this acquisition represents an important milestone in our growth strategy, allowing us to participate immediately in the luxury performance car and premium all-terrain vehicle segments and enhance our global market presence.

 

   

In October 2010, we also acquired an 80% equity interest in Trilix Srl., Turin (Italy), a design and engineering company in line with our objective to enhance our styling/design capabilities to global standards. Trilix offers design and engineering services in the automotive sector, including styling, architecture, packaging, surfacing, macro and micro feasibility and detailed engineering development. Other services include physical models (styling, surface sing-off, etc.), CAE and manufacturing process feasibility.

We produce a wide range of automotive products, including:

 

   

Passenger Cars. Our passenger cars include the small car – the Tata Nano, the compact cars-Indica and the Indica Vista, the mid-sized cars – Indigo and the Indigo Manza .We have expanded our car lines with several variants and fuel options to suit various customer preferences. Jaguar has established its presence in the premium car segment. With the discontinuation of production of the X-Type in December 2009, Jaguar currently produces three car lines XK Sports car (coupe & convertible), XF Saloon and XJ Saloon. We showcased the Jaguar C-X75 concept car at the Paris Motor show in September 2010 which revealed the next-generation Power train technology in the form of electric motors and a Bladon Jets-developed turbine generator. We intend to build production versions of the C-X75 in association with Williams F1.

 

   

Utility Vehicles. We manufacture a number of utility vehicles, or UVs, including the Sumo, and the sports utility vehicle, or SUV, Tata Safari the lifestyle pickup, the Xenon XT and the newly launched premium Crossover, the Aria and the Multipurpose Utility Vehicle (MPV) the Venture. The Sumo, the Safari and the Xenon XT have variants to meet different consumer preferences such as the Safari DICOR 2.2 VTT range, powered by a new 2.2 L Direct Injection Common Rail (DICOR) engine the Sumo Grande, an SUV with the comforts of a family car .Tata Aria is India’s first four wheeler drive crossover, a luxurious creation with the finesse of a Sedan and the muscle of an SUV blended in one car. The Tata Venture is a MPV with the footprint and maneuverability of a hatchback car, but the interior space of a utility vehicle. Land Rover produces five car lines under the brands of Range Rover and Land Rover, and provides us with market share in the premium all-terrain vehicles segment. Range Rover is the premium range consisting of Range Rover and Range Rover Sport, and the Land Rover brand comprises of the Defender, Discovery 4 and Freelander 2 vehicles. The Range Rover Evoque made a debut at the Paris Motor Show and is available in a 3 door and 5 door versions. It is currently the smallest and most fuel efficient Range Rover to be commercialized and is scheduled to be available to customers in September, 2011 .

 

   

Light Commercial Vehicles. We manufacture a variety of light commercial vehicles, or LCVs, including pickup trucks, trucks and buses with a GVW of between 0.6 ton and 7.5 tons. This also includes the Ace, India’s first indigenously developed mini-truck with a 0.75 ton payload in different fuel options, Super Ace with a 1 ton payload, Ace Zip with a 0.6 ton payload, the Magic and Magic Iris, both passenger variants for commercial transportation developed on the Ace platform, and the Winger.

 

   

Medium and Heavy Commercial Vehicles We manufacture a variety of medium and heavy commercial vehicles, or M&HCVs, which include trucks, tractors, buses, tippers, dumpers and multi-axled vehicles with GVW of between 8 tons and 49 tons. In addition, through TDCV we manufacture a range of high horsepower trucks ranging from 215 horsepower to 560 horsepower, including dump trucks, tractor-trailers, mixers and cargo vehicles. During Fiscal 2010, we unveiled a new range of trucks, referred to as the as ‘Tata Prima’ line, to our customers in India, South Korea, and have partially extended the offering by providing various products off the ‘Prima’ line. We also expect to gradually export these ‘Prima’ products to other countries such as South Africa, Russia, the other SAARC countries, Middle East and various countries in Africa.

We believe that the foundation of our growth over the last five decades has been a deep understanding of economic conditions and customer needs, and the ability to translate them into customer desired products though research and development. Our Engineering Research Centre, or ERC, established in 1966, has enabled us to successfully design, develop and produce our own range of vehicles. As a consequence of the acquisition of Jaguar Land Rover, we now have state-of-the-art-engineering and design facilities. We believe the ERC along with the capabilities of our Jaguar Land Rover business will enhance our product engineering capability and facilitate speedy introduction of new products. Furthermore, we have a wholly-owned subsidiary, Tata Motors European Technical Centre PLC, or TMETC, in the United Kingdom, which is engaged in automobile research and engineering. In October 2008, TMETC acquired Miljobil Grenland AS, Miljobil, a Norwegian company, focuses and hold core competence on energy storage technology. Miljobil has concentrated on developing propulsion batteries for electric vehicles and Miljobil has vision to substitute old technology batteries and usage of fossil fuels for a variety of applications and is in the development, manufacturing and sales of products and services of batteries and other energy sources, and related systems for automotive industry and other areas of usage.

 

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Through our other subsidiary and associate companies, we are engaged in providing engineering and automotive solutions, construction equipment manufacturing, automotive vehicle components manufacturing and supply chain activities, machine tools and factory automation solutions, high-precision tooling and plastic and electronic components for automotive and computer applications, and automotive retailing and service operations.

Tata Technologies Limited, or TTL ,our 83.38% owned subsidiary, is engaged in providing specialized engineering & design services, product lifecycle management and product-centric IT services to leading global manufacturers. TTL’s customers are among the world’s premier automotive, aerospace and consumer durables manufacturers. TTL had eight functional subsidiary companies and one joint venture as at March 31, 2011. The consolidated revenue for TTL was Rs.12,493 million in Fiscal 2011, growth of 16.8 % from Rs. 10,699 million in Fiscal 2010, as worldwide automotive and aerospace markets showed volume traction. TTL recorded profit after tax of Rs 1,343 million in Fiscal 2011, representing an increase of 119.1% over Rs. 613 million in Fiscal 2010 contributed by higher offshore revenues and cost reduction measures that were implemented. In May 2011, TTL received private equity investment of Rs 1,410.6 million by selling 13.09% stake via issuance of primary shares following which our equity interest in the company stood at 72.46%.

TML Distribution Company Limited, or TDCL, our wholly-owned subsidiary, was incorporated on March 28, 2008. TDCL is engaged in the business of selling and providing logistics support for distribution of our products throughout India. TDCL commenced its operations in Fiscal 2009.

Our wholly-owned subsidiary, Tata Motors Finance Limited, or TMFL, was incorporated on June 1, 2006 with the objective of becoming a preferred financing provider for our dealer’s customers by capturing customer spending over the vehicle life-cycle relating to vehicles sold by us. TMFL commenced operations on September 1, 2006. In India, TMFL is registered with the RBI as a Systemically Important Non-Deposit Taking Non-Banking Financial Company and is classified as an Asset Finance Company under the RBI’s regulations on Non-Banking Financial Companies.

Our wholly-owned subsidiary, Tata Motors Insurance Broking and Advisory Services Limited, undertakes the business of insurance and reinsurance broking, which commenced business in Fiscal 2008.

As of March 31, 2011, our operations included 67 consolidated subsidiaries and 26 equity method affiliates, in respect of which we exercise significant influence.

As of March 31, 2011, we had approximately 52,244 permanent employees, including approximately 26,030 permanent employees at our consolidated subsidiaries.

Tata Incorporated serves as our authorized United States representative. The address of Tata Incorporated is 3 Park Avenue, 27th Floor, New York, NY 10016, United States of America.

Our Registered Office is located at Bombay House, 24, Homi Mody Street, Mumbai 400 001, India. Our telephone number is +91-22-6665-8282 and our website address is www.tatamotors.com. Our website does not constitute a part of this annual report.

B. Business Overview.

We primarily operate in the Automotive segment. Our Automotive segment operations include all activities relating to the development, design, manufacture, assembly and sale of vehicles including financing thereof, as well as sale of related parts and accessories. The acquisition of the Jaguar Land Rover business has enabled us to enter the premium car market in the developed markets such as UK, USA and Europe as well as in the growing markets like China and Russia, where we were not present earlier. We are in the process of managing the global automotive business focusing on integration and synergy. Towards this objective, various steps have been initiated/being taken which mainly include sharing of resources, platforms, facilities for product development and manufacturing, sourcing strategy and mutual sharing of best practices. It is expected that through these measures, the group will achieve an overall improved performance of the automotive business.

Our business segments are (i) automotive operations and (ii) all other operations. Our automotive operations include all activities relating to development, design, manufacture, assembly and sale of vehicles including financing thereof, as well as sale of related parts and accessories. We provide financing for vehicles sold by dealers in India. The vehicle financing is intended to drive sale of vehicles by providing financing to the dealers’ customers and as such is an integral part of automotive business.

 

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Our automotive operations segment is further divided into Tata and other brand vehicles (including spares and financing thereof) and Jaguar and Land Rover.

Our other operations business segment includes information technology, or IT services, machine tools and factory automation solutions, and investment business.

Our Strategy

We believe that we have established a strong position in the Indian automobile industry by launching new products, investing in research and development, strengthening our financial position and expanding our manufacturing and distribution network. We have pursued the strategy of increasing our presence in the global automotive markets and enhancing our product range and capability through strategic acquisitions/alliances. Our goal is to position ourselves as a major international automotive company by offering products across various markets by combining our engineering and other strengths as well as through strategic acquisitions. Our strategy to achieve these goals consists of the following elements:

Leveraging our capabilities: We offer an extensive range of commercial vehicles (for both goods and passenger transport) as well as passenger vehicles. We have plans to expand the range of our product base further with our strong brand recognition in India, our understanding of local consumer preferences, well developed in-house engineering capabilities and extensive distribution network.

We believe that our in-house research and development capabilities, including that of our subsidiaries Jaguar Land Rover, TDCV and Hispano, and our joint-ventures with Marcopolo of Brazil in India and with Thonburi in Thailand, and our relationship with Fiat, will enable us to expand our product range and extend our geographical reach. An example of this is the unveiling, during Fiscal 2010, of our next generation of heavy trucks – Prima, which we co-developed along with our subsidiary TDCV. During Fiscal 2011, we expanded our product range in the ‘Prima’ lines. Our launch of the Ace in May 2005, as the first sub one-ton payload mini-truck in India created a new category of vehicle in the Indian commercial vehicle industry. We rolled out the 100,000th Ace in a record time of 22 months after its launch. Similarly the launch of the Magic, a passenger variant from the same platform, has enabled us to tap into the potential increase in mass passenger transport in both rural and urban regions in certain markets. In Fiscal 2011, we further expanded our product range with passenger and freight variants based on the Ace platform. We also launched the Winger, which currently is India’s only maxi-van, to cater to the intra-city and long-distance transportation needs of our customers.

In the passenger vehicles market, we entered the compact car segment with the Indica in 1998. We sold approximately 100,000 units of the Indica within 25 months of its launch in the market. On the same platform, we developed a sedan version, the Indigo, which was launched in 2002. We also launched several versions to expand our offerings over the years including an estate version and the country’s first stretched sedan concept. In August 2008, we launched a new generation of the Indica, the Indica Vista, with options of diesel and gasoline engines, from our joint venture with Fiat as well as our own engines and followed that in October 2009 with the launch of the next generation sedan, the Indigo Manza. We have also conceptualized, developed and commercially launched the Nano, a low cost car for safe family transportation, breaking several conventional ideas of automobile development. The Nano sold approximately 100,000 units within 21 months of its launch, and we have achieved sales of 63,591 units in Fiscal 2011. We believe that our investment in Miljobil Grenland will also enable us to develop convenient and sustainable solutions for electric and hybrid vehicles. Through Jaguar Land Rover, we further expanded our product range into luxury performance cars and premium all-terrain vehicles and obtained three major manufacturing facilities and two advanced design and engineering facilities in the United Kingdom, that will further strengthen our capabilities.

Continuing focus on high quality and enhancing customer satisfaction: One of our principal goals is to achieve international quality standards for our products and services. We have established a procedure for ensuring quality control of outsourced components. Products purchased from approved sources undergo a supplier quality improvement process. We also have a program for assisting vendors from whom we purchase raw materials or components to maintain quality. Each vendor is reviewed on a quarterly basis on parameters of quality, cost and delivery and preference is given to vendors with TS 16949 certification. We are pursuing various quality improvement programmes, both internally and at our suppliers’ operations, in an effort to enhance customer satisfaction and reduce our future warranty costs. We have also established a procedure for ensuring quality control of outsourced components, and products purchased from approved sources undergo a supplier quality improvement process. Reliability and other quality targets are built into our new product introduction process. Assurance of quality is further driven by the design team, which interacts with downstream functions like process-planning, manufacturing and supplier management to ensure quality in design processes and manufacturing. We believe our extensive sales and service network has also enabled us to provide quality and timely customer service. Through close coordination supported by our IT systems, we monitor quality performance in the field and implement corrections on an ongoing basis to improve the performance of our products thereby improving customer satisfaction.

 

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In India, we maintained our 5th ranking in the 2010 in J D Power India Consumer Satisfaction Index survey with an increase of 29 points against the increase in industry average by 27 points. Jaguar and Land Rover collectively received over 80 awards from leading international motoring writers, magazines and opinion formers in 2010. The Jaguar XF is Jaguar’s best-selling model across the world by volume and it has garnered more than 80 international awards since its launch, including being named ‘‘Best Executive Car’’ for four years running by What Car? magazine. In May 2010, customer deliveries of the new XJ commenced and it received more than 20 international awards in 2010, including ‘‘Best Luxury Car’’ from China’s Auto News, ‘‘Annual Limousine King’’ from Quattroroute (Italy), ‘‘Luxury Car of the Year’’ from Top Gear (UK), Automobile Magazine’s ‘‘2011 Design of the Year’’ and ‘‘Best Executive Sedan’’ at the Bloomberg Awards in the United States. The Discovery 4 (LR4) is a mid-size SUV that features all-terrain capability. A range of new features, including the new 3.0-liter LR-TDV6 diesel engine, helped to propel the Discovery to the What Car? magazine award for the Best 4x4 for the seventh successive year in Fiscal 2011.

Products and environmental performance: Our strategy is to invest in products and technologies that position its products ahead of expected stricter environmental regulations and ensure that it benefits from a shift in consumer awareness of the environmental impact of the vehicles they drive. The company is committed to continued investment in new technologies, including developing sustainable technologies to improve fuel economy and reduce CO2 emissions. We are the largest investor in automotive R&D in the United Kingdom. We believe that we are the leader in automotive green-technology in the United Kingdom. Our environmental vehicle strategy focuses on new propulsion technology, weight reduction and reducing parasitic losses through the driveline. Projects like REEVolution, REHEV and Range-e are some examples of our research into the electrification of premium sedan and all-terrain vehicles.

Jaguar Land Rover is working on introducing a new Premium Lightweight Architecture for its products. This has seen a host of environmentally-friendly technologies including new aluminium alloys, down-sized power trains, Eco HMI, sustainable materials, best- CO2 navigation routes, electronic power steering, aerodynamic features and many more technologies. These technologies enable the delivery of class leading ‘Luxury’ and ‘Performance’ combined with low CO2 and laid the foundations for efficient Hybridization of the platform. JLR’s initial Full-Hybrid programme is also in advanced stages.

Our Jaguar Land Rover business already offers two aluminium vehicles, the Jaguar XJ and Jaguar XK and plans to deploy its core competency in aluminium construction across more models in its range. The new, all-aluminium Jaguar XJ 3.0 V6 twin-turbo diesel has CO2 emissions rated at 184g/km. We are also developing more-efficient vehicle technologies. Range Rover’s 2011 Model Year has been updated with an all-new 4.4-liter TDV8 with 8-speed transmission, resulting in a 14% reduction in CO2 and an improvement in fuel consumption of nearly 19% to 7.81L/100km. The 2011 Model Year Freelander 2, which went on sale in December 2010, features a new eD4 diesel engine capable of 4.98L/100km and CO2 emissions of 158g/km in 2WD. Jaguar’s C-X75 concept car incorporates electric plus twin gas turbines and demonstrates some of the technologies the company are developing for the future. The Jaguar XF and Range Rover Evoque to be launched in the second quarter of Fiscal 2012 will continue this trend. The XF 2.2 Diesel 8 speed Automatic transmission variant with Stop/Start technology reduces the entry model CO2 output while the Evoque features a number of lightweight, vehicle efficiency and Power-Train technologies that make this the most fuel efficient Range Rover produced.

In Fiscal 2011, some of the Plug-In Hybrid projects of JLR were completed and have provided the technical foundation for a production development programme for Parallel Plug-In Hybrids. In addition, JLR has made significant progress on a number of ongoing collaborative Research and Development programmes investigating a wide range of CO2 reduction technologies. These include radical combustion engine downsizing/pressure charging, alternative power sources for Series Hybrids, Flywheel KERS and waste energy recovery systems.

Mitigating cyclicality: The automobile industry is impacted by cyclicality. To mitigate the impact of cyclicality, we plan to continually strengthen our operations through gaining market share across different segments, and a wide range of products and geographies. We also plan to continue to strengthen our business operations other than vehicle sales, such as financing of our vehicles, spare part sales, service and maintenance contracts, sales of aggregates for non-vehicle businesses, reconditioning of aggregates and sale of castings, production aids and tooling / fixtures, to reduce the impact of cyclicality of the automotive industry.

Expanding our international business: Our international expansion strategy involves strategic acquisitions and introducing our product range into select geographies, where we have an opportunity to grow in markets with similar characteristics to the Indian market. Our international business strategy has already resulted in the growth of our international operations in select markets and chosen segments over the last 5 to 6 years. For example, we were the largest competitor in the LCV bus market for the seven meter category and the second largest competitor in the LCV Truck market in the 7.5 ton GVW category, in terms of unit sales in Ukraine in Fiscal 2011.We have also further consolidated our market share in commercial vehicles in other SAARC countries – Bangladesh, Nepal, Sri Lanka and Bhutan.

 

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Our acquisition of Jaguar Land Rover has expanded our geographical presence significantly. Through Jaguar Land Rover we now offer products in the luxury performance car and premium all-terrain vehicle segments with globally recognized brands and we have diversified our business across markets and product segments. We will continue to build upon the internationally recognized brands of Jaguar Land Rover. TDCV continues to be the largest exporter of heavy commercial vehicles from South Korea. While we continue to export from India and South Korea into many of these markets, we are also establishing manufacturing facilities where it is beneficial to do so. We have established a joint venture along with Thonburi in Thailand to manufacture pickup trucks. During Fiscal 2008, we established a joint venture company to undertake manufacture and assembly operations in South Africa, which has been one of our largest export markets from India, in terms of unit volume.

Reducing operating costs: We believe that our scale of operations provides us with a significant advantage in reducing costs and we plan to continue to sustain and enhance our cost advantage.

Our ability to leverage our technological capabilities and our manufacturing facilities among our commercial vehicle and passenger vehicle businesses enables us to reduce cost. For example, the diesel engine used in our Indica was modified for use in the Ace, which helped to reduce the project cost of the Ace. Similarly, platform sharing for the manufacture of pickup trucks and UVs enables us to reduce capital investment that would otherwise be required, while allowing us to improve the utilization levels at our manufacturing facilities. Where it is advantageous for us to do so, we intend to add our existing low cost engineering and sourcing capability to vehicles manufactured under the Jaguar Land Rover brand.

Our vendor relationships also contribute to our cost reductions. For example, we believe that the vendor rationalization program that we are undertaking will provide economies of scale to our vendors which would benefit our cost programs. We are also undertaking various internal and external benchmarking exercises that would enable us to improve the cost effectiveness of our components, systems and sub-systems.

We have intensified efforts to review and realign our cost structure through a number of measures such as reduction of manpower costs and rationalization of other fixed costs. Our Jaguar Land Rover business has undertaken several cost control and cost reduction initiatives such as increased sourcing of materials from low cost countries, reduction in number of suppliers, rationalization of marketing setup, reduction of manpower costs through increased employee flexibility between sites and several other initiatives. Further, our Jaguar Land Rover business is exploring opportunities through reduction in number of platforms, reduction in engineering change costs, increased use of off-shoring and several other initiatives.

Enhancing capabilities through the adoption of superior processes: Tata Sons and the entities promoted by Tata Sons, including us, aim at improving quality of life through leadership in various sectors of national economic significance. In pursuit of this goal, Tata Sons and the Tata Sons promoted entities have institutionalized an approach, called the Tata Business Excellence Model, or TBEM, which has been formulated along the lines of the Malcolm Baldridge National Quality Award to enable us to improve performance and attain higher levels of efficiency in our businesses and in discharging our social responsibility. The model aims to nurture core values and concepts embodied in various focus areas such as leadership, strategic planning, customers, markets and human resources, and to translate them to operational performance. Our adoption and implementation of this model seeks to ensure that our business can be conducted through superior processes.

We have deployed a balance score card, or BSC, management system, developed by Dr. Robert Kaplan and Dr.David Norton of the Harvard Business School for measurement based management and feedback. We have also deployed a new product introduction, or NPI, process for systematic product development and a product lifecycle management system for effective product data management across our organization. On the human resources front, we have adopted various processes to enhance the skills and competencies of our employees. We have also enhanced our performance management system, with appropriate mechanisms to recognize talent and sustain our leadership base. We believe these will enhance our way of doing business, given the dynamic and demanding global business environment.

Customer financing. With financing increasingly being a critical factor in vehicle purchases and the rising aspirations of consumers in India, we intend to expand our vehicle financing activities to enhance our vehicle sales. Further, in a scenario where there is lack of sufficient finance availability for vehicle sales in the Indian market, as was witnessed during the financial crisis, our finance business is expected to play a significant role in filling the gap created when financing from other banks and non banking financial companies dries up. In addition to improving our competitiveness in customer attraction and retention, we believe that expansion of our financing business would also contribute towards moderating the impact on our financial results from the cyclical nature of vehicle sales.

Continuing to invest in technology and technical skills: We believe we are one of the most technologically advanced indigenous vehicle manufacturers in India. Over the years, we have enhanced our technological strengths through extensive in-house research and development activities. Further, our research and development facilities at our subsidiaries, like TMETC, TDCV, TTL, Hispano and Trilix, together with the two advanced engineering and design centers of Jaguar Land Rover, have increased our capabilities in product design and engineering.

 

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In our Jaguar Land Rover business, we are committed to continue to invest in new technologies to develop products that meet the opportunities of the premium segment, including developing sustainable technologies to improve fuel economy and reduce CO2 emissions. We consider technological leadership to be a significant factor in continued success, and therefore intend to continue to devote significant resources to upgrade our technological base. We are also enhancing our capabilities in the development of convenient and sustainable solutions for electric and hybrid vehicles through our subsidiary Miljobil Grenland.

Maintaining financial strength: Our cash flow from operating activities in Fiscal 2011 and 2010 was Rs.141,976 million and Rs. 128,365 million, respectively. The improved position in our operating cash flows is primarily a result of volume growth, implementation of cost reduction programs, and prudent working capital management. We have established processes for project evaluation and capital investment decisions with an objective to enhance our long term profitability.

Leveraging brand equity: We believe Indian customers associate the Tata name with reliability, trust and ethical value, and our brand name is gaining significant international recognition due to the international growth strategies of various Tata Companies. The Tata brand is used and its benefits are leveraged by Tata companies to their mutual advantage. We recognize the need for enhancing our brand recognition in highly competitive markets in which we compete with internationally recognized brands. We, along with Tata Sons and other Tata companies, will continue to promote the Tata brand and leverage its use in India, as well as in various international markets where we plan to increase our presence. Supported by the corporate level ‘Tata’ brand, our product brands like Indica, Indigo, Sumo, Safari, Aria, Venture Nano, Prima, Ace, Magic along with Daewoo, Hispano, Jaguar, Range Rover and Land Rover are highly regarded, and will be nurtured and promoted.

Automotive Operations

We sold 1,078,814, 869,602, and 672,747 vehicles in Fiscal 2011, 2010 and 2009 respectively, consisting of 835,469 units of Tata and other brand vehicles and 243,345 units of Jaguar Land Rover vehicles in Fiscal 2011. In terms of units sold our largest market is India where we sold 763,095 and 629,878 units during Fiscal 2011 and 2010, (constituting 70.7%and 72.4% of total sales in Fiscal 2011and Fiscal 2010 respectively) followed by United Kingdom where we sold 58,238 units and 55,070 units in Fiscal 2011and Fiscal 2010 respectively (constituting 5.4% and 6.3 %of total sales). A geographical breakdown of our revenues is set forth in Item 5.A “— Operating Results — Geographical breakdown”.

Our total sales (including international business sales and Jaguar Land Rover sales) for Fiscal 2011,2010 and 2009 are set forth in the table below:

 

Category

   Fiscal 2011     Fiscal 2010     Fiscal 2009*  
     Units      %     Units      %     Units      %  

Passenger Cars

     322,149         29.90     279,465         32.10     214,019         31.80

Utility Vehicles

     243,934         22.60     181,489         20.90     159,340         23.70

Light Commercial Vehicles

     311,167         28.80     228,987         26.30     160,787         23.90

Medium and Heavy Commercial Vehicles

     201,564         18.70     179,661         20.70     138,601         20.60

Total

     1,078,814         100.00     869,602         100.00     672,747         100.00

Revenues from our automotive operations were Rs. 1,223,547 million, Rs. 897,970 million and Rs. 691,778 million in Fiscal 2011, 2010 and 2009, respectively. Tata and other brand vehicles (including spares and financing thereof) constituted 43.0% of our total automotive revenues before inter-segment elimination in Fiscal 2011 while Jaguar Land Rover constituted 57.0%.

 

* Note: Jaguar Land Rover vehicle sales are included from June 2, 2008.

Tata and other brand vehicles (including spares and financing thereof)

We sold 835,469, 675,761, and 505,399 units of Tata and other brand vehicles in Fiscal 2011, 2010 and 2009 respectively. Of the 835,469 units sold in Fiscal 2011, 762,206 units were sold in India while 73,263 units were sold outside of India, compared to 629,878 units and 45,883 units respectively for Fiscal 2010. Our share of the Indian four-wheeler automotive vehicle market (i.e. automobile vehicles other than two and three wheeler categories) decreased from 25.5% in Fiscal 2010 to 24.3% in Fiscal 2011. We maintained our leadership position in the commercial vehicle segment in an industry which saw increased competition during the year. The passenger vehicle market also continued to be subject intense competition which resulted in marginal loss of market share in the compact car segment.

 

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The following table sets forth our total sales of Tata and other brand vehicles:

 

Category

   Fiscal 2011     Fiscal 2010     Fiscal 2009  
     Units      %     Units      %     Units      %  

Passenger Cars

     269,194         32.20     232,006         34.30     166,962         33.00

Utility Vehicles

     53,544         6.40     35,107         5.20     39,049         7.70

Light Commercial Vehicles

     311,167         37.20     228,987         33.90     160,787         31.90

Medium and Heavy Commercial Vehicles

     201,564         24.20     179,661         26.60     138,601         27.40

Total

     835,469         100.00     675,761         100.00     505,399         100.00

The following table sets forth our market share in various categories in the Indian market-based on wholesale volumes:

 

Category

   Fiscal 2011     Fiscal 2010     Fiscal 2009  

Passenger Cars

     14.40     15.30     13.20

Utility Vehicles

     13.20     12.40     17.60

Light Commercial Vehicles

     63.20     64.70     65.40

Medium and Heavy Commercial Vehicles

     60.10     63.30     61.90

Total Four-Wheel Vehicles

     24.30     25.50     24.40

Note: Passenger cars include Fiat vehicles distributed by us and Jaguar and Land Rover Vehicles sold in India.

Passenger cars market share, are for the segments where we are present, ie small cars and Midsize segments.

Our performance in various categories of the Indian market is described below:

Passenger cars: Rise in disposable incomes driven by a buoyant economy, several new offerings, higher discounts to mitigate intensifying competition, availability of financing alternatives, supported the passenger vehicle sales in Fiscal 2011. Following the revival of economic activity and improved consumer sentiments, the total passenger car industry grew by 29.8% in Fiscal 2011 compared with an increase of 24.8% in Fiscal 2010.

The small car category, which consists of mini and compact cars, constitutes over 60% of total domestic passenger car sales in India. In Fiscal 2011, the small car category grew by about 29.7% as compared to a growth rate of 27.4% in Fiscal 2010. We sold 63,590 Nano cars in Fiscal 2011, a growth of 112.6% over Fiscal 2010. The Sanand plant was inaugurated in June 2010 and production was progressively ramped up through the year. We are focused on expanding the reach for the Nano through Special Nano Access Points, and ensuring availability of finance for all segments of customers through tailored finance schemes. We continue to offer products at a lower price point in the entry level mid-size sedan market through a portfolio including the old Indigo. In the first quarter of Fiscal 2011, we launched the Indigo eCS, the most fuel-efficient sedan in the country with a host of exciting features while in the fourth quarter of Fiscal 2011, we launched the Indigo Manza Elan, the top end variant of the new Tata Manza series with a host of premium features. As a result our market share in Midsize segment increased to 25.8% in Fiscal year 2011 from 23.7% in Fiscal 2010. We have also been distributing Fiat cars through the Tata-Fiat dealer network since March 2006. During Fiscal 2011, we sold 20,493 Fiat cars, our joint venture with Fiat in India. Fiat launched new variants of Grande Punto and Linea - Grande Punto 90 HP in July 2010 and Linea T Jet in October 2010. With a product portfolio comprising of Fiat 500, Punto and Linea, Fiat stood at eleventh position among the top car companies in the country. The Tata-Fiat dealer network has been upgraded to 170 dealer facilities as per new DI norms across 128 cities as of March 31, 2011. The customer satisfaction levels for Fiat have improved considerably and it was ranked 2nd in the JD Power 2010 India Customer Satisfaction Survey as against 10th rank in 2009.

Since the commencement of distribution of Jaguar and Land Rover vehicles through our exclusive dealership in India in June 2009, the brands have witnessed positive market response and the sales volumes in Fiscal 2011 over Fiscal 2010 have multiplied. We have appointed seven dealerships in Fiscal 2011. Jaguar Land Rover now has fully operational sales and service facilities in Mumbai, Delhi, Hyderabad and Kolkata. On June 26, 2011, the newest addition to the dealership network was established in Kolkata.By the end of calendar year 2011, fully operational sales and service facilities are planned in the cities of Bengaluru, Chennai, Kochi, Ludhiana, Ahmedabad, Pune, Jaipur and Indore. We commenced the local assembly of the Land Rover Freelander 2, in our facility at Pune in May 2011 and expect that this would enable us to further penetrate the premium/luxury automotive passenger car market in India.

Utility Vehicles: The utility vehicles industry saw healthy growth in Fiscal 2011. The company launched the new Tata Aria in October 2010, to an encouraging market response. We also launched the Tata Venture in January 2011. The new launches assisted by growing sales of Sumo and Safari improved our utility vehicles market share to 13.2% in Fiscal 2011 from 12.4% in Fiscal 2010.

 

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Commercial Vehicles: The commercial vehicles market in India in Fiscal 2011, recorded a robust growth of 27.3% which resulted in our highest ever sales of 447,299 units in Fiscal 2011. High growth rates continued through the first half of the fiscal year supported by sustained economic growth and impact of a lower base in the corresponding period last year. Driven by growth in the agricultural and industrial sectors of the economy, the demand for commercial vehicles continued to be robust which resulted in increased demand for freight and transportation. From April 1, 2010, India migrated its emission norms to Bharat Stage IV (equivalent to Euro IV) for four-wheelers in 13 cities and Bharat Stage III (equivalent to Euro III) in the rest of the country from October 1, 2010. Our market share stood at 61.8% for Fiscal 2011, affected by factors such as inventory correction in the industry, inability of key suppliers to ramp-up production to meet market demand, and new competition in the SCV segment where Ace had been the only product.

Light Commercial Vehicles (including pickups): Our range of LCVs includes small commercial vehicles, pickup trucks, trucks and commercial passenger carriers between 0.6 ton and 7.5 tons. The LCV market segment grew by 22.7% in Fiscal 2011, mainly aided by the continuing expansion of the small commercial vehicle segment. Our sales increased by 29.0% to 272,455 units. We also improved performance in the pickup segment.

The sales of the Tata Ace continued to increase in its fifth year of introduction. We launched a portfolio of variants on the popular Ace platform such as the Ace EX, Super Ace which have been well received in the market. With the new launches in the passenger & haulage applications of the Ace platform, we expected to gain market share. However, entry of new competition in the small commercial vehicle category, where we enjoy strong market share, as well as expanding market size, resulted in our share of the Indian market falling to 63.2% in Fiscal 2011 from 64.7% in Fiscal 2010.

Medium and Heavy Commercial Vehicles: Our M&HCVs have a wide range of applications and are generally configured as trucks, tippers, buses, tankers, tractors or concrete mixers. We sold 1,74,844 units during Fiscal 2011, resulting a market share of 60.1% .We recorded our highest ever sales in the domestic commercial vehicle market as well as in our international business where sales exceeded 50,000 units for the first time. We launched variants of our products tailored to specific market segments. including Construck range of the Prima platform. We upgraded the entire commercial vehicles product range to comply with the Bharat Stage III emission norms with effect from October 1, 2010. During the Commonwealth Games, we showcased and operated for the first time our CNG Hybrid city bus.

Tata and other brand vehicles — Sales and Distribution:

Our sales and distribution network in India as of March 2011, comprises approximately 1,600 sales contact points for our passenger and commercial vehicle business. In line with our growth strategy, we formed a 100% subsidiary, TML Distribution Company Limited, or TDCL, in March 2008, to act as a dedicated distribution and logistics management company to support the sales and distribution operations of our vehicles in India. We believe this has improved the efficiency of our selling and distribution operations and processes.

TDCL provides distribution and logistics support for vehicles manufactured at our facilities and has set up stocking points at some of our plants and also at different places throughout India. TDCL helps us improve planning, inventory management, transport management and timely delivery. We believe it has made our delivery and inventory management more efficient. We have completed the initial rollout of a new customer relations management system (CRM) at all our dealerships and offices across the country and have been certified by Oracle as the largest Siebel deployment in the automotive market. The combined online customer relations management system initiative supports users both within our Company and among our distributors in India and abroad.

Through our vehicle financing division and wholly owned subsidiary, Tata Motors Finance Limited, or TMFL we also provide financing services to purchasers of our vehicles through our independent dealers, who act as our agents for financing transactions, and through our branch network. During Fiscal 2011 and 2010, approximately 21% and 25% respectively, of our vehicle unit sales in India were made by the dealers through financing arrangements where our captive vehicle financing divisions provided the support. Total vehicle finance receivables outstanding as at March 31, 2011 and 2010 amounted to Rs. 146,328 million and Rs. 147,143 million respectively.

We use a network of service centers on highways and a toll-free customer assistance center to provide 24-hour on-road maintenance (including replacement of parts) to vehicle owners. We believe that the reach of our sales, service and maintenance network provides us with a significant advantage over our competitors.

 

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We also market our commercial and passenger vehicles in several countries in Europe, Africa, the Middle East, South East Asia, South Asia and other African countries. We have a network of distributors in almost all of the countries where we export our vehicles, who work with us in appointing a local dealer for sales and servicing our product in various regions. We have also stationed overseas resident sales and service representatives in various countries to oversee our operations in their respective territories.

Tata and other brand vehicles — Competition:

We face competition from various domestic and foreign automotive manufacturers in the Indian automotive market. Improving infrastructure and robust growth prospects compared to other mature markets are now attracting a number of international companies to India who have either formed joint-ventures with local partners or have established independently owned operations in India. Global competitors bring with them decades of international experience, global scale, advanced technology and significant financial resources. Hence competition is likely to further intensify in the future. We have designed our products to suit the requirements of the Indian market based on specific customer needs such as safety, driving comfort, fuel efficiency and durability. We believe that our vehicles are suited to the general conditions of Indian roads, and the local climate and they comply with applicable environmental regulations currently in effect. We also offer a wide range of optional configurations to meet the specific needs of our customers. We intend to and are developing products to strengthen our product portfolio in order to meet the increasing customer expectation of owning “world class” products.

Tata and other brand vehicles — Seasonality:

Demand for our vehicles in the Indian market is subject to seasonal variations. Demand generally peaks between January and March, although there is a decrease in demand in February just before release of the Indian Fiscal Budget. Demand is usually lean from April to July and picks up again in the festival season from September onwards with a decline in December due to model year change.

Tata and other brand vehicles — Exports:

We are expanding our export operations, which have been ongoing since 1961. We market our commercial and passenger vehicles in several countries in Europe, Africa, the Middle East, South East Asia and South Asia. Our exports of vehicles manufactured in India increased by 70.1% in Fiscal 2011 to 57,982 units from 34,088 units in Fiscal 2010, with significant economic improvement in our major international markets such as the Indian sub-continent, South Africa and the Middle East.

In Fiscal 2011, our top five export destinations from India accounted for approximately 74% and 83% of our exports of commercial vehicles and passenger vehicle units respectively. We are strengthening our position in the geographic areas we are currently operating in and exploring possibilities of entering new markets with similar market characteristics to the Indian market.

Tata Daewoo Commercial Vehicle Co. Ltd., Korea: TDCV recorded a 2.9% decline in its overall vehicle sales to 8,745 units in Fiscal 2011 from 9,011 units in Fiscal 2010. TDCV’s performance was adversely impacted by severe slowdown in its main export markets. TDCV exported 3,002 units in Fiscal 2011 compared to 3,658 units in Fiscal 2010, a decline of 17.9%.TDCV has major presence in countries like Algeria which showed signs of fatigue in Dump / Mixer segment. The Gulf Cooperation Council (GCC) block which is one of the Company‘s major exports market had been worst effected during the global financial crisis and did not fully recover even in Fiscal 2011. In the South Korean market, TDCV’s market share declined to 23.2% in Fiscal 2011 from 26.1% in Fiscal 2010 in the M&HCV category, adversely impacted largely by financial instability of its sole distributor Daewoo Motor Sales Corporation, or DMSC in the first half of the year. TDCV launched its wholly owned Sales and Distribution Company – Tata Daewoo Commercial Vehicle Sales and Distribution Co. Ltd or TDSC during the year to act as its sole distributor in domestic market. Following the stability of operations of TDSC, the sales and market shares of TDCV have been gradually improving each quarter during Fiscal 2011.

Tata Hispano Motors Carrocera, S.A. Spain: We believe that our subsidiary Tata Hispano, with its design and development capabilities in manufacturing bodies for high-end buses, complements our current range of light and medium commercial passenger carriers and aids us in increasing our presence in the international bus market. We continue to own the brand rights of Hispano and Tata Hispano. Tata Hispano reported consolidated sales of 505 units for Fiscal 2011. The volumes improved by 103.6% from 248 units sold in Fiscal 2010. This was mainly driven by new product launches, customer centric focus, through road shows, customer meets and customer plant visits.

Jaguar Land Rover

We acquired Jaguar Land Rover from the Ford Motor Company, or Ford on June 2, 2008. As a part of acquisition ,we acquired the global business relating to Jaguar Land Rover including three major manufacturing facilities and two advanced design and engineering centers in United Kingdom, a worldwide sales and dealership network, intellectual property rights, patents and trademarks.

 

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The strengths of Jaguar Land Rover include its internationally recognized brands, strong product portfolio of award winning luxury performance cars and premium all-terrain vehicles, global distribution network, strong research and development capabilities, and a strong management team. Our total sales of Jaguar Land Rover for Fiscal 2011, 2010 and 2009 are set forth in the table below:

 

     Fiscal 2011     Fiscal 2010**     Fiscal 2009*  
     Units      %     Units      %     Units      %  

Jaguar

     52,955         21.80     47,459         24.50     47,057         28.10

Land Rover

     190,390         78.20     146,382         75.50     120,291         71.90

Total

     243,345         100.00     193,841         100.00     167,348         100.00

 

* For Fiscal 2009 sales are from June 2, 2008 to March 2009
** Included sales of Model X-type (discontinued in December 2009)

Jaguar:

Jaguar’s principal products are the XK sports car (coupe and convertible), XF saloon and the XJ saloon. Until recently Jaguar’s product range included the X-Type but, in line with our strategy to build the Jaguar brand as a premium sports car, we discontinued the production of the X-Type, a compact-size four-door sedan, in December 2009.

The Jaguar XK is an all-aluminium sports coupe and convertible available with naturally aspirated and supercharged V8 petrol engines. The XK was significantly updated in 2009 with a new engine and exterior and interior design enhancements; the XK range has been further revised with a new look for 2011. In March 2011, the new Jaguar XKR-S was revealed at the Geneva motor show and launched to the press shortly afterwards creating a sporting flagship for our revitalised, modern XK line-up. The XKR-S is the fastest and most powerful production sports car that Jaguar has ever built. Aimed at driving enthusiasts, it is adopts a more powerful version of the 5.0-liter V8.

The XF, launched in 2008, is a premium executive car that merges sports car styling with the sophistication of a luxury saloon. The Jaguar XF, is Jaguar’s best-selling model across the world and it has garnered more than 80 international awards since its launch, including being named “Best Executive Car” for four years running by What Car? magazine. For 2011, fundamental design changes to the front and rear of the XF aim to bring a more assertive, purposeful stance to the XFR, which we believe is now a bolder and more appealing automobile closer to the original C-XF concept car. In addition, the Jaguar 2012 model year line-up was introduced at the New York Auto Show April 2011, including a new four-cylinder 2.2-liter diesel version of the XF with Intelligent Stop-Start Technology, making it the most fuel-efficient Jaguar yet and allowing Jaguar to compete with smaller capacity diesel engines offered by our competitors.

The XJ is Jaguar’s largest luxury saloon vehicle, powered by a choice of supercharged and naturally aspirated 5.0-liter V8 petrol engine and a 3.0-liter diesel engine. A 3.0-liter V6 petrol engine XJ was introduced to the Chinese market during 2011. Utilizing Jaguar’s aerospace inspired aluminium body architecture, the XJ’s lightweight aluminium body provides improved agility and economy. The new XJ commenced sales in May 2010 and has already received more than 20 international honors in 2010, including “Best Luxury Car” from China’s Auto News, “Annual Limousine King” from Quattroroute (Italy), “Luxury Car of the Year” from Top Gear (UK), Automobile magazine’s “2011 Design of the Year” and “Best Executive Sedan” at the Bloomberg Awards in the United States. For 2011, the XJ has been upgraded to include a new Executive Package and a Rear Seat Comfort package.

The Jaguar C-X75 concept car was showcased at the Paris Motorshow in September 2010, to mark the brand’s 75th anniversary. It uses next-generation power train technology in the form of electric motors and a Bladon Jets-developed turbine generator. In the latter half of the year, a decision of the build production versions of the C-X75 in association with Williams F1 was taken, and details were announced to the press.

During Fiscal 2011, Jaguar marked the 75th anniversary of the Jaguar brand. Fiscal 2011 marks the Jaguar E-Type’s 50th anniversary. Significant PR and marketing activity has been conducted to use the momentum created by the occasion to reach potential new customers to Jaguar’s current model line up.

 

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Land Rover:

Land Rover’s principal products are the Defender, Freelander 2 (LR2), Discovery 4 (LR4), Range Rover Sport and Range Rover.

The Defender is Land Rover’s most capable off-roader and is recognized as a leading vehicle in the segment targeting extreme all-terrain abilities.

The Freelander 2 (LR2) is a versatile vehicle for both urban sophistication and off-road capability. For the 2011 Model Year, we offered customers a choice of 4 Wheel Drive (WD) and 2Wheel Drive (WD) Freelanders, with an eD4 engine capable of 4.98L/100km which was well received in major European markets.

The Discovery is a mid-size SUV that features genuine all-terrain capability. A range of new features, including the new 3.0-liter LR-TDV6 diesel engine, helped to propel the Discovery to the What Car? magazine award for the Best 4x4 for the seventh successive year.

The Range Rover Sport combines the performance of a sports tourer with the versatility of a Land Rover.

The Range Rover is the flagship of the brand with a unique blend of British luxury, classic design with distinctive, high-quality interiors and all-terrain ability. The 2011 Model Year Range Rover, with an all-new 4.4-liter TDV8 engine providing a 14% reduction in CO2 emissions and a 19% improvement in fuel consumption to 7.81L/100km, has been particularly well received both at home and abroad. Land Rover products offer a range of power trains, including turbocharged V6 diesel, V6 petrol engines and V8 naturally aspirated and supercharged petrol engines, with manual and automatic transmission.

Jaguar and Land Rover achieved relatively strong sales, during Fiscal 2011 as unit sales (wholesales) in total increased to 243,345 units from sales of 193,841 units in Fiscal 2010 reflecting an increase of 25.5%. Jaguar volumes increased to 52,955 units during Fiscal 2011 from 47,459 in Fiscal 2010 reflecting an increase of 11.6%. Land Rover volumes increased to 190,390 units from 146,382 units in Fiscal 2010, reflecting an increase of 30.1 % as a result of increased Range Rover, Range Rover Sport and Discovery 4 (LR4) sales. The company exported 183,898 units in Fiscal 2011 compared to 138,546 units in Fiscal 2010, an increase of 32.7%.

Jaguar Land Rover’s performance in key geographical markets on retail basis

United States

The US premium car segment volumes increased by 14.4% as compared to Fiscal 2010, with Jaguar up 16.3% for the same period. The US premium SUV segment volumes were up 45% versus the same period in the prior year with Land Rover up 49% for the same period. The US retail volumes for Fiscal 2011 for the combined brands were 46,881 units.

Jaguar retail volumes for Fiscal 2011 increased by 16% compared to Fiscal 2010, leading to a 0.1% increase in market share. Land Rover retail volumes for Fiscal 2011 increased by 23% compared to Fiscal 2010, maintaining market share.

United Kingdom

The UK premium car segment volumes increased by 18.4% in Fiscal 2011 as compared to Fiscal 2010, with Jaguar up by 18.8% for Fiscal 2011. The UK premium SUV segment volumes increased by 30% in Fiscal 2011 as compared to Fiscal 2010, with Land Rover up 9% for the same period.

The UK retail volumes for Fiscal 2011 for the combined brands were 58,134 units. Jaguar retail volumes for Fiscal 2011 decreased by 10.9% (increase of 19% excluding X-Type which ceased production in December 2009) compared to Fiscal 2010, leading to a 0.1% increase in market share. Land Rover retail volumes for Fiscal 2011 increased by 7.8% compared to Fiscal 2010, maintaining market share.

Europe (excluding Russia)

The European premium car segment volume increased by 18.6% compared to Fiscal 2010, and the premium SUV segment volumes increased by 29.7% as compared to Fiscal 2010.

 

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The European retails for Fiscal 2011 for the combined Jaguar Land Rover brands were 53,711 units, representing a 6.2% increase as compared to Fiscal 2010. Jaguar retail volumes for Fiscal 2011 decreased by 4.5% (increase of 36% excluding X-Type which ceased production in December 2009) compared to Fiscal 2010, but Jaguar increased its share of the segment by 0.1 percentage points to 2.4%. Land Rover retail volumes for Fiscal 2011 increased by 9.3% compared to Fiscal 2010, whilst its segment share decreased by 0.5 percentage points to 2.9%. Trading within certain European markets remained challenging during the period, especially with recent uncertainty in Greece, Portugal, Spain, Ireland and Italy prompting the downgrading of sovereign debt ratings and leading to additional pressure on financial markets.

Russia

The Russia premium car segment volumes increased by 61.1% in Fiscal 2011 as compared to Fiscal 2010 and the premium SUV segment volumes increased 52% in Fiscal 2011 as compared to Fiscal 2010.

The Russia retail volumes for Fiscal 2011 for the combined brands were 11,689 units. Jaguar retail volumes for Fiscal 2011 increased by 27.3% compared to Fiscal 2010, leading to a 0.2% increase in market share. Land Rover retail volumes for Fiscal 2011 increased by 9.3% compared to Fiscal 2010, leading to a 33% increase in market share. The Russian market was showing signs of recovery which was hard hit during Fiscal 2009 and Fiscal 2010 by global economic crisis, particularly by the sharp fall in oil prices and the drying up of foreign credits on which Russian banks and companies tend to rely heavily.

China

The China premium car segment volumes (for imports) increased by 46% in Fiscal 2011 as compared to Fiscal 2010, with Jaguar up by 51% for Fiscal 2011. The China premium SUV segment volumes (for imports) increased by 109% in Fiscal 2011 as compared to Fiscal 2010 with Land Rover up 73% for Fiscal 2011.

The China retail volumes for Fiscal 2011 for the combined brands were 28,893 units. Jaguar retail volumes for Fiscal 2011 increased by 41.2% compared to Fiscal 2010, leading to a 0.1% increase in market share. Land Rover retail volumes for Fiscal 2011 increased by 73.8% compared to Fiscal 2010, leading to a 2% decrease in market share.

Growth within the Chinese market was further enhanced through the strengthening of the company’s business in China, which was supported by the launch of an NSC in China in mid of Fiscal 2010.

Jaguar Land Rover — Sales & Distribution:

We market Jaguar products in 101 countries and Land Rover products in 174 markets, through a global network of 18 national sales companies (“NSCs”), 84 importers, 61 export partners and 2,241 franchise sales dealers, of which 524 are joint Jaguar and Land Rover dealers.

Sales locations for Jaguar Land Rover vehicles are operated as independent franchises. Jaguar Land Rover is represented in its key markets through national sales companies as well as third party importers. Jaguar and Land Rover have regional offices in certain select countries that manage customer relationships, vehicle supplies and provide marketing and sales support to their regional importer markets. The remaining importer markets are managed from the UK.

Jaguar Land Rover products are sold through our dealerships to retail customers. Jaguar Land Rover products are also sold to fleet customers, including daily rental car companies, commercial fleet customers, leasing companies, and governments. As a consequence, Jaguar Land Rover has a diversified customer base which reduces its independence on any single customer or group of customers.

Jaguar Land Rover — Competition:

We operate in a globally competitive environment and face competition from established premium and other vehicle manufacturers who aspire to move into the premium performance car and premium SUV markets, some of which are much larger than we are. Jaguar vehicles compete primarily against other European brands such as Audi, BMW and Mercedes Benz. Land Rover and Range Rover vehicles compete largely against SUVs manufactured by Audi, BMW, Infiniti, Lexus, Mercedes Benz, Porsche and Volkswagen. The Land Rover Defender competes with vehicles manufactured by Isuzu, Nissan and Toyota.

 

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Jaguar Land Rover — Seasonality:

The business of Jaguar Land Rover is impacted by the bi-annual registration of vehicles in the United Kingdom where the vehicle registration number changes every six months, which in turn has an impact on the resale value of the vehicles. This leads to a bunching up of sales during the periods when the change occurs. Seasonality in most other markets is driven by introduction of new model year derivatives, for example US market. Additionally in the US market there is some seasonality around purchase of vehicles within the snow belt states where the purchase of Jaguar vehicles is biased towards the spring /summer months with a preference for 4x4 vehicles in the autumn/winter months. In China there is an increase in vehicle purchases at the time of the Chinese new year holiday. Furthermore, western European markets tend to be impacted by summer and winter holidays. The resulting sales profile influences operating results on a quarter to quarter basis.

Research and Development:

Over the years, we have devoted significant resources towards our research and development activities. Our research and development activities focus on product development, environmental technologies and vehicle safety. Our Engineering Research Centre, or ERC, established in 1966, which is one of the few government recognized in-house automotive research and development centers in India. The Engineering Research Centre is integrated with all of the Tata Motors Global Automotive Product Design and Development Centers in South Korea, Spain and United Kingdom.In addition to this, we leverage key competencies through various engineering service suppliers and design teams of our suppliers.

We have a modern crash test facility for testing our new products for passenger safety. We have a pedestrian safety testing facility, a pendulum impact test facility and a bus rollover test facility, to develop products that comply with various safety norms. We also have a hemi-anechoic chamber testing facility for developing vehicles with lower noise and vibration levels and an engine emissions testing facility to develop products meeting international standards. Other key facilities include a full vehicle climate test facility, heavy duty dynamometers and aggregate endurance test rigs.

Our Jaguar Land Rover research and development operations currently consist of a single engineering team, operating within a co-managed engineering facility, sharing premium technologies, power train designs and vehicle architecture.

In addition, our research and development activities also focus on developing vehicles running on alternative fuels, including CNG, liquefied petroleum gas, bio-diesel and compressed air and electric cars. We are in a constant endeavor to develop green vehicles and are presently developing an electric vehicle on the Indica Vista platform. We are pursuing alternative fuel options such as ethanol blending for development of vehicles fuelled by hydrogen. In our Jaguar Land Rover products, we are pursuing several initiatives including alternative energy technologies to meet the targeted reduction in CO2 emissions in the next 5 years.

Our product design and development centers are equipped with computer-aided design, manufacture and engineering tools, with sophisticated hardware, software, and other information technology infrastructure, designed to create a digital product development environment and virtual testing and validation, resulting in a reduction in the product development cycle-time and data management. Rapid prototype development systems, testing cycle simulators, advanced emission test laboratories and styling studios are also a part of our product development infrastructure. We have aligned our end-to-end digital product development objectives and infrastructure, with our business goals and have made significant investments to enhance the digital product development capabilities especially in the areas of product development through Computer Aided Design/Computer Aided Manufacturing/Computer Aided Engineering/Knowledge Based Engineering/Product Data Management.

To augment the abilities of our Engineering Research Centre and to obtain access to leading-edge technologies to support the product development activities, which we plan to undertake to sustain and enhance our position in the increasingly competitive global markets, we established a wholly-owned subsidiary, TMETC, in the United Kingdom in 2006. We gained access to what we believe are leading edge propulsion and electric energy systems through our investment in Miljobil Grenland in 2009, by TMETC. In October, 2010 we also acquired a design house in Italy, Trilix Srl, that has been working with us on many of our projects and are now a part of Tata Motors Design organization.

We endeavor to absorb the best of technologies for our product range to meet the requirements of a globally competitive market. All of our vehicles and engines are compliant with the prevalent regulatory norms in the respective countries in which they are sold. Our strategy to invest and develop our development capabilities have helped us in attaining significant achievements such as the design and development of India’s first indigenously developed compact car, the segment creating mini- truck – the ‘Tata Ace’ and the world’s most affordable family car — the Tata Nano. In collaboration with our subsidiary TDCV, we developed the “World Truck”, now referred to as ‘Prima’, a sophisticated and contemporary M&HCV range with performance standards similar to those in developed markets, which we launched in India and in South Korea during Fiscal 2010. In 2010, we also launched the Tata Aria, India’s first premium crossover which has many high end features introduced for the first time in India in that segment.

 

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We are pursuing various initiatives, such as the introduction of Premium Lightweight Architecture (PLA), to enable our business to comply with the existing and evolving emissions legislations in the developed world, which we believe will be a key enabler of both reduction in CO2 and further efficiencies in manufacturing and engineering. Over recent years, Jaguar Land Rover has made significant progress in reducing the development cycle times. The ERC in India and Jaguar Land Rover engineering and development operations in the UK have identified areas to leverage the facilities and resources to enhance the product development process and achieve economies of scale.

Initiatives in the area of vehicle electronics such as engine management systems, in-vehicle network architecture, telematics for communication and tracking and other emerging technological areas are also being pursued and which could possibly be deployed on our future range of Jaguar and Land Rover vehicles. Likewise various new technologies and systems that would improve safety, performance and emissions of our product range are under implementation on our passenger cars and commercial vehicles.

For providing prompt service to the customer, development of enterprise level vehicle diagnostics system for achieving speedy diagnostics of complex electronics of modern vehicles has been underway. Also the initiative in telematics has further spanned into a fleet management and vehicle tracking system using GNSS (Global Navigation Satellite Systems).

Intellectual Property

We create, own, and maintain a wide array of intellectual property assets that are among our valuable assets throughout the world. Our intellectual property assets include patents, trademarks, copyrights and designs. Patents relate to our innovations and products; trademarks secured relate to our brands and products; copyrights are secured for creative content; designs are secured for aesthetic features of products/components, trade secrets, and other intellectual property rights. We proactively and aggressively seek to protect our intellectual property in India and other countries.

We own a number of patents registered and have applied for new patents which are pending registration in India as well as in other countries. We have also filed a number of patent applications outside India under the Patent Cooperation Treaty, which will be effective in different countries going forward. We obtain new patents through our ongoing research and development activities.

We own registrations for number of trade-marks and have pending applications for registration of these in India as well as other countries. The registrations mainly include trademarks for our vehicle models and other promotional initiatives. We use the “Tata” brand, which has been licensed to us by Tata Sons Limited. We believe that establishment of the “Tata” word mark and logo mark in India and world over is material to our operations. As part of our acquisition of TDCV, we have the perpetual and exclusive use of the “Daewoo” brand and trademarks in Korea and overseas markets for the product range of TDCV.

As part of the acquisition of Jaguar Land Rover business, ownership/co-ownership of core intellectual property were transferred to us. Additionally, perpetual royalty free licenses to use other essential intellectual properties have been licensed to us for use in Jaguar and Land Rover vehicles. Jaguar and Land Rover own registered designs, to protect the design of their vehicles in several countries.

In varying degrees, all our intellectual property is important to us. In particular, the Tata brand is integral to the conduct of our business, a loss of which could lead to dilution of our brand image and have a material adverse effect on our business.

Components and Raw Materials -

The principal materials and components required by us for use in Tata and other brand vehicles are steel sheets and plates, castings, forgings and items such as tires, fuel injection equipment, batteries, electrical items and rubber and plastic parts, consumables (paints, oils, thinner, welding consumables, chemicals, adhesives and sealants) and fuels. We also require aggregates like axles, engines, gear boxes and cabs for our vehicles, which are manufactured by ourselves or by our subsidiaries, affiliates and strategic suppliers. We have long term purchase agreements for some critical components such as transmissions and engines. Most commodities have continued to experience large price volatility during Fiscal 2011. We have established contracts with some of the commodity suppliers to cover our own as also our suppliers’ requirements to moderate the effect of such high volatility. Special initiatives were also undertaken to reduce material consumption through value engineering and value analysis techniques.

We have undertaken an e-commerce initiative through the development of a business-to-business site with the assistance of our subsidiary, TTL, for electronic interchange of data with our suppliers in India. This has enabled us to have real time information exchange and processing to manage our supply chain effectively. We use external agencies as third party logistic providers. This has resulted in space and cost saving.

 

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As part of our strategy to become a low-cost vehicle manufacturer, we have undertaken various initiatives to reduce our fixed and variable costs. In India we started an e-sourcing initiative in 2002, pursuant to which we procure some supplies through reverse auctions.

We have established a procedure for ensuring quality control of outsourced components. Products purchased from approved sources undergo a supplier quality improvement process. We also have a program for assisting vendors from whom we purchase raw materials or components to maintain quality. Each vendor is reviewed on a quarterly basis on parameters of quality, cost and delivery. Preference is given to vendors with TS 16949 certification. We also maintain a stringent quality assurance program that includes random testing of production samples, frequent re-calibration of production equipment and analysis of post-production vehicle performance and ongoing dialogue with workers to reduce production defects. Further, we have established a Strategic Sourcing group for certain regions to consolidate, strategize and monitor our supply chain activities with respect to major items of purchase as well as major inputs of technology and services. The Strategic Sourcing Group is responsible for recommending, for the approval by the Management Committee, the long-term strategy and purchase decision for these items, negotiation and relationship with vendors with regard to these items, formulating and overseeing our purchasing policies, norms in respect of all items, evolving guidelines for vendor quality improvement, vendor rating and performance monitoring and undertaking company-wide initiatives such as e-sourcing and supply chain management/policies with respect to vehicle spare parts. We are also exploring opportunities for increasing the global sourcing of parts and components from lower cost countries, and have embarked on a vendor management program that includes vendor base rationalization, vendor quality improvement and vendor satisfaction surveys. We initiated steps to include our supply chain in our initiatives on social accountability, environment management activities including supply chain carbon footprint measurement, knowledge sharing on various environmental aspects etc.

The principal materials and components required by us for use in our Jaguar and Land Rover vehicles are steel and aluminium in sheet (for in-house stamping) or externally pre-stamped form, aluminium castings and extrusions, iron/steel castings and forgings, and items such as alloy wheels, tires, fuel injection systems, batteries, electrical wiring systems, electronic information systems and displays, leather trimmed interior systems such as seats, cockpits, doors, plastic finishers and plastic functional parts, glass and consumables (paints, oils, thinner, welding consumables, chemicals, adhesives and sealants) and fuels. We also require certain highly functional components such as axles, engines and gear boxes for our vehicles, which are mainly manufactured by strategic suppliers. We have long term purchase agreements for critical components such as transmissions (ZF Friedrichshafen) and engines (Ford and Ford–PSA). The components and raw materials in our cars include steel, aluminium, copper, platinum and other commodities. Most commodities continued to experience great price volatility during the Fiscal 2011. We have established contracts with certain commodity suppliers to cover our own and our suppliers’ requirements to mitigate the effect of such high volatility. Special initiatives were also undertaken to reduce material consumption through value engineering and value analysis techniques.

The Jaguar Land Rover business works with a range of strategic suppliers to meet its requirements for parts and components. The Jaguar Land Rover business has established quality control programmes to ensure that externally purchased raw materials and components are monitored and meet its quality standards. Such programmes include site engineers from Jaguar Land Rover who regularly interface with suppliers and carry out visits to supplier sites to ensure that relevant quality standards are been adhered to. Site engineers are also supported by persons in other functions, such as program engineers who interface with new model teams as well as resident engineers co-located at Jaguar Land Rover plants, who provide the link between the site engineers and the Jaguar Land Rover plants. The Jaguar Land Rover business has and will continue to work with its suppliers to optimize its procurements and enhance its supplier base, including by sourcing certain of its raw material and component requirements from low cost countries.

Suppliers

We have an extensive supply chain for procuring various components. We also outsource many of the manufacturing processes and activities to various suppliers. In such cases, we provide training to outside suppliers who design and manufacture the required tooling and fixtures.

Our associate company Tata AutoComp Systems Ltd., or TACO, manufactures auto components and encourages the entry of internationally acclaimed auto component manufacturers into India by setting up joint ventures with them. Some of these joint ventures include: Tata Johnson Controls Limited for seats, Tata Yazaki AutoComp Ltd for wiring harnesses and Tata Toyo Radiators Ltd for radiator assemblies. These joint ventures supply components for our products.

 

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In order to leverage benefits of economies of sales we have also developed a set of suppliers for our Indian operations, who also serve other customers. These suppliers include some of the large Indian automotive supplier groups having multiple product offerings, such as Anand Group, Sona Group, TVS Group etc, as also some large multinational suppliers, such as Bosch, Continental, Delphi, Denso etc. Also for our Jaguar Land Rover business, we continue to work with our suppliers to optimize procurements and enhance our supplier base, including sourcing certain of our raw material and component requirements from low cost countries. Additionally co- development of few aggregates is also being evaluated which will lead to development of low cost supplier base for JLR.

In India, we have established vendor parks in the vicinity of our manufacturing operations and vendor clusters have been formed at our facilities at Pantnagar (Uttarakhand) and Sanand (Gujarat). This initiative is aimed at ensuring flow of component supplies on a real-time basis, there-by reducing logistics and inventory costs as well as lowering uncertainties in the long-distance supply-chain. Efforts are being taken to replicate the model at new upcoming locations as well as a few existing plant locations.

We have embarked upon a vendor management program that includes vendor base rationalization, vendor quality improvement and vendor satisfaction surveys. As part of driving continuous improvement in procurement, we have integrated our system for electronic interchange of data with our suppliers with the ERP. This has facilitated real time information exchange and processing to manage our supply chain more effectively.

We have established processes to encourage improvements via knowledge sharing among our vendor base through an initiative called Vendor Council consisting of our senior executives and representatives of major suppliers. The Vendor Council also helps in addressing common concerns through joint deliberations. Vendor council works on four critical aspects of engagement between and TML suppliers (i.e. quality, efficiency, relationship and new technology development).

We import some components that are either not available in the domestic market or when equivalent domestically-available components do not meet our quality standards. We also import products to take advantage of lower prices in foreign markets, such as special steels, wheel rims and power steering assemblies.

Ford has been and continues to be a major supplier of parts and services to Jaguar Land Rover. In connection with our acquisition of Jaguar Land Rover in June 2008, supply agreements have been entered into with Ford, ranging in duration from seven to nine years, as further set out below:

 

   

Long term agreements have been entered with Ford for technology sharing and joint development providing technical support across a range of technologies focused mainly around power train engineering such that we may continue to operate according to our existing business plan.

 

   

Supply agreements, ranging for duration of seven to nine years, were entered into with Ford for (i) the long term supply of engines developed by Ford, (ii) engines developed by us but manufactured by Ford and (iii) engines from Ford-PSA co-operation.

Based on learnings from the latest global financial crisis and the cascading effect on the financial health of the suppliers, we have commenced efforts to assess supplier financial risk.

Suppliers are appraised based on or long term requirement through number of platforms such as vendor council meetings, council regional chapter meetings, national vendor meet, location specific vendor meet etc.

Capital and Product Development Expenditures: -

Our capital expenditure totaled to Rs. 90,719 million, Rs. 96,980 million and Rs. 101,197 million during Fiscal 2011 ,2010 and 2009 respectively. Our capital expenditure during the past Fiscal years related mostly to new product development and capacity expansion for new and existing products to meet the market demand and investments towards improving quality, reliability and productivity that are aimed at operational efficiency.

We intend to continue to invest in our business units and research and product development over the next several years in order to improve our existing product range, develop new products and platforms and to build and expand our presence in the passenger vehicle and commercial vehicle categories. We believe this would strengthen our position in India and help us to grow our presence in international markets.

As a part of this future growth strategy, we plan to make investments in product development, capital expenditure in capacity enhancement, plant renewal and modernization and to pursue other growth opportunities. Our subsidiaries also have their separate growth plans and related capital expenditures plans. These expenditures are expected to be funded largely through cash generated from operations, existing investible surplus in the form of cash and cash equivalents, investment securities and other external financing sources. In August 2010, we obtained the shareholders’ approval through postal ballot to raise additional long term resources up to Rs. 47 billion in the domestic and/or international market, in one or more tranches and increased our borrowing limit from Rs.200 billion to Rs. 300 billion.

 

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Other Operations

In addition to our automotive operations, we are also involved in other business activities, including information technology services. Net revenues from these activities totaled to Rs. 14,916 million and Rs. 33,483 million in Fiscal 2011 and 2010, respectively, representing nearly 1.2% and 3.6% of our total revenues before inter-segment elimination in Fiscal 2011 and Fiscal 2010, respectively. On March 30, 2010, we sold controlling equity interest in our construction equipment subsidiary, Telco Construction Equipment Co. Ltd (Telcon), which resulted in a 55.5% decrease in revenues from our other operations in Fiscal 2011.

Information Technology Services:

As of March 31, 2011we owned an 83.38% equity interest in our subsidiary ,Tata Technologies Limited, or TTL, TTL, founded in 1994 and a part of Tata group, is a global leader in Engineering Services Outsourcing, or ESO, and Product Development IT services solutions for Product Lifecycle Management, or PLM, and Enterprise Resource Management, or ERM, to the world’s leading automotive, aerospace and consumer durables manufacturers and their suppliers. The company’s services include product design, analysis and production engineering, Knowledge based engineering, PLM, Enterprise Resource Planning and Customer Relationship Management systems (CRM). The company also distributes implements and supports PLM products from leading solution providers in the world such as Dassault Systems and Autodesk.

TTL has its international headquarters in Singapore, with regional headquarters in the United States (Novi, Michigan), India (Pune) and the UK (Coventry). TTL has a combined global workforce of more than 4600 professionals serving clients worldwide from facilities in North America, Europe and the Asia-Pacific region. TTL responds to customers’ needs through its subsidiary companies and through its two offshore development centers. TTL had eight functional subsidiary companies and one joint venture as of March 31, 2011.

The consolidated revenues of TTL for Fiscal 2011 were Rs. 12,493 million reflecting a growth of 16.8% against Rs.10,699 million in the previous with traction in the automotive and aerospace markets. TTL recorded profit after tax of Rs. 1,343 million in Fiscal 2011, reflecting growth of 119.1% over Rs. 613 million in Fiscal 2010 resulting from higher offshore revenues and cost reduction measures implemented by TTL. In May 2011, TTL received private equity investment of Rs.1,410.6 million by selling a 13.09% equity interest via issuance of primary shares.

 

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Government Regulation

Indian Automotive Sector

Automotive Mission Plan, 2006-2016

The automotive mission plan (“Plan 2006”) laid down by the Ministry of Heavy Industries and Public Enterprises of the Government of India in December 2006, consists of recommendations to the task force of the Development Council on Automobile and Allied Industries constituted by the Government of India, in relation to the preparation of the mission plan for the Indian automotive industry. Plan 2006 recommends that a negative list of items, such as no duty concession for import of used or re-manufactured vehicles, or treatment of remanufactured automotive products as old products, should be negotiated for free trade agreements or regional trade agreements on a case-by-case basis with other countries. It recommends the adoption of appropriate tariff policy to attract more investment into the automobile industry, the improvement of power infrastructure to facilitate faster growth of automotive sector both domestically and internationally, policy initiatives such as encouragement of collaboration of the automotive industry with research and academic institutions, tax concessions and incentives to enhance competitiveness in manufacturing and promotion of research and technology development. For the promotion of exports in the automotive components sector, among other things, it recommends creation of special automotive component parks in special economic zones and creation of virtual special economic zones, which would enjoy certain exemptions on sales tax, excise and customs duty. Strengthening the inspection and certification system by encouraging public-private partnership and rationalization of the motor vehicles regulations are also among the major recommendations of the plan.

A committee set up under the chairmanship of the Secretary, Heavy Industries and Public Enterprises consisting of all stake holders including representatives of the Ministry of Finance, representatives of interested parties relating to road transport, environment, commerce, industrial policy and promotion, labour, shipping, railways, human resource development, science and technology, new and renewable energy, petroleum and natural gas and representatives of automotive industry, will monitor the implementation and progress of the Plan 2006.

The Auto Policy, 2002

The Auto Policy was introduced by the Department of Heavy Industry, Ministry of Heavy Industries and Public Enterprises of the Government of India in March 2002, with the aim, among others, to promote a globally competitive automotive industry and emerge as a global source for automotive components, establish an international hub for manufacturing small, affordable passenger cars, ensure a balanced transition to open trade at a minimal risk to the Indian economy and local industry, to encourage modernization of the industry and facilitate indigenous design, research and development and to develop domestic safety and environment standards at par with international standards.

Auto Fuel Policy, 2003

In 1992, the government of India issued emission and safety standards, which were further tightened in April 1996, under the Indian Motor Vehicle Act. Currently Bharat Stage IV norms (equivalent to Euro IV norms) are in force for four wheelers in 13 cities and Bharat Stage III norms (equivalent to Euro III norms) in the rest of India. Our vehicles comply with these norms. The next change in emission regulations is yet to be discussed by Government of India.

Central Motors Vehicles Rules, 1989

Chapter V of the Central Motor Vehicle Rules, 1989, or the CMV rules, lays down provisions relating to construction and maintenance of motor vehicles. Among specifications pertaining to dimensions, gears, indicators, reflectors, lights, horns, safety belts and others, the CMV rules govern emission standards for vehicles operating on compressed natural gas or CNG, petrol, liquefied petroleum gas and diesel. Bharat Stage IV Emission Norms (equivalent to Euro IV norms) are now applicable to all 4 wheelers as of April 1, 2010 in the cities of Delhi/National Capital Region, Mumbai, Kolkata, Chennai, Bangalore, Hyderabad, Ahmedabad, Pune, Surat, Kanpur, Agra, Solapur and Lucknow. Manufacturers must comply with the emission standards as laid down in the CMV rules from time to time and are required to certify such compliance. Bharat Stage III Emission Norms (equivalent to Euro III norms) are in force from October 1, 2010 for the rest of the country.

 

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Additionally, pursuant to the CMV rules, every manufacturer must also submit the prototype of every vehicle to be manufactured by it for testing by the Vehicle Research and Development Establishment of the Ministry of Defence of the Government of India, or Automotive Research Association of India, Pune, or the Central Machinery Testing and Training Institute, Budni (MP), or the Indian Institute of Petroleum, Dehradun, or the Central Institute of Road Transport, Pune, or the International Centre for Automotive Technology, Manesar or such other agencies as may be specified by the central government for granting a certificate by that agency as to the compliance of provisions of the Motor Vehicles Act, 1988 and these rules.

In case of CNG fitments by vehicle manufacturers on new petrol vehicles, each model manufactured must be a type approved pursuant to the prevailing mass emission norms as applicable for the category of new vehicle in respect of the place of its use.

The CMV Rules also require the manufacturers to comply with notifications in the Official Gazette, issued by central government to use such parts, components or assemblies in manufacture of such vehicle, of such standards as may be specified or the relevant standards as specified by the Bureau of Indian Standards.

Emission and Safety in India

In 1992, the Government of India issued emission and safety standards, which were further tightened in April 1996 under the Indian Motor Vehicle Act. From April 1, 2010, India migrated its emission norms to Bharat Stage IV (equivalent to Euro IV norms) for four wheelers in 13 cities and Bharat Stage III (equivalent to Euro III norms) in the rest of the country since October 1, 2010. Further, fuel efficiency norms are under discussion with Government of India.

We are also working on meeting all the regulations which we believe are likely to come into force in various markets in future. Our vehicle exports to Europe comply with Euro IV norms, and we believe our vehicles also comply with the various safety regulations in effect in the other international markets we operate in.

The Indian automobile industry is progressively harmonizing its safety regulations with international standards in order to facilitate sustained growth of the Indian automobile industry as well as to make India a large exporter of automobiles.

India has been a signatory to the 1998 UNECE Agreement on Global Technical Regulations (GTR) since April 22, 2006 and has voted in favor of all the eleven Global Technical Regulations. Tata Motors works closely with the Government of India to participate in WP 29 World Forum Harmonization activities.

India has a well established regulatory framework administered by the Indian Ministry of Road Transport and Highways. The Ministry issues notifications under the Central Motor Vehicles Rules and the Motor Vehicles Act. Chapter V of the Central Motor Vehicles Rules, 1989, deals with construction, equipment and maintenance of vehicles. Vehicles manufactured in the country must comply with relevant Indian standards and automotive industry standards. The Indian Ministry of Road Transport and Highways finalized a road map on automobile safety standards in January 2002. The road map is based on current traffic conditions, traffic density, driving habits and road user behavior in India and is generally aimed at increasing safety requirements for vehicles under consideration for Indian markets.

The Essential Commodities Act, 1955

The Essential Commodities Act, 1955, as amended by the Essential Commodities (Amendment and Validation) Act, 2009, or the Essential Commodities Act, authorises the central government, if it finds it necessary or expedient to do so, to provide for regulating or prohibiting the production, supply, distribution, trade and commerce in the specified commodities under the Essential Commodities Act, in order to maintain or increase supplies of any essential commodity or to secure their equitable distribution and availability at fair prices, or to secure any essential commodity for the defence of India or the efficient conduct of military operations. The definition of “essential commodity” under the Essential Commodities Act includes “component parts and accessories of automobiles”.

Environmental Regulations

Manufacturing units or plants must ensure compliance with environmental legislation, such as the Water (Prevention and Control of Pollution) Act 1974, the Air (Prevention and Control of Pollution) Act, 1981, the Environment Protection Act, 1986 and the Hazardous Wastes (Management and Handling) Rules, 1989. The basic purpose of these statutes is to control, abate and prevent pollution.

 

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In order to achieve these objectives, Pollution Control Boards (“PCBs”), which are vested with diverse powers to deal with water and air pollution, have been set up in each state. The PCBs are responsible for setting the standards for maintenance of clean air and water, directing the installation of pollution control devices in industries and undertaking inspection to ensure that units or plants are functioning in compliance with the standards prescribed. These authorities also have the power of search, seizure and investigation.

Our manufacturing plants have received or are in the process of obtaining the Indian government’s environmental clearances required for our operations. We are fully committed to our role as a responsible corporate citizen with respect to reducing environmental pollution. We treat the effluents at our plants and have made significant investments in lowering the emissions from our products.

In addition, the Ministry of Environment and Forests conducts environment impact assessments. The Ministry receives proposals for expansion, modernization and establishment of projects and then the impact which such projects would have on the environment is assessed by the Ministry before it grants clearances for the proposed projects.

Regulation of Imports and Exports

Quantitative restrictions on imports into India were removed with effect from April 1, 2001, pursuant to India’s World Trade Organization obligations and imports of capital goods and automotive components were placed under the open general license category. In addition, we are also regulated by the provisions of the Customs Act, 1962 and the Central Excise Act, 1944.

Automobiles and automotive components can, generally, be imported into India without a license from the Government of India subject to their meeting Indian standards and regulations as specified by designated testing agencies. Cars, UVs and SUVs in completely built up or CBU condition can be imported at 60% basic customs duty. Commercial vehicles can be imported at basic customs duty of 10% and components can be imported at basic customs duty ranging from at 10% to 7.5% (for engine component).

The FDI Policy

Automatic approval for foreign equity investments up to 100% is allowed in the automobile manufacturing sector under the FDI Policy.

Indian Taxes

See Item 10.E “— Additional Information — Taxation” for additional information relating to our taxation.

Excise Duty:

In the Indian Union Budget 2008-2009, the Government of India reduced the excise duty on small cars from 16% to 12%. The Government of India further reduced the excise duty rate from 12% to 8% in December 2008. This reduction was a part of government initiative towards revival of automobile industry from the recessionary situation. In February, 2010 this duty was increased by the Government of India from 8% to 10%. The excise duty on cars other than small cars presently stands at 22% + Rs. 15,000/- (Rs. 15,000/- applicable if engine capacity exceeds 1500 cc). Small cars are defined to mean cars of length not exceeding 4,000mm and with an engine capacity not exceeding 1,500cc for cars with diesel engines and not exceeding 1,200cc for cars with gasoline engines.

The Government of India reduced the excise duty on motor vehicles for transport of more than 13 persons, including the driver, from 16% to 12% in March 2008 and from 12% to 8% in December 2008. The rate of 8% was revised to 10% in February, 2010. Excise duty on chassis fitted with engines for such vehicles was also reduced from “16% + Rs.10,000 per chassis” to “12% + Rs.10,000 per chassis” which was further reduced to “8% + Rs.10,000 per chassis” in December 2008. In February 2010 this rate was increased to “10% + Rs. 10,000/- per chassis”.

Excise duty on trucks was reduced from 16% to 14% during the Indian Union Budget 2008-2009, which was further reduced to 10% in December 2008. The excise duty on trucks was again reduced from 10% to 8% in the Indian Union Budget 2009-2010. Excise duties on trucks were then increased from 8% to 10% in February 2010. Similarly excise duty on truck chassis fitted with engine was reduced from 16% + Rs. 10,000/- per chassis to 14% + Rs. 10,000/- per chassis during Union Budget 2008-09 which was further reduced to 10% + Rs. 10,000/- per chassis in December 2008. The excise duty on trucks chassis fitted with engine was again reduced from 10% + Rs. 10,000/- per chassis to 8% + Rs. 10,000/- per chassis in the Indian Union Budget 2009-2010. Excise duties on trucks chassis fitted with engine were then increased to 10% + Rs. 10,000/- per chassis in February 2010.

 

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In December 2008, the excise duty on Safari, SUVs & UVs was reduced from “24% + Rs.20,000 per vehicle” to “20% + Rs.20,000 per vehicle”, which was further reduced to “20% + Rs.15,000 per vehicle” in July 2009. This rate was revised to “22% + Rs.15,000 per vehicle” in the Indian Union Budget 2010-2011.

In addition to the excise duty indicated above, vehicles are also subject to National Calamity Contingent Duty (NCCD) at 1%, Automobile Cess at 0.125%, Educational Cess at 2% and Higher Education Cess at 1%.

Valued Added Tax:

The Value Added Tax, or VAT, has been implemented throughout India. VAT enables set-off from sales tax paid on inputs by traders and manufacturers against the sales tax collected by them on behalf of the government, thereby eliminating the cascading effect of taxation. Two main brackets of 4% and 12.5%, along with special brackets of 0%, 1% 5% and 20% have been announced for various categories of goods and commodities sold in the country and certain states have introduced additional VAT of 1% to 3% on specified commodities, including automobiles. In some of the states, surcharge of 10% on VAT has been introduced on automobiles. Central Sales Tax, however, continues to exist, although it is proposed to be abolished in a phased manner. Since its implementation, VAT had a positive impact on us. Prior to the implementation of VAT, sales tax formed part of our total cost of material. However, the implementation of VAT would result in savings on sales tax component, as VAT paid on inputs can be set off against tax paid on outputs.

In the Indian Union Budget 2009-2010, the Central Sales Tax rate was reduced to 2% which remained unchanged for Fiscal 2011.

Goods and Services Tax:

The Government of India is proposing to reform the indirect tax system in India with a comprehensive national goods and services tax, or GST, covering the manufacture, sale and consumptions of goods and services. The date of introduction of GST is not yet known. The proposed GST regime will combine taxes and levies by the central and state governments into one unified rate structure. The Government of India has publicly expressed the view that following the implementation of the GST, indirect tax incidence on domestically manufactured goods is expected to decrease along with prices on such goods.

We have and are availing ourselves of excise duty exemptions for manufacturing facilities in the state of Uttarakhand and other incentives in certain states of India either through subsidy or loan from such states where we have manufacturing operations. While both the Government of India and other state governments of India have publicly announced that all committed incentives will be protected following the implementation of the GST, given the limited availability of information in the public domain concerning the GST, we are unable to provide any assurance as to the effect of this or any other aspect of the tax regime following implementation of the GST.

Direct Tax Code:

The Direct Tax Code Bill 2010, or DTC, proposes to replace the existing Income Tax Act, 1961 and other direct tax laws , with a view to simplify and rationalize the tax provisions into one unified code. The DTC bill is proposed to come into effect from April 1, 2012 .The various proposals included in DTC bill are subject to review by Indian parliament and as such impact if any, is not quantifiable at this stage.

Insurance Coverage:

The Indian insurance industry is predominantly state-owned and insurance tariffs are regulated by the Indian Insurance Regulatory and Development Authority. We have insurance coverage which we consider reasonably sufficient to cover all normal risks associated with our operations (including business interruptions) and which we believe is in accordance with industry standards in India. We have obtained coverage for product liability for some of our vehicle models in several countries to which we export vehicles. TDCV has insurance coverage as is required and applicable to cover all normal risks in accordance with industry standards in South Korea, including product liability. We have also taken insurance coverage on directors and officers’ liability to minimize risks associated with international litigations for us and some of our subsidiaries.

Jaguar Land Rover has global insurance coverage which Jaguar Land Rover considers to be reasonably sufficient to cover normal risks associated with our operations and insurance risks (including property, business interruption, marine and product/general liability) and which Jaguar Land Rover believes is in accordance with commercial industry standards.

 

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Economic Stimulus Package and Incentives:

In January 2009, the Government of India announced an Economic Stimulus Package targeting the automotive industry. The Public Sector banks were encouraged to fund the auto sector along with providing a line of credit to NBFCs, specifically for the CVs. The States were to be provided a one time assistance to purchase 15,000 buses for their urban transport system. There was a 4% cut in the central value added tax rate, or cenvat, on cars and trucks and a 2% cut in cenvat rate on motor vehicles for transport of more than 13 persons, including the driver. Further, in February 2009, the cenvat was reduced from 10% to 8% for Trucks and buses and service tax was also reduced from 12% to 10%. The Government of India has also provided for an accelerated tax depreciation of 50% for commercial vehicles purchased between January 1 and September 30, 2009. The cenvat rate has been restored to 10% since April 1, 2010.

In the UK interest rates have been maintained at an historic low of 0.5% since March 2009, interest rates have been kept at this level in order to provide stimulus to the economy. The European Central Bank increased its base rate to 1.25% in April 2011, following no changes for just under two years, in response to the risk of accelerating inflation. Within Europe there is still concern regarding the sovereign debt issues within Greece, Ireland and Portugal. Continued high employment in the US has led to the use of fiscal stimuli, quantitative easing and lower interest rates despite positive GDP outlook, which could lead to higher inflation.

To support economic growth during the global economic crisis, the Chinese government introduced a series of incentive policies to stabilize the recovery of automotive industry, including subsidy program for rural families to purchase vehicle, subsidy program for auto replacement which was amid a slew of measures to stimulate private spending and curb pollution, levying vehicle purchase tax on passenger vehicles with an engine capacity of 1.6 liters or smaller at the reduced tax rate down from 10%. The unprecedented growth of auto sales in China for the past years caused the government to cease these incentives from January 1, 2010.

In June 2010, the Chinese government announced subsidy program of RMB3,000 for each energy-conservation passenger vehicle with an engine capacity of 1.6 liters or smaller. The Central Government also provided for a subsidy for private purchase of new energy vehicles (HEV up to RMB50,000 and BEV up to RMB60,000) along with additional subsidy from local government. Furthermore, The Development Plan in Energy-saving and New Energy Vehicle Industry, which has been submitted to State Council for final approval and is expected to be released in the 3rd quarter of 2011, will be the blueprint for China automotive industry development over the next ten years (2011-2020).

For emission reduction and environmental protection, China plans to adopt Fuel Consumption Stage III with stringent fuel economy requirements soon. It requires automakers to invest and speed up development of smaller and more fuel efficient vehicles for China auto market.

Environmental, Fiscal and Other Governmental regulations around the world

Our Jaguar Land Rover business has significant operations in the US and Europe which have stringent regulations relating to vehicular emissions. The proposed tightening of vehicle emissions regulations by the European Union will require significant costs of compliance for Jaguar Land Rover. While we are pursuing various technologies in order to meet the required standards in the various countries in which we operate, the costs of compliance with these required standards can be significant to our operations and may adversely impact our results of operations.

Greenhouse gas /CO2 / fuel economy legislation: Legislation is now in place limiting the manufacturer fleet average greenhouse gas emissions in Europe for passenger cars starting January 2012 and the US with their Federal GHG Standard running 2012-2016MY. In addition, many other markets either have or will shortly define similar GHG emissions standards (some of these include Canada, China, Japan, Korea, Switzerland, Australia, South Africa). In Europe implementation of Light Commercial Vehicle CO2 standards would affect the Defender and a small number of Freelander and Discovery vehicles.

In Europe, non compliance penalties are in the form of millions of Euros in compensation. In the US, non compliance results in market exclusion.

California is currently developing a new Zero Emission Vehicle regulation mandating increased penetration of electric and plug in hybrid electric vehicles from 2018MY above and beyond the requirements of the Federal GHG Standard.

 

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Jaguar Land Rover undertakes technology deployment plans directed to achieving these standards. These plans include the use of lightweight materials, including aluminium, which will contribute to the manufacture of lighter vehicles with improved fuel-efficiency, reducing parasitic losses through the driveline and improvements in aerodynamics. They also include the development and installation of smaller engines in our existing vehicles and other drive train efficiency improvements, including the introduction of eight-speed transmissions in some of our vehicles. We also plan to introduce smaller vehicles, commencing with the introduction of the Range Rover Evoque, the most fuel-efficient vehicle in the Land Rover line-up. The technology deployment plans also include the research development and deployment of hybrid-electric vehicles. These technology deployment plans include the research, development and deployment of hybrid electric vehicles initially in Europe and the United States, which require significant investment. Additionally, local excise tax initiatives are also a key consideration in ensuring our products meet customer needs for environmental footprint and cost of ownership concerns.

Non-greenhouse gas emissions legislation:

Existing EU5 regulations planned EU6 and EU7 regulations in Europe; existing US California LEV2 regulations and planned LEV3 regulations place ever stricter limits on particulate emissions, oxides of nitrogen and hydrocarbons for passenger and light duty trucks. These regulations require ever increasing levels of technology in engine control systems on-board diagnostics and after treatment systems affecting base costs of our power trains. Additional stringency of evaporative emissions also require more advanced materials and joints solutions to eliminate fuel evaporative losses, all for much longer warranted periods (up to 150,000 miles in the US). While in Europe and California lead the implementation of these emissions programmes, other nations and states follow on with adoption of these regulations 2-4 years after (e.g. EU5 Europe September 2009, China January 2012).

To comply with the current and future environmental norms, we may have to incur substantial capital expenditure and research and development expenditure to upgrade products and manufacturing facilities, which would have an impact on our cost of production and results of operation.

Imposition of any additional taxes and levies by the Indian government designed to limit the use of automobiles could adversely affect the demand for our products and our results of operations.

Vehicle safety: Vehicles sold in Europe are subject to vehicle safety regulations established by the European Union or by individual Member States. In 2009, the European Union enacted a new regulation to establish a simplified framework for vehicle safety, repealing more than 50 existing directives and replacing them with a single regulation aimed at incorporating relevant United Nations standards. The incorporation of the United Nations standards will commence in 2012, and as to new regulations on advanced safety systems, the European Commission plans to require new model cars from 2011 to have electronic stability control systems, to introduce regulations relating to low-rolling resistance tires in 2013, to require tire pressure monitoring systems starting in 2012 and to require heavy vehicles to have advanced emergency braking systems and lane departure warning systems from 2013. From April 2009, the criteria for whole vehicle type approval were extended to cover all new road vehicles, to be phased in over five years depending on vehicle category. The extension clarifies the criteria applicable to small commercial vehicles.

The NHTSA issues federal motor vehicle safety standards covering a wide range of vehicle components and systems such as airbags, seatbelts, brakes, windshields, tires, steering columns, displays, lights, door locks, side impact protection and fuel systems. We are required to test new vehicles and equipment and assure their compliance with these standards before selling them in the United States. We are also required to recall vehicles found to have defects that present an unreasonable risk to safety or which do not conform to the required Federal Motor Vehicle Safety Standards, and to repair them without charge to the owner. The financial cost and impact on consumer confidence of such recalls can be significant depending on the repair required and the number of vehicles affected. We have no investigations relating to alleged safety defects or potential compliance issues pending before the NHTSA.

These standards add to the cost and complexity of designing and producing vehicles and equipment. In recent years the NHTSA has mandated, among other things:

 

   

a system for collecting information relating to vehicle performance and customer complaints, and foreign recalls to assist in the early identification of potential vehicle defects as required by the Transportation Recall Enhancement, Accountability, and Documentation (TREAD) Act; and

 

   

enhanced requirements for frontal and side impact, including a lateral pole impact.

 

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Furthermore, the Cameron Gulbransen Kids Transportation Safety Act of 2007 (Kids and Cars Safety Act), passed into law in 2008, requires the NHTSA to enact regulations related to rearward visibility and brake-to-shift interlock and requires the NHTSA to consider regulating the automatic reversal functions on power windows. The costs to meet these proposed regulatory requirements may be significant.

Vehicle safety regulations in Canada are similar to those in the United States; however, many other countries have vehicle regulatory requirements which differ from those in the United States. The differing requirements among various countries create complexity and increase costs such that the development and production of a common product that meets the country regulatory requirements of all countries is not possible. Global Technical Regulations (“GTRs”), developed under the auspices of the United Nations continue to have an increasing impact on automotive safety activities, as indicated by EU legislation. In 2008, GTRs on electronic stability control, head restraints and pedestrian protection were each adopted by the UN “World Forum for the Harmonization of Vehicle Regulations,” and are now in different stages of national implementation. While global harmonisation is fundamentally supported by the automobile industry in order to reduce complexity, national implementation may still introduce subtle differences into the system.

Legal Proceedings

In the normal course of business, we face claims and assertions by various parties. We assess such claims and assertions and monitor the legal environment on an ongoing basis, with the assistance of external legal counsel wherever necessary. We record a liability for any claims where a potential loss is probable and capable of being estimated and disclose such matters in our financial statements, if material. For potential losses which are considered reasonably possible, but not probable, we provide disclosure in the financial statements, but do not record a liability in our financial statements unless the loss becomes probable. Should any new developments arise, such as a change in law or rulings against us, we may need to make provisions in our financial statements, which could adversely impact our reported financial condition and results of operations. Furthermore, if significant claims are determined against us and we are required to pay all or a portion of the disputed amounts, there could be a material adverse effect on our business and profitability. Certain claims that are above Rs. 200 million in value are described in Note 35 to our consolidated financial statements included in this annual report. Certain claims that are below Rs. 200 million in value pertain to indirect taxes, labour and other civil cases. There are other claims against us which pertain to motor accident claims (involving vehicles that were damaged in accidents while being transferred from our manufacturing plants to regional sales offices) product liability claims and consumer complaints. Some of these cases relate to replacement of parts of vehicles and/or compensation for deficiency in services provided by us or our dealers.

We believe that none of the contingencies, either individually or in the aggregate, would have a material adverse effect on our financial condition, results of operations or cash flows.

C. Organizational Structure

I Tata Sons- Promoter and its Promoted Entities

Tata Sons is a holding company that has equity holdings in a range of businesses. The various companies promoted by Tata Sons, including us, are based substantially in India and had combined revenues of approximately US$85 billion for Fiscal 2011. The operations of Tata Sons promoted entities are highly diversified and can be categorized under seven business sectors, namely, engineering, materials, energy, chemicals, consumer products, services, communications and information systems. These companies do not constitute a ‘group’ under Indian Law.

Tata Sons promoted entities has its origins in the trading business founded by Jamsetji Tata in 1874 , that was developed and expanded in furtherance of his ideals by his two sons, Sir Dorabji Tata and Sir Ratan Tata, following their father’s death in 1904. The family interests subsequently vested largely in the Sir Ratan Tata Trust, the Sir Dorabji Tata Trust and other related trusts. These trusts were established for philanthropic and charitable purposes and together own a substantial majority of the shares of Tata Sons Limited.

By 1970, the operations of Tata Sons promoted entities had expanded to encompass a number of major industrial and commercial enterprises including The Indian Hotels Company Limited (1902), The Tata Steel Limited (Tata Steel) (1907), which became the sixth largest steel maker in the world after it acquired Corus, The Tata Power Company Limited (1910), Tata Chemicals Limited (1939), which is the world’s second largest manufacturer of soda ash, and Tata Motors Limited (1945), which is among the top five medium and heavy commercial vehicle manufacturers in the world and which acquired Jaguar and Land Rover in 2008. Tata Motors, which made India’s first indigenously developed car, the Indica, in 1998, and introduced the world’s lowest- cost car, the Tata Nano in Fiscal 2010. Other Tata entities include Voltas Limited (1954), and Tata Global Beverages Ltd. (1962), which is the second largest branded tea company in the world, through its UK-based subsidiary Tetley.

 

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Tata Sons also promoted India’s first airline, Tata Airlines, which later became Air India (India’s national carrier), as well as India’s largest general insurance company, New India Assurance Company Limited, both of which were subsequently taken over by the Government as part of the Government’s nationalization program. Tata Consultancy Services Limited (TCS) is Asia’s leading software services provider and the first Indian software firm to exceed sales of US$4 billion. TCS has delivery centres in the US, UK, Hungary, Brazil, Uruguay and China, as well as India. In 1999, Tata Sons also invested in several telephony and telecommunication ventures, including acquiring a portion of the Indian Government’s equity stake in the state owned Tata Communications Limited which is one of the world’s largest wholesale voice carriers. Tata companies are building multinational businesses that will achieve growth through excellence and innovation, while balancing the interests of shareholders, employees and civil society.

We have for many years been a licensed user of the “Tata” brand owned by Tata Sons Limited, and thus have both gained from the use of the Tata brand as well as helped to sustain its brand equity. Tata Sons along with the Tata Sons promoted entities instituted a corporate identity program to re-position the brand to compete in a global environment. A substantial ongoing investment and recurring expenditure is planned to develop and promote a strong, well-recognized and common brand equity, which is intended to represent for the consumer a level of quality, service and reliability associated with products and services offered by the Tata Sons promoted entities.

Each of the Tata Sons promoted consenting entities pays a subscription fee to participate in and gain from the Tata brand identity. We believe that we benefit from the association with the Tata brand identity and accordingly, Tata Motors Limited and certain of our subsidiaries have agreed to pay an annual subscription fee to Tata Sons Limited which is equal to 0.15%-0.25% of annual net income (defined as net revenues exclusive of excise duties and other governmental taxes and non-operating income), subject to a ceiling of 5% of annual profit before tax (defined as profit after interest and depreciation but before income tax). In the past, Tata Sons also has lowered the subscription fee, considering its requirement of outlay for activities related to brand promotion and protection. For the Fiscal years ended March 31, 2010 and 2011, Tata Motors on a standalone basis paid an amount less than 0.25% of its annual net income as per Indian GAAP. Pursuant to our licensing agreement with Tata Sons Limited, we have also undertaken certain obligations for the promotion and protection of the new Tata brand identity licensed to us under the agreement. The agreement can be terminated by written agreement between the parties, by Tata Sons Limited upon our breach of the agreement and our failure to remedy the same, or by Tata Sons Limited upon providing six months notice for reasons to be recorded in writing. The agreement can also be terminated by Tata Sons Limited upon the occurrence of certain specified events, including liquidation.

The Tata Sons promoted entities have sought to continue to follow the ideals, values and principles of ethics, integrity and fair business practices originally established by the founder of Tata Sons, Mr. Jamsetji Tata, and his successors. To further protect and enhance the Tata brand equity, these values and principles have been articulated in the Tata code of conduct, which has been adopted by most of the Tata Companies that have access to the larger resources and services of the Tata Sons promoted entities. These companies have endeavored to maintain high standards of management efficiency and to promote the commercial success of Indian enterprises. The Tata Sons promoted entities have also made significant contributions towards national causes through promotion of public institutions in the field of science, such as the Indian Institute of Science and the Tata Institute of Fundamental Research and in the field of social services through the Tata Institute of Social Sciences, the Tata Memorial Hospital and the National Center of the Performing Arts. Tata trusts are among the largest charitable foundations in the country.

A large number of the Tata Sons promoted entities hold shares in one another and some of our directors hold directorships on the boards of Tata Sons and/or Tata Sons promoted entities. However, there are no voting agreements, material supply or purchase agreements or any other relationships or agreements that have the effect of tying us together with other Tata Sons promoted entities at management, financial or operational levels. With the exception of Tata Steel Limited, which under our Articles of Association has the right to appoint one director to the Board, Tata Sons Limited and its subsidiaries do not have any special contractual or other power to appoint our directors or management beyond the voting power of their shareholdings in us. Except as set forth in the tables below under the heading “Subsidiaries and Affiliates” and except for approximately a 15.37% equity interest in Tata Services Ltd, a 9.55% equity interest in Tata Industries Limited and a 6.67% equity interest in Tata Projects Ltd, our shareholdings in other the Tata Sons promoted entities are generally insignificant as a percentage of their respective outstanding shares or in terms of the amount of our investment or the market value of our shares of those companies.

 

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II Tata Motors Group:

Subsidiaries and Affiliates

The subsidiaries and equity method affiliates of Tata Motors Limited that together with Tata Motors Limited form the Tata Motors Group under Indian Law as of March 31, 2011 are set forth in the chart below:-

LOGO

 

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  1. The holdings in these subsidiaries range between 83.38% to 83.51%.

 

  2. The subsidiaries are based in many countries abroad.

 

  3. The subsidiary is based in Morocco and the name was changed to Tata Hispano Motors Carrocerries Maghreb from Carrosseries Hispano Maghreb, Morocco with effect from February 22, 2011

 

  4. The holding in its subsidiary is 71.69%

 

  5. The subsidiary is based in Norway.

 

  6. The holding in its subsidiary is 78.39%

 

  7. The holdings in these affiliates range between 15.83% to 31.66%.

 

  8. Is an affiliate of Tata Technologies Ltd

 

  9. The holdings in these affiliates range between 17.76% to 40.00%.

D. Property, Plants and Equipment

Facilities:

We operate five principal automotive manufacturing facilities in India. The first facility was established in 1945 at Jamshedpur in the State of Jharkhand in eastern India. We commenced construction of a second facility in 1966 (with production commencing in 1976) at Pune, in the State of Maharashtra in western India, and a third in 1985 (with production commencing in 1992) at Lucknow, in the State of Uttar Pradesh in northern India, a fourth at Pantnagar in the State of Uttarakhand, India, which commenced operations in Fiscal 2008, and a fifth at Sanand in Gujarat in western India for manufacturing of the Nano, which commenced operations in June, 2010. The Jamshedpur, Pune and Lucknow manufacturing facilities have been accredited with ISO/TS 16949:2000(E) certification.

We have set up a plant for the manufacturing of Tata Marcopolo buses under our joint venture with Marcopolo at Dharwad in Karnataka and at Lucknow.

The manufacturing facilities of TDCV are based in Gunsan, South Korea. TDCV has received the ISO/TS 16949 certification, an international quality systems specification given by SGS UK Ltd., an International Automotive Task Force (IATF) accredited certification body. It is the first Korean automobile original equipment manufacturer to be awarded the same.

Fiat India Automobiles Limited, our joint venture with Fiat Group Automobiles S.p.A Italy, has its manufacturing facility located in Ranjangaon, Maharashtra. The plant is used for manufacturing Tata and Fiat branded cars as well as engines and transmissions for use by both partners.

Tata Motors (Thailand) Limited is our joint venture with Thonburi Automotive Assembly Plant Co. Ltd for the manufacture and assembly of pickup trucks. The manufacturing facility is located in Samutprakarn province, Thailand.

Our 100% stake in Tata Hispano Motors Carrocera S.A. provides us with access to two manufacturing units, one in Spain and another one in Morocco.

Following our acquisition of Jaguar Land Rover, we currently operate three principal automotive manufacturing facilities in the United Kingdom at Solihull, Castle Bromwich, and Halewood and have also established two product development facilities in the United Kingdom at Gaydon and Whitley. Most of these facilities are owned freehold or held through long-term leaseholds, generally with nominal rents.

Tata Motors European Technical Centre Plc, UK, along with its Norwegian subsidiary, is specialized in the development and manufacture of electric cars and lithium-ion batteries.

Description of environmental issues that may affect the Company’s utilization of facilities:

Tata Motors Limited:

Automobile industry participants around the world are understandably concerned about climate change as they are exposed to various regulations for controlling the emissions contributing to climate change. We are also exposed to such regulatory risks related to climate change.

The design and development of fuel efficient vehicles and vehicle running on alternative renewable energy have become a priority as a result of fossil fuel scarcity escalating price and growing awareness about energy efficiency among customers.

We have adopted the Tata Group Climate Change Policy which addresses key climate change issues related to products, processes and services. We are committed to reduction of greenhouse gases emissions throughout the lifecycle of our products and development of fuel efficient and low Green House Gas (“GHG”) emitting vehicles is an integral part of our product development and manufacturing strategy.

 

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Considering the climate change risk, we are actively involved in partnerships with technology providers to embrace the best energy efficient technologies not only for products but also for processes and are also participating actively in the various National Committees in India which are working on formulating policies and regulations for improvement of environment, including GHG reduction.

India, as a party to the United Nations Framework Convention on Climate Change, 1992 and its Kyoto Protocol, 1997 has been committed to addressing the global problem on the basis of the principle of “common but differentiated responsibilities and respective capabilities” of the member parties. At present, there are no legally binding targets for GHG reductions for India as it is a developing country. There are however opportunities for minimizing energy consumption through elimination of energy losses during manufacturing, thereby reducing manufacturing costs and increasing productivity.

In order to manage regulatory and general risks of climate change, we are increasingly investing in design and development of fuel efficient and alternative energy vehicles, besides implementing new advanced technologies to increase efficiency of internal combustion engines. We have manufactured a CNG version of buses, light commercial vehicles, an LPG version of passenger car, the Indica, and a CNG version of the ACE goods carrier and pickup, Xenon.

In September 2010, Tata Motors presented CNG-Electric Hybrid Low-floor Starbuses to the Delhi Transport Corporation (DTC). This is the first time in India that hybrid buses will be used for public transportation. The Tata Hybrid Starbus offers substantial improvements in fuel economy compared to a conventional bus. The usage of this technology leads to lower emissions thereby contributing to cleaner air and a greener, more environment-friendly commercial passenger transportation application.

Further, we are using latest available low GWP refrigerants like R134A in products for minimizing contribution of GHG emissions. We also ensure that no refrigerant is released to atmosphere during any service, repair and maintenance. The refrigerant charge on the vehicle is first recovered before the system is serviced and recharged. In addition, we are voluntarily disclosing passenger vehicles fuel efficiency information in India in accordance with the decision by the Society of Indian Automobile Manufacturers (SIAM). We are also continually in the process of developing products that meet the current and future emission norms in India and other countries. For example we have products which meet the BS III and BS IV norms in India and are also working on products that will meet the impending Euro V norms in international markets.

We also strive to increase the proportion of energy sourced from renewables. We have incorporated environmentally sound practices as one of our prime objectives – in our processes, products and services, and all manufacturing facilities at Pune, Jamshedpur, Lucknow and Pantnagar in India have an Environmental Management System (EMS), in place and have achieved ISO-14001 certification. We have been implementing various Environment Management Programmes (EMPs) on energy conservation such as reduction in electricity and fuel consumption and thereby reducing greenhouse gases emissions. We are actively working towards a shift to gas fuels to meet process heat requirements.

Jaguar Land Rover:

Our production facilities are subject to a wide range of environmental, health and safety requirements. These requirements address, among other things, air emissions, wastewater discharges, accidental releases into the environment, human exposure to hazardous materials, the storage, treatment, transportation and disposal of wastes and hazardous materials, the investigation and clean up of contamination, process safety and the maintenance of safe conditions in the workplace. Many of our operations require permits and controls to monitor or prevent pollution. We have incurred, and will continue to incur, substantial ongoing capital and operating expenditures to ensure compliance with current and future environmental, health and safety laws and regulations or their more stringent enforcement. Other environmental, health and safety laws and regulations could impose restrictions or onerous conditions on the availability or the use of raw materials the company need for our manufacturing process.

Our manufacturing process results in the emission of greenhouse gases such as carbon dioxide. The EU Emissions Trading Scheme, an EU-wide system in which allowances to emit greenhouse gases are issued and traded, is anticipated to cover more industrial facilities and become progressively more stringent over time, including by reducing the number of allowances that will be allocated free of cost to manufacturing facilities. In addition, a number of further legislative and regulatory measures to address greenhouse gas emissions, including national laws and the Kyoto Protocol, are in various phases of discussion or implementation. These measures could result in increased costs to: (i) operate and maintain our production facilities; (ii) install new emissions controls; (iii) purchase or otherwise obtain allowances to emit greenhouse gases; and (iv) administer and manage the company’s greenhouse gas emissions programme.

 

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Many of our sites have an extended history of industrial activity. We may be required to investigate and remediate contamination at those sites, as well as properties at which we formerly conducted operations, regardless of whether the company caused the contamination or whether the activity causing the contamination was legal at the time it occurred. In connection with contaminated properties, as well as our operations generally, the company also could be subject to claims by government authorities, individuals and other third parties seeking damages for alleged personal injury or property damage resulting from hazardous substance contamination or exposure caused by our operations, facilities or products. We could be required to establish or substantially increase financial reserves for such obligations or liabilities and, if we fail to accurately predict the amount or timing of such costs, the related impact on our business, financial condition or results of operations could be material.

We have a good health and safety record. We maintain our plant and facilities with a view to meeting these regulatory requirements and have also put in place a compliance reporting and monitoring process which is intended to help us to mitigate risk.

Production Capacity:

The following table shows our production capacity as of March 31, 2011 and production levels by plant and product type in Fiscal 2011 and 2010:

 

     Fiscal Year ended March 31,  
     Production
Capacity*
     Production (Units)  
        2011      2010  

TML Plants in India

        

Medium and Heavy Commercial Vehicles, Light Commercial Vehicles, Utility Vehicles, Passenger Cars, Construction Equipment1

     1,528,000         758,435         620,761   

Jaguar Land Rover**

        

Utility Vehicles, Passenger Cars

     514,000         246,958         193,159   

Other Subsidiary companies plants (excluding JLR)***

        

Medium & Heavy Commercial Vehicles, Buses & bus body and Pick-up trucks

     60,570         25,060         19,009   

1 Construction equipment units are as of March 31, 2010

 

* These are estimated production capacity on a double shift basis for all plants (except Uttarakhand plant for which capacity is on three shift basis) for manufacture of vehicles and replacement parts.
** Production capacity is on three shift basis.
*** The plants are located in Korea, Spain, Morocco and Thailand. Production capacity of plants at Spain and Morocco are on single shift basis

Properties:

We produce vehicles and related components and carry out other businesses through various manufacturing facilities. In addition to our manufacturing facilities, our properties include sales offices and other sales facilities in major cities, repair service facilities and research and development facilities.

The following table sets forth information, with respect to our principal facilities, a substantial portion of which are owned by us as of March 31, 2011. The remaining facilities are on leased premises.

 

Location

  

Facility or Subsidiary Name

  

Principal Products or Functions

India

     

In the State of Maharashtra

     

Pune (Pimpri, Chinchwad, Chikhali(1), Maval)

   Tata Motors Ltd.    Automotive vehicles, components & Research & Development

Pune (Chinchwad)

   TAL Manufacturing Solutions Ltd.    Factory automation equipment and services

Pune (Hinjewadi)(1)

   Tata Technologies Ltd.    Software consultancy and services

Mumbai

   Tata Motors Ltd./Concorde Motors (India) Ltd.    Automobile sales & service

Nagpur(1)

   TAL Manufacturing Solutions Ltd.    Under construction for Hybrid Floor Beam Project

 

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—  

  

Facility or Subsidiary Name

  

Principal Products or Functions

In the State of Jharkhand

     

Jamshedpur

   Tata Motors Ltd.    Automotive vehicles, components & R&D

Jamshedpur

   HV Axles Ltd.    Axles for M&HCVs

Jamshedpur

   HV Transmissions Ltd.    Transmissions for M&HCVs

In the State of Uttar Pradesh

     

Lucknow(1)

   Tata Motors Ltd.    Automotive vehicles/ parts & R&D
   Tata Marcopolo Motors Ltd.    Bus Bodies

In the State of Karnataka

     

Dharwad

   Tata Motors Ltd.    Spare parts and warehousing
   Tata Marcopolo Motors Ltd.    Bus body manufacturing

Bangalore(2)

   Concorde Motors (India) Ltd.    Automobile sales and service

In the State of Uttarakhand

     

Pantnagar(1)

   Tata Motors Limited    Automotive vehicles & components

In the State of Gujarat

     

Sanand

   Tata Motors Ltd.    Automotive vehicles & components

Rest of India

     

Hyderabad(2) & Chennai(1)

   Concorde Motors (India) Ltd.    Automobile sales and service

Cochin

   Concorde Motors (India) Ltd    Automobile sales and service

Various other properties in India

   Tata Motors Ltd.    Vehicle financing business (office/ residential)

Outside India

     

Singapore

   Tata Precision Industries Pte. Ltd.    Precision equipment and computer and peripherals warehousing
   Tata Technologies Pte Ltd    Software consultancy and services

Republic of Korea

   Tata Daewoo Commercial Vehicle Co. Ltd.    Automotive vehicles, components & Research &Development, Spare parts and warehousing

Thailand

   Tata Motors (Thailand) Ltd.    Pick-up trucks
   Tata Technologies (Thailand) Ltd    Software consultancy and services

United Kingdom

   Tata Motors European Technical Centre    Engineering consultancy and services
   INCAT International PLC & Tata Technologies Europe Ltd    Software consultancy and services

United Kingdom

   Jaguar Land Rover   

- Solihull

   Jaguar Land Rover    Automotive vehicles & components

- Castle Bromwich

   Jaguar    Automotive vehicles & components

- Halewood

   Jaguar Land Rover    Automotive vehicles & components

- Gaydon

   Jaguar Land Rover    Headquarters and Product Development

- Whitley

   Jaguar Land Rover    Product Development

Spain

   Tata Hispano Motors Carrocera S.A.    Bus Body Manufacturing and service

Morocco

   Tata Hispano Motors Carrocerries Maghreb.    Bus Body Manufacturing and service

Norway

   Miljobil Grenland AS    Engineering consultancy and services

Rest of the world

   Tata Technologies Group of Companies    Software consultancy and services
   Jaguar Land Rover    National sales companies
      Regional sales offices

 

(1) Land at these locations have been taken under operating lease.
(2) Some of the facilities are under operating lease and some are owned.

Substantially all of our owned properties are subject to mortgages in favor of secured lenders and debenture trustees for the benefit of secured debenture holders. A significant portion of our property, plant and equipment is pledged as collateral securing indebtedness incurred by us. We believe that there are no material environmental issues that may affect our utilization of these assets.

We have additional property interests throughout the world for limited manufacturing, sales offices, dealer training and testing. The majority of these are housed within leased premises.

        Property, plant and equipment as of March 31, 2011 includes buildings located in the State of West Bengal in India for the purposes of manufacturing automobiles of Rs.3,098.8 million. Consequent to the decision to relocate and construct a similar manufacturing facility at another location, the management is in the process of evaluating several options, under all of which no adjustment to the carrying amount of the buildings is considered necessary.

On June 21, 2011, the newly elected Government of West Bengal enacted a legislation to expropriate the assets described in the preceding paragraph. The legislation also contains the process for claim of compensation by us. We have challenged the legal validity of the legislation including the process of compensation in the Court of Law, the outcome of which is pending as of the date of this annual report.

 

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We consider all of our principal manufacturing facilities and other significant properties to be in good condition and adequate to meet the needs of our operations.

 

Item 4A. Unresolved Staff Comments

None.

 

Item 5. Operating and Financial Review and Prospects

You should read the following discussion of our financial condition and results of operations together with our consolidated financial statements prepared in conformity with IFRS and information included in this annual report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors including, but not limited to, those set forth in Item 3.D and elsewhere in this annual report.

A. Operating Results.

All financial information discussed in this section is derived from our financial statements included in this Annual Report on Form 20-F, which has been prepared in accordance with International Financial Reporting Standards as issued by International Accounting Standards Board.

Overview

In Fiscal 2011, our total revenue (net of excise duties) including finance revenues increased by 33.0 % to Rs.1,232,134 million from Rs. 926,263 million in Fiscal 2010. We recorded a net income (excluding the share of loss attributable to non-controlling interest) of Rs.73,402 million and Rs. 38,029 million in Fiscal 2011 and 2010 respectively, representing an increase of 93.0 % or Rs. 35,373 million, over Fiscal 2010.

Automotive operations.

Automotive operations are our most significant segment, accounting for 99.3 % and 97.0 % for Fiscal 2011 and 2010 respectively, of our total revenues. For Fiscal 2011, revenue from automotive operations before inter segment eliminations was Rs.1,223,547 million as compared to Rs. 897,970 for Fiscal 2010.

Our automotive operations include:

 

   

All activities relating to development, design, manufacture, assembly and sale of vehicles as well as related spare parts and accessories;

 

   

Distribution and service of vehicles; and

 

   

Financing of our vehicles in certain markets.

Our automotive operations are further divided into Tata and other brand vehicles / spares and financing thereof, and the Jaguar Land Rover business. For Fiscal 2011, Jaguar Land Rover contributed 57.0 % of our total automotive revenue and the remaining Rs. 526,847 million (43.0% of total) was contributed by Tata and other brand vehicles.

 

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Tata and other brands vehicles (including spares and financing thereof)

In Fiscal 2011 the Indian economy continued to record robust growth at an estimated 8.6% over Fiscal 2010. This growth has been driven by growth in the agricultural sector (5.4%), industrial sector (8.1%) and services sector (9.6%). The growth rate in the first half of the fiscal year was higher and moderated in the second half. The year also witnessed an inflationary trend. The RBI implemented monetary policy changes to counter the inflation which resulted in an increase in lending interest rates by the banks and financial institutions. This progressively impacted the business sentiment through the year. The second half of the fiscal year also saw a drop in the Index for Industrial Production (IIP) as industrial activity was affected. Our vehicle sales increased by 23.6% to 835,469 units in Fiscal 2011 from 675,761 units in Fiscal 2010, resulting in a revenue (before inter-segment elimination) increase of 29.3% to Rs. 526,847 million in Fiscal 2011, compared to Rs.407,594 million in Fiscal 2010.

Sale of our commercial vehicles in India increased by 21.2% to 447,299 units in Fiscal 2011 from 368,996 units in Fiscal 2010, our highest ever sales in the domestic commercial vehicle market. We launched variants of its products tailored to specific market segments. like the Construck range off the Prima platform. We upgraded the entire commercial vehicles product range to comply with the Bharat Stage III emission norms with effect from October 1, 2010. From April 1, 2010, India migrated its emission norms to Bharat Stage IV (equivalent to Euro IV) for four-wheelers in 13 cities and implemented Bharat Stage III (equivalent to Euro III) in the rest of the country with effect from October 1, 2010.

In the domestic market, the M&HCV category grew by 10.8% supported by strong growth in the Indian economy. The light commercial vehicles category grew by 29.0% in Fiscal 2011, largely aided by the growth/demand for small commercial vehicles. We also improved Light commercial vehicles volume performance in the pickup segment realizing sales of 311,167 units, an increase of 35.9% over 228,987 units sold in Fiscal 2010 . The sales of the Tata Ace continued to increase in its fifth year of introduction. We also have launched a portfolio of variants on the popular Ace platform such as the Ace EX and Super Ace, Ace Zip and passenger applications such as the Magic Iris.

Our passenger vehicle sales in India increased by 20.7% to 314,907 units in Fiscal 2011 from 260,882 units in Fiscal 2010. We launched a variety of new products and variants in the year like the Indica e-V2 and Indigo-eCS, which are expected to have leading fuel efficiencies in respective segments. We inaugurated the Sanand plant for the production of the Nano in June 2010 and ramped up production to sell 63,590 Nano cars in Fiscal 2011, a growth of 112.6% over 29,908 units in Fiscal 2010. We continued to increase the sales of the Indigo Manza through the year. With the launch of the Indigo eCS powered by the CRAIL engine and a segment leading fuel efficiency of 23.30 km per liter, our market share in this segment increased to 25.7%.

In the UV category, we sold 52,774 units in Fiscal 2011, representing an increase of 52.9% from 34,514 units in Fiscal 2010, we also introduced a Multi Purpose Vehicle (MPV), the Venture, and the first Indian crossover the Aria, in the UV segment which aided the increase in sales in this segment.

Our overall sales in international markets increased by 59.7% to 73,263 units in Fiscal 2011 as compared to 45,883 units in Fiscal 2010. Our exports of vehicles manufactured in India increased significantly by 70.1% in Fiscal 2011 to 57,982 units from 34,088 units in Fiscal 2010, resulting from improved global macro economic indicators in certain markets.

TDCV recorded a 2.9% decline in its overall vehicle sales to 8,745 units in Fiscal 2011 from 9,011 units in Fiscal 2010. TDCV’s performance was adversely impacted by severe slowdown in its main export markets. The company exported 3,002 units in Fiscal 2011 compared to 3,658 units in Fiscal 2010, a decline of 17.9%. In the South Korean market, TDCV’s market share declined to 23.2% in Fiscal 2011 from 26.1% in Fiscal 2010 in the M&HCV category, largely due to financial instability of its sole distributor Daewoo Motor Sales Corporation, or DMSC in the first half of the year. TDCV launched its wholly owned sales and distribution company – Tata Daewoo Sales Company, or TDSC, during the year to act as its sole distributor in domestic market. Following the stability of operations of TDSC, the sales and market shares of TDCV gradually improved during Fiscal 2011.

Revenue from our vehicle financing operations increased by 2.0% to Rs. 22,232 million in Fiscal 2011 as compared to Fiscal 2010.

Earnings before other income, interest and tax before inter-segment eliminations from Tata and other brand vehicles/spares and financing thereof increased by 4.6% to Rs. 48,916 million in Fiscal 2011, compared to Rs.46,756 million in Fiscal 2010. The profitability was mainly impacted by lower operating margins on account of increases in input costs and increases in fixed market costs.

 

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Automotive operations - Jaguar Land Rover

In Fiscal 2011, the external environment for JLR continued to improve compared to Fiscal 2010, with favourable GDP growth in key markets, particularly China and Russia, driving increased demand for premium products. JLR continued to benefit from favourable exchange rates, particularly the US$ and the Euro throughout the year. There were still concerns around some of the European markets where a lack of confidence and sovereign debt crises affected the external economic environment. Jaguar Land Rover results reflect strong sales growth together with margin improvement actions and favorable foreign exchange. Wholesale volumes for Fiscal 2011 were 243,345 units compared to 193,841 units in Fiscal 2010 representing an increase of 25.5%. The financial results of the Jaguar Land Rover business show significant improvement over Fiscal 2010.

Wholesale volumes for Jaguar in Fiscal 2011 were 52,955 units representing an increase of 11.6 % as compared to 47,459 units sold in Fiscal 2010. Wholesale volumes for Land Rover in Fiscal 2011 were 190,390 units representing an increase of 30.1% over sales of 146,382 units in Fiscal 2010.

On a retail basis, retail volumes for Fiscal 2011 totaled 58,134 units in the UK, while retail volumes in North America totaled 50,280 units in Fiscal 2011. Retail in China continued to be strong across all products with retail volumes of 28,893 units in Fiscal 2011 as compared to 17,004 units. Retail in Russia totaled to 11,689 units, showed an increase of 32.4% in Fiscal 2011.

Revenues (before inter-segment eliminations) for the Jaguar Land Rover were Rs.699,754 million for Fiscal 2011 compared to Rs. 491,261million for Fiscal 2010 representing a 42.4% increase over Fiscal 2010. For Fiscal 2011, the Jaguar Land Rover business reported a profit of Rs. 75,673 million as compared to a profit of Rs. 878 million for Fiscal 2010 before other income, interest, and tax. The increase in reported profits is attributable to an increase in sales volumes particularly in Russia and China, improved model and market mix and improvement in operations through profitable margin growth.

Other Operations

Other operations comprise primarily of activities relating to providing engineering solutions and software operations. Our revenue from other operations before inter segment eliminations was Rs.14,916 million in Fiscal 2011, a decline of 55.5 % from Rs. 33,483 million in Fiscal 2010. Income from other operations for Fiscal 2010 included income from our construction equipments operations, Telco Construction Equipment Co. Ltd (Telcon). In March 2010, we sold a portion of our controlling interest in Telcon. Revenues from other operations represented 1.2% and 3.6% of our total revenues, before inter-segment eliminations, in Fiscal 2011 and 2010 respectively. Earnings before other income, interest and tax were Rs.1,487 million and Rs.1,265 million before inter-segment eliminations in Fiscal 2011 and 2010 respectively.

Geographical breakdown

We have pursued a strategy to increase exports of Tata and other brand vehicles to new and existing markets. Jaguar Land Rover have significantly contributed to the increase of presence in major international markets. Improved sentiments and strong product positioning of JLR products have enabled us to increase our presence in international markets. The performance of our subsidiary in South Korea, TDCV and successful operations of INCAT and its subsidiaries following acquisitions by TTL facilitated a significant increase in our sales to international markets. TDCV’s major export markets are Algeria, Colombia, Vietnam, and countries in the Middle East. Following the acquisition of the Jaguar Land Rover business in Fiscal 2009, the proportion of our net sales earned from markets outside of India has increased significantly to 62.3% and 58.9% for Fiscal 2011 and Fiscal 2010 respectively.

 

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The following table sets forth our revenue from our key geographical markets:

 

      Fiscal 2011     Fiscal 2010     Fiscal 2009  

Revenue

   Rs. in million      Percentage     Rs. in million      Percentage     Rs. in million      Percentage  

India

     464,676         37.7     380,846         41.1     272,889         37.8

United Kingdom

     136,906         11.1     116,646         12.6     167,605         23.2

United States of America

     147,428         12.0     100,018         10.8     60,070         8.3

China

     116,459         9.4     47,808         5.2     20,218         2.8

Rest of Europe

     150,148         12.2     131,358         14.2     91,071         12.6

Rest of the World

     216,517         17.6     149,587         16.1     110,953         15.3
  

 

 

      

 

 

      

 

 

    

Total

     1,232,134           926,263           722,806      
  

 

 

      

 

 

      

 

 

    

Significant Factors Influencing Our Results of Operations.

Our results of operations are dependent on a number of factors, which include mainly the following:

 

   

General economic conditions. We, similar to the rest of the automotive industry, are substantially affected by general economic conditions. See Item 3.D “ — Risk Factors — Risks associated with Our Business and the Automotive Industry”.

 

   

Interest rates and availability of credit for vehicle purchases. Our volumes are significantly dependent on availability of vehicle financing arrangements and the cost thereof. For further discussion of our credit support programs, see Item 4.B “ — Business Overview — Automotive Operations — Sales and Distribution of Vehicles”.

 

   

Excise duty and sales tax rates. In India the excise / sales tax rate structure affects the cost of vehicles to the end user and hence impacts demand significantly. For a detailed discussion regarding tax rates applicable to us, please see Item 4.B “— Business Overview — Government Regulations — Excise Duty”.

 

   

Our competitive position in the market. For a detailed discussion regarding our competitive position, see Item 4.B “— Business Overview — Automotive Operations — Competition”.

 

   

Cyclicality. Our results of operations are also dependent on the cyclicality in demand in the automotive market, new government and environmental regulations.

 

   

Environmental Regulations. There has been a greater emphasis on raising emission and safety standards for the automobile industry by governments in the various countries in which we operate. Compliance with these norms will have a significant bearing on the costs and product life cycles in the automotive industry. For further details with respect to these regulations, please see Item 4.B “ — Business Overview — Government Regulations — Emission and Safety”.

 

   

Foreign Currency Rates. Our operations and financial position is quite sensitive to fluctuations in foreign currency rates in the countries in which we operate. Jaguar Land Rover earns significant revenue in the United States, Europe and China and also sources a significant portion of its input material from Europe. Thus any exchange rate fluctuations of GBP to Euro, GBP to US dollars and GBP to other currencies would affect our financial results. We have significant borrowings in foreign currencies denominated mainly in US dollars. Fluctuations in exchange rates also have an impact on the reported result of operations through translation differences. Our consolidated financial results are affected by foreign currency exchange fluctuations through both translation risk and transaction risk. Changes in foreign currency exchange rates may positively or negatively affect our revenues, results of operations and net income.

 

   

To the extent that our financial results for a particular period will be affected by changes in the prevailing exchange rates at the end of the period, such fluctuations may have a substantial impact on comparisons with prior periods. However, the translation effect is a reporting consideration and does not impact our underlying results of operations.

 

   

Transaction risk is the risk that the currency structure of our costs and liabilities will deviate from the currency structure of sales proceeds and assets. However, we enter into hedging instruments to mitigate some of these transaction risks. These instruments enable us to reduce, but not eliminate, the impact of fluctuations in foreign currency exchange rates. Please see Item 11 “ — Quantitative and Qualitative Disclosures About Market Risk” for further detail.

 

   

Political and Regional Factors. Similar to the rest of the automotive industry, we are affected by political and regional factors. For a detailed discussion regarding these risks, please see Item 3.D “— Risk Factors — Political and Regulatory Risks.”

 

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Results of operations

The following table sets forth selected items from our consolidated statements of income for the periods indicated and shows these items as a percentage of total revenues:

 

     Percentage of Total Revenue     Percentage Change  
     Fiscal 2011     Fiscal 2010     Fiscal 2009     2010 to 2011      2009 to 2010  

Total Revenues

     100     100     100     33.0         28.1   

Raw materials and Purchase of product for sale (including change in stock)

     64.6        66.8        67.6        28.7         26.6   

Employee Cost

     7.5        9.5        10.4        4.9         16.9   

Other expenses

     18.9        19.5        24.3        28.6         3.0   

Depreciation and Amortization

     3.5        4.0        3.9        18.6         30.7   

Expenditure capitalised

     -4.7        -5.0        -6.3        24.7         1.6   

Gain on sale of controlling equity interest in subsidiary

     —          -3.0        -0.2        -100.0         1862.4   

Other (income)/ loss (net)*

     0.7        —   **      -2.0        1863.2         102.9   

Interest Income

     -0.3        -0.3        -0.4        42.8         -17.0   

Interest expense (net)

     3.0        4.4        4.7        -8.8         18.0   

Foreign exchange (gain) / loss (net)

     -0.3        -1.7        6.7        -80.7         -133.3   

Excess of fair value of net assets acquired over cost of acquisition

     —          —          -0.9        —           —     

Share of (profit) / loss of equity accounted investees

     —   **      0.1        0.5        -62.7         -64.5   

Net income /(loss) before tax

     7.1        5.7        -8.3        65.3         -187.4   

Income tax expense

     1.0        1.6        0.1        -13.4         1654.7   

Net income /(loss)

     6.1        4.1        -8.4        96.2         -161.8   

Net income / (loss) attributable to shareholders of Tata Motors Limited

     6.1        4.1        -8.3        93.0         -163.2   

Net income / (loss) attributable to non-controlling interests

     —   **      —   **      -0.1        -177.5         -29.1   

 

* Includes gain on sale of available for sale securities and gain on sale of equity interest in subsidiary companies with respect to Fiscal 2009.
** Less than 0.1

The following table sets forth selected data regarding our automotive operations (Tata and other brand vehicles including financing thereof and Jaguar Land Rover) for the periods indicated and the percentage change from period to period. (before inter-segment eliminations).

 

                       Percentage Change  
     Fiscal 2011     Fiscal 2010     Fiscal 2009     2010 to 2011      2009 to 2010  

Total Revenues (Rs.Millions)

     1,223,547        897,970        691,778        36.3         29.8   

Earnings/(loss) before other income, interest and tax (Rs.Millions)

     124,419        47,537        (1,665     161.7         -2955.1   

Earnings/(loss) before other income, interest and tax (%)

     10.2     5.3     (0.2 )%      

The following table sets forth selected data regarding our other operations for the periods indicated and the percentage change from period to period. (before inter-segment eliminations).

 

                       Percentage Change  
     Fiscal 2011     Fiscal 2010     Fiscal 2009     2010 to 2011      2009 to 2010  

Total Revenues (Rs.Millions)

     14,916        33,483        35,434        -55.5         -5.5   

Earnings/(loss) before other income, interest and tax (Rs.Millions)

     1,487        1,265        2,534        17.6         -50.1   

Earnings/(loss) before other income, interest and tax (%)

     10.0     3.8     7.2     

 

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Fiscal 2011 Compared to Fiscal 2010

Revenues.

Our total consolidated revenues (net of excise duty, where applicable) including finance revenues were Rs. 1,232,134 million in Fiscal 2011, an increase of Rs. 305,871 million or 33.0%, from Rs. 926,263 million in Fiscal 2010. The growth was driven by an increase in total vehicle volumes of 24.1%, improved realization per vehicle, and continued growth in our vehicle financing activity which resulted in a 36.3% increase in revenues from automotive operations.

Revenues from the domestic market (India) for Fiscal 2011 increased by 22.0 % to Rs. 464,676 million in Fiscal 2011 from Rs. 380,846 million in Fiscal 2010. Revenues from markets outside India increased by 40.7% to Rs. 767,458 million in Fiscal 2011 from Rs. 545,417 million in Fiscal 2010. The revenues from markets outside India are mainly attributable to our Jaguar Land Rover business.

The following is a discussion of our revenues for each of our business segments.

Revenues from Automotive Operations.

Automotive operations constitute the largest proportion of our total revenues. Revenues from automotive operations (before inter-segment elimination) increased by Rs. 325,577 million to Rs. 1,223,547 million, or 36.3% from Rs. 897,970 million in Fiscal 2010.

This increase was primarily due to:

 

   

a 21.0% increase in vehicle unit sales in India;

 

   

a 31.7% increase in sales of vehicles outside of India;

 

   

an increase in spares and after sales activity; and

 

   

a 2.0% increase in automotive financing revenues.

Revenue for the Jaguar Land Rover business increased by 42.4% to Rs. 699,754 million. The increase is attributable to an increase in sales volumes particularly in Russia and China.

Revenues from Other Operations

Revenues (net of excise duty, where applicable) from other operations were Rs.14,916 million in Fiscal 2011, a decline of 55.5% from Rs. 33,483 million in Fiscal 2010. On March 30, 2010, we sold controlling interest in our construction equipment subsidiary, Telco Construction Equipment Co. Ltd (Telcon), and revenues from other operations for Fiscal 2011 do not include revenues from Telcon. Revenues from other operations represent 1.2% and 3.6% of our total revenues, before inter-segment eliminations, in Fiscal 2011 and 2010, respectively.

Cost and Expenses

Raw Materials and Purchase of Products for Sale (including change in stock): Raw material costs as a percentage of revenues (excluding finance revenues) declined to 65.8% in Fiscal 2011 as compared to 68.4% in Fiscal 2010, due to our cost reduction initiatives, improved product mix, better price realization. Raw material costs for Fiscal 2011 were Rs. 796,224 million compared to Rs. 618,705 million in Fiscal 2010, reflecting an increase of Rs.177,519 or 28.7% from Fiscal 2010. The increase is mainly attributable to an increase in vehicle volumes.

Employee Cost: Our employee cost was Rs. 92,250 million in Fiscal 2011 as compared to Rs. 87,945 million in Fiscal 2010 .The increase in our employee cost mainly relates to increases on account of normal yearly increases in compensation, performance payments and wage revisions and partly on account of increased volumes. However, our employee cost as a percentage of total revenues reduced to 7.5% in Fiscal 2011 from 9.5% in Fiscal 2010.

Other Expenses: Other expenses increased by 28.6% to Rs. 232,342 million in Fiscal 2011 from Rs. 180,808 million in Fiscal 2010. The increase mainly relates to increase in volumes. Despite inflation, we were able to contain costs through continued focus on cost reduction .As a percentage of total revenues these expenses represented 18.9 % in Fiscal 2011 compared to 19.5% in Fiscal 2010. The major components of expenses are as follows:

 

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     Year ended March 31,      Increase/
(Decrease)
 
     2011      2010     
     (Rs. in millions)  

Freight and Transportation expenses

     30,886         25,065         5,821   

Works Operation and Other Expenses

     76,801         58,606         18,195   

Publicity

     40,453         29,354         11,099   

Allowance for trade and other receivables, and finance receivables

     5,972         6,510         (538

Warranty and product liability expenses

     29,334         22,524         6,810   

 

i) The increase in freight and transportation expenses mainly relate to volumes and increases in freight rates.

 

ii) Our Works Operation and Other Expenses represented 6.2% and 6.3% of total revenue for Fiscal 2011 and 2010 respectively.

 

iii) The increase in publicity related expenses mainly relate to new product introduction campaigns for the Nano, Prima and New Jaguar XJ brands.

 

iv) The increase in warranty expenses is consistent with the increase in volumes.

Expenditure capitalised: These represent employee costs, store and other manufacturing supplies and other works expenses incurred mainly towards product development projects and also includes costs attributable to internally constructed capital items. The increase reflects expenditure on new products and other major product development plans.

Depreciation and Amortization: Our depreciation and amortization cost increased by 18.6% to Rs. 43,446 million in Fiscal 2011, compared to Rs. 36,637 million in Fiscal 2010. The increase in depreciation expenses is on account of additions to fixed assets towards plant and facilities for expansion and new products, mainly production facility at Sanand. The increase in amortization of product development cost consequent to commencement of commercial production of new products mainly Aria, Prima, Nano, New XJ and impact of products introduced in earlier years.

Other income (net): The net loss was Rs. 8,218 million in Fiscal 2011 as compared to Rs. 419 million in Fiscal 2010. During Fiscal 2011, there was a loss on fair value of conversion option of Rs. 13,850 million (Rs. 11,174 million for Fiscal 2010). Further the profit from sale of investment was lower at Rs. 167 million in Fiscal 2011 as compared to Rs. 7,023 million in Fiscal 2010.

Interest expense (net): Our interest expense (net of interest capitalized) decreased by 8.8% to Rs. 36,854 million in Fiscal 2011, compared to Rs. 40,396 million in Fiscal 2010. As a percentage of total revenues, interest expenses represented 3.0% in Fiscal 2011 compared to 4.4% in Fiscal 2010. The decrease represents:

 

  i. Lower borrowing cost at JLR consequent to strong improvement in operations

 

  ii. Substitution of borrowed fund through issue of equity. In Fiscal 2011 we raised Rs. 32,498 (net of issue expenses) million by way of issue of shares through QIP.

 

  iii. Reduction in borrowing rates.

 

  iv. Borrowings pertaining to FCCN has come down due to conversion into equity shares of Rs. 28,212 million.

Foreign exchange (gain)/loss (net): We had a foreign exchange gain of Rs.3,090 million in Fiscal 2011, compared to Rs. 16,045 million in Fiscal 2010. A significant portion of the exchange gain in the Fiscal 2010 reflect (a) exchange gain on foreign currency borrowing and (b) notional exchange gain on year end valuation of foreign currency borrowings.

 

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  i. There has been a reduction in overall marginal tax rates applicable to entities in Fiscal 2011 to 27.8% from 32.6% in Fiscal 2010.

 

  ii. Higher tax benefit on research and product development cost – tax effect of Rs. 5,584 million for Fiscal 2011 as compared to Rs 3,869 million for Fiscal 2010.

 

  iii. In Fiscal 2011, unrecognized tax losses of previous years utilised was Rs. 7,617 million against Rs. Nil in Fiscal 2010 and in Fiscal 2011, credit was recognised of deferred tax on property, plant and equipment which was not previously recognised of Rs. 9,453 million.

 

  iv. In respect of losses for which deferred tax assets was not recognised due to uncertainty of realization is Rs. 580 million in Fiscal 2011 as against Rs 2,045 million in Fiscal 2010.

 

  v. The above reductions were partly off-set by;

 

  a. gain (net) on sale of investments (including equity interest in subsidiaries), which is subject to lower tax rate or not liable to tax, was Rs.2 million in Fiscal 2011 as compared to Rs. 5,285 million in Fiscal 2010.

 

  b. tax treatment of certain foreign currency gains/losses; increase in tax Rs 1,344 million.

 

  c. items considered as inadmissible on account of interest, loss on conversion option and other expenses; net increase in tax Rs. 1,716 million.

 

  d. increase in tax on undistributed earnings of subsidiaries and associates, increase of Rs. 1,489 million.

 

  e. effect of lower tax rate on fair valuation of retained equity interest , was Rs. Nil in Fiscal 2011 against Rs. 2,030 million in Fiscal 2010.

For further details refer note 16 to our consolidated financial statements.

Non-controlling Interests in Consolidated Subsidiaries and Share of profit of equity accounted investees, net of tax: In Fiscal 2011 our share of non-controlling interest reflected a gain of Rs. 347 million, as compared to loss of Rs. 448 million in Fiscal 2010, primarily due to increased profitability of our subsidiaries.

Net Income/Loss

Our consolidated net income for Fiscal 2011 excluding our non-controlling share was Rs. 73,402 million, compared to Rs. 38,029 million in Fiscal 2010. Net income as a percentage of total revenues increased to 6.1% in Fiscal 2011 from 4.1% to total revenues in Fiscal 2010. This increase was the result of the following factors:

 

   

A 24.1% increase in vehicle unit sales in Fiscal 2011 compared to Fiscal 2010, resulting in a 33.0% increase in revenues and better product mix;

 

   

a decrease in raw material cost as a proportion to our total revenues (excluding finance revenues) from 68.4% in Fiscal 2010 to 65.8% in Fiscal 2011;

 

   

Overall reduction in other cost through volume leverage and cost management;

 

   

a decrease in interest expenses; and

 

   

Lower income tax expense

Fiscal 2010 Compared to Fiscal 2009

Revenues.

Our total consolidated revenues (net of excise duty, where applicable) including finance revenues were Rs. 926,263 million in Fiscal 2010, an increase of Rs. 203,457 million or 28.1%, from Rs. 722,806 million in Fiscal 2009. The growth was driven by an increase in total vehicle volumes of 29.3%, improved realization per vehicle, and continued growth in our vehicle financing activity which resulted in a 29.8% increase in revenues from automotive operations.

Revenues from the domestic market (India) for Fiscal 2010 increased by 39.6 % to Rs. 380,846 million in Fiscal 2010 from Rs.272,889 million in Fiscal 2009. Revenues from markets outside India increased by 21.2% to Rs.545,417 million in Fiscal 2010 from Rs.449,917 million in Fiscal 2009. The revenues from markets outside India mainly relate to Jaguar Land Rover.

The following is a discussion of our revenues for each of our business segments.

 

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Revenues from Automotive Operations.

Automotive operations constitute the largest proportion of our total revenues. Revenues from automotive operations (before inter-segment elimination) increased by Rs.206,192 million to Rs. 897,970 million, or 29.8% from Rs. 691,778 million in Fiscal 2009.

This increase was primarily due to:

 

   

a 36.4% increase in vehicle unit sales in India;

 

   

a 13.7% increase in sales of vehicles outside of India;

 

   

an increase in spares and after sales activity; and

 

   

a 8.1% increase in automotive financing revenues.

Revenue for the Jaguar Land Rover business increased by 25.7% to Rs.491,261 million. The increase was driven by improvement in the market for premium cars in the second half of Fiscal 2010. The prior reporting period only covered ten months and therefore is not directly comparable, however, the overall trend showed an improvement in Fiscal 2010 from Fiscal 2009.

Revenues from Other Operations

Revenues (net of excise duty, where applicable) from other operations were Rs.33,483 million in Fiscal 2010, a decline of 5.5% from Rs.35,434 million in Fiscal 2009, mainly due to the downturn in the US automotive and aerospace markets which affected the sales of Product lifecycle management (PLM) services by our subsidiary TTL. Revenues from other operations represent 3.6% and 4.9% of our total revenues, before inter-segment eliminations, in Fiscal 2010 and 2009, respectively.

Cost and Expenses

Raw Materials and Purchase of Products for Sale (including change in stock): Raw material costs as a percentage of revenues (excluding finance revenues) declined to 68.4% in Fiscal 2010 as compared to 69.6% in Fiscal 2009, due to our cost reduction initiatives, improved product mix, better price realization. Raw material costs for Fiscal 2010 were Rs. 618,705 million compared to Rs. 488,733 million in Fiscal 2009, reflecting an increase of Rs.129,972 or 26.6% from Fiscal 2009. The increase is mainly attributable to an increase in vehicle volumes.

Employee Cost: Our employee cost increased by 16.9% to Rs. 87,945 million in Fiscal 2010 from Rs.75,200 million in Fiscal 2009. The increase in our employee cost and of our subsidiaries (excluding the Jaguar Land Rover business) mainly relates to increases on account of normal yearly increases in compensation, performance payments and wage revisions. The Jaguar Land Rover business constitutes a major portion of our employee cost. The increase reflects impact on account of compensation structure at Jaguar Land Rover as the comparative figure for Fiscal 2009 is for a period June 2, 2008 to March 31, 2009. Further, increase also relates to increased pension costs on account revisions in actuarial and other assumptions. However, our employee cost as a percentage to total revenues reduced to 9.5% in Fiscal 2010 from 10.4% in Fiscal 2009.

Other Expenses: Other expenses increased to Rs. 180,808 million in Fiscal 2010 from Rs. 175,614 million in Fiscal 2009. As a percentage of revenue these represented 19.5 % in Fiscal 2010 compared to 24.3% in Fiscal 2009. The major components of expenses are as follows:

 

     Year ended March 31,      Increase/
(Decrease)
 
     2010      2009     
     (Rs. in millions)  

Freight and Transportation expenses

     25,065         24,129         936   

Works Operation and Other Expenses

     58,606         62,055         (3,499

Publicity

     29,354         26,154         3,200   

Allowance for trade and other receivables, and finance receivables

     6,510         8,525         (2,015

Warranty and product liability expenses

     22,524         23,862         (1,338

 

i) The increase in other expenses was mainly due to the change in composition and differences in cost structure following our acquisition of Jaguar Land Rover since the figures for the Fiscal 2009 are for a period June 2, 2008 to March 31, 2009.

 

ii) The increase in freight and transportation expenses mainly relate to volumes and increases in freight rates.

 

iii)

Despite an increase in volumes, works operation and other expenses decreased to Rs. 58,606 million in Fiscal 2010 from Rs.62,055 million in Fiscal 2009 and represented 6.3% and 8.6% of total revenue for Fiscal 2010 and Fiscal 2009, respectively.

 

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  The decrease mainly relates to significant reduction in accrual of residual risk on vehicle sold in certain markets due to improved market conditions. The decreases in costs are a result of our continued cost management initiatives.

 

iv) The increase in publicity related expenses was mainly necessitated by new product introduction campaigns for the Nano, Prima and New Jaguar XJ brands.

 

v) Allowances pertaining to finance receivables decreased. The vehicle financing operations undertook many initiatives for improving efficiencies in evaluation, disbursements, management of non-performing and collection process.

 

vi) Warranty expenses have reduced due to change in product mix and lower per unit cost due to quality improvement, experience adjustment.

Expenditure capitalised: These represent employee costs, store and other manufacturing supplies and other works expenses incurred mainly towards product development projects and also includes costs attributable to internally constructed capital items. The increase reflects new products and other major product development plans.

Depreciation and Amortization: Our depreciation and amortization cost increased to Rs. 36,637 million in Fiscal 2010, compared to Rs. 28,040 million in Fiscal 2009. The increase in depreciation expenses is attributable to additions to property, plant and equipment in Fiscal 2009 and 2010. Further, the increased amortization is attributable to product development projects where production has commenced; new products are mainly Prima, Nano and other products.

Gain on sale of controlling equity interest in subsidiary: Gain on sale of controlling equity interest in subsidiary increased to Rs. 27,566 million in Fiscal 2010 as compared to Rs. 1,405 million in Fiscal 2009. In Fiscal 2010, we sold the controlling stake (20%) in Telco Construction Equipment Company Limited (Telcon) resulting in a gain of Rs. 10,572 million and also adopted IAS 27 (amended in 2008) and recognised gain of Rs. 16,994 million attributable to fair value of the interest retained (40%) in Telcon.

Other income (net): We incurred a loss (net) of Rs. 419 million in Fiscal 2010, compared to a gain of Rs.14,295 million in Fiscal 2009. The other income for Fiscal 2010 includes gain on sale of investment of Rs. 7,023 million and other miscellaneous income of Rs. 4,772 million which was offset by loss due to change in fair value of conversion option of Rs.11,174 million. Net decrease as compared to Fiscal 2009 is attributable to loss due to change in fair value of conversion option of Rs.11,174 million as compared to gain of 2,807 million in Fiscal 2009.

Interest expense (net): Our interest expense (net of interest capitalized) increased by 18.0% to Rs.40,396 million in Fiscal 2010, compared to Rs.34,222 million in Fiscal 2009. Although we have substituted part of our borrowed funds through issues of equity and internal cash generation and have lowered interest charges through borrowings at lower rates, additional capital expenditure and increases in working capital resulting from increased volumes and level of acceptances in Fiscal 2010, were partly funded through additional borrowed funds resulting in increases in interest and discounting charges (net). The bridge loan taken for the acquistion of Jaguar and Land Rover business was fully repaid during Fiscal 2010 through issue of equity, divestment of investments and proceeds of bonds and debentures. As a percentage of revenue these represented 4.4% in Fiscal 2010 compared to 4.7% in Fiscal 2009.

Foreign exchange (gain)/loss (net): We had a foreign exchange gain of Rs.16,045 million in Fiscal 2010, compared to a loss of Rs. 48,143 million in Fiscal 2009. A significant portion of the exchange gain in the Fiscal 2010 reflect (a) exchange gain on foreign currency borrowing and (b) notional exchange gain on year end valuation of foreign currency borrowings.

Income Taxes: We had an income tax expense of Rs.14,772 million in Fiscal 2010, compared to Rs.842 million in Fiscal 2009.

The effective tax rate for Fiscal 2010 was 28.2% of net income before tax as compared to tax expense of 1.4 % of net loss before tax in Fiscal 2009.

 

  i. In Fiscal 2009, deferred tax asset amounting to Rs 12,071 million was not recognised for losses due to uncertainty of realization.

 

  ii. Certain foreign currency gains /losses, interest relating to borrowings for investments and loss on conversion option are not tax deductible /gain is not liable to tax. The impact for Fiscal 2009 was Rs. 8,682 million (net).

As compared to expected tax expense (considering marginal rates of tax) of 32.6%, the tax expense of Fiscal 2010 was lower at 28.2% of net income before tax mainly due to:

 

  i. Tax benefit on account of R&D expenses of Rs 3,869 million.

 

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  ii. Sale of investment, other capital gain and fair value of retained equity interest in erstwhile subsidiary not liable to tax / taxed at a lower rate impact Rs.7,314 million in Fiscal 2010.

For further details refer note 16 to our consolidated financial statements.

Non-controlling Interests in Consolidated Subsidiaries and Share of profit of equity accounted investees, net of tax: In Fiscal 2010, share of non-controlling interest was a loss of Rs. 448 million, as compared to loss of Rs. 632 million in Fiscal 2009. This is on account of decreased profitability of our subsidiaries and due to change in accounting policy during the year for allocation of total comprehensive income/losses. Refer Note 2 (v) to our consolidated financial statements.

Net Income/Loss

Our consolidated net income for Fiscal 2010 excluding our non-controlling share was Rs. 38,029 million, compared to net loss of Rs. 60,142 million in Fiscal 2009. Net income as a percentage of total revenues increased to 4.1% in Fiscal 2010 from net loss of 8.3% to total revenues in Fiscal 2009. This increase was the result of the following factors:

 

   

A 29.3% increase in vehicle unit sales in Fiscal 2010 compared to Fiscal 2009, resulting to 28.1% increase in revenues and better product mix;

 

   

a gain on sale of controlling equity interest in subsidiary and further gain from fair valuation of retained interest in Telcon;

 

   

a gain on account of exchange fluctuation;

 

   

a decrease in raw material cost as a proportion to our total revenues (excluding finance revenues) from 69.6% to 68.4%; and

 

   

a reduction in other expenses

Recent Accounting Pronouncements

Please refer to Note 2 (w) to our Consolidated Financial Statements for adopted and yet to be adopted accounting pronouncements as of March 31, 2011.

Critical Accounting Policies

The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income, expenses and disclosures of contingent assets and liabilities at the date of these financial statements and the reported amounts of revenues and expenses for the years presented. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and future periods affected. In particular, information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements is included in the following notes:

Impairment of Goodwill

Cash generating unit to which goodwill is allocated are tested for impairment annually at each balance sheet date, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to that unit and then to the other assets of the unit pro rata on the basis of carrying amount of each asset in the unit. Goodwill impairment loss recognized is not reversed in subsequent period.

Impairment of property, plant and equipment and intangible assets

At each balance sheet date, the Company assesses whether there is any indication that any property, plant and equipment and intangible assets with finite lives may be impaired. If any such impairment exists the recoverable amount of an asset is estimated to determine the extent of impairment, if any. Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually, or earlier, if there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

 

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If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognized immediately in the statement of operations.

Product Warranty

Vehicle warranties are provided for a specified period of time. Our vehicle warranty obligations vary depending upon the type of the product, geographical location of its sale and other factors.

The estimated liability for vehicle warranties is recorded at the time products are sold. These estimates are established using historical information on the nature, frequency, and average cost of warranty claims and our estimates regarding possible future incidence based on actions on product failures.

Changes in warranty liability as a result of changes in estimated future warranty costs and any additional costs in excess of estimated costs, can materially affect our net income. Determination of warranty liability is based on the estimated frequency and amount of future claims, which are inherently uncertain. Our policy is to continuously monitor warranty liabilities to determine the adequacy of our estimate of such liabilities. Actual claims incurred in the future may differ from our original estimates, which may materially affect warranty expense.

Employee Benefits

Employee benefit costs and obligations are dependent on assumptions used in calculating such amounts. These assumptions include salary increase, discount rates, health care cost trend rates, benefits earned, interest cost, expected return on plan assets, mortality rates and other factors.

While we believe that the assumptions used are appropriate, differences in actual experience or changes in assumptions may affect our employee benefit costs and obligations.

Recoverability/recognition of deferred tax assets

Deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the carrying values of assets and liabilities and their respective tax bases, and unutilized business loss and depreciation carry-forwards and tax credits. Such deferred tax assets and liabilities are computed separately for each taxable entity and for each taxable jurisdiction. Deferred tax assets are recognized to the extent that it is probable that future taxable income will be available against which the deductible temporary differences, unused tax losses, depreciation carry-forwards and unused tax credits could be utilized.

Conversion options valuation

Fair value of conversion option in foreign currency convertible notes is determined using various option valuation models such as Black Scholes Merton model, Cox Ross Rubinstein model and Monte Carlo simulation. Management uses its best judgment in estimating the fair value of its financial instruments. However, there are inherent limitations in any valuation technique. Changes in fair valuation of conversion option could have material impact on the results of the Company. However, there are no direct cash flow consequences.

Property, plant and equipment

Property, plant and equipment as of March 31, 2011 includes buildings located in the State of West Bengal in India for the purposes of manufacturing automobiles of Rs.3,098.8 million. Consequent to the decision to relocate and construct a similar manufacturing facility at another location, the management is in the process of evaluating several options, under all of which no adjustment to the carrying amount of the buildings is considered necessary (Refer note 11 (3) to our consolidated financial statements).

B. Liquidity and Capital Resources

We finance our capital requirements through cash generated from operation, debt, and equity. We also raise funds through sale of investments including divestment in stakes of subsidiaries on a selective basis. As of March 31, 2011, our borrowings (including short term debt) were Rs. 387,462 million compared with Rs.423,152 million as on March 31, 2010. For our loan maturity profile, see “— Liabilities and Sources of Financing”.

We believe that we have sufficient resources available to us to meet our planned capital requirements. However, our sources of funding could be adversely affected by an economic slowdown or other macroeconomic factors in India and abroad, which are beyond our control. A decrease in the demand for our products and services could lead to an inability to obtain funds from external sources on acceptable terms or in a timely manner.

 

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In order to refinance our acquisition related borrowings and for supporting long term fund needs, we continued to raise funds in Fiscal 2010 through issue of various equity, equity linked and debt securities. In May 2009, we issued debentures of Rs. 42,000 million with maturities ranging from 23 months to 83 months. In October 2009 we issued new equity shares in the form of Global Depositary Shares aggregating to US$ 375 million and simultaneously issued 4% unlinked convertible notes aggregating US$ 375 million. We raised Rs. 9,529 million raised through divestment of investments which were used to prepay the entire outstanding acquisition related borrowing of US$ 2 billion by October 2009, ahead of the stipulated timeline.

In October 2010, we raised funds aggregating Rs. 33,510 million by an issue of 3,21,65,000 ‘A’ Ordinary Shares at a price of Rs. 764/- per share and 83,20,300 Ordinary Shares at a price of Rs.1,074/- per share to Qualified Institutional Buyers (‘QIBs’), under a qualified institutional placement. This milestone in the financing strategy enabled reduce risks by further de-leveraging.

During the Fiscal 2011 the noteholders exercised the option and FCCN of Rs. 13,403 million were converted in equity.

Additionally during Fiscal 2010 we concluded the arrangement of facilities from third parties for working capital requirements at Jaguar Land Rover which was acquired in Fiscal 2009 on a cash free debt free basis. Jaguar Land Rover has also availed of an 8 year amortizing loan of GBP338 million from the European Investment bank, guaranteed by commercial banks and the loan was granted under the European Clean Transport Facility. The loan will be used for product development programs aimed at lowering CO2 emissions.

While global credit markets witnessed an improvement in liquidity and risk aversion, following the exceptional circumstances of Fiscal 2009, the recent events of the European sovereign debt crisis presents a continued element of uncertainty. Our strategy is aimed at ensuring that we have sufficient funding available with high degree of certainty throughout the business cycle. We have set up plans for aggressive cost reduction to improve generation of operating cash and also raising of funds through a combination of capital market intervention and divestment of investments.

Subsequent to March 31, 2011, Jaguar Land Rover Plc. (JLR), subsidiary of the Company has issued GBP 1,000 million equivalent Senior Notes (Notes). The Notes issued includes GBP 500 million Senior Notes due 2018 at a coupon of 8.125% per annum, USD 410 million Senior Notes due 2018 at a coupon of 7.75% per annum and USD 410 million Senior Notes due 2021 at a coupon of 8.125% per annum. The proceeds will be used to refinance existing debt and for general corporate purposes.

Cash Flow Data

The following table sets forth selected items from our consolidated statements of cash flows for the periods indicated and shows the percentage change between periods.

 

     Rs. in million     Percentage change  
     2011     2010     2009     2010 to 2011     2009 to 2010  

Net Cash provided by Operating Activities:

     141,976        128,365        25,194        10.6     409.5

Net income/ (loss) after tax

     73,749        37,581        (60,774    

Adjustments to net income/ (loss) after tax

     109,630        64,743        90,102       

Changes in Operating Assets and Liabilities

     (27,510     38,365        1,535       

Income tax paid

     (13,893     (12,324     (5,668    

Net Cash used in Investing Activities

     (74,988     (75,981     (162,380     1.3     53.2

Purchase of Property, Plant and Equipment and Intangible Assets (Net)

     (81,714     (81,404     (88,857    

Net Investment, short term deposit , margin money and loans given

     2,339        (8,327     7,381       

Proceeds from sale of controlling/ equity ownership interest in subsidiary, net of cash

     —          11,145        1,379       

Acquisitions

     (119     (426     (98,644    

Realization (deposit) of foreign currency deposit with bank

     —          —          11,338       

Dividend and Interest received

     4,506        3,031        5,023       

Net Cash provided/ (used in) Financing Activities

     (42,999     (5,966     155,437        -620.8     -103.8

Equity issuance ( net of issue expenses)

     32,479        17,231        41,097       

Proceeds from issue of shares by a subsidiary to non-controlling shareholders

     58        542        3       

 

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     Rs. in million     Percentage change  
     2011     2010     2009     2010 to 2011     2009 to 2010  

Dividends paid (including to non-controlling shareholders of subsidiaries)

     (10,230     (3,652     (7,492    

Purchase of additional equity interest in a subsidiary

     —          (137     —         

Interest paid

     (33,967     (34,842     (32,047    

Net borrowings (net of debt issuance cost)

     (31,339     14,892        153,876       

Net change in cash and cash equivalents

     23,989        46,418        18,251        -48.3     154.3

Effect of foreign exchange on cash flows

     3,219        (5,782     (6,840    

Cash and cash equivalents, beginning of the year

     63,463        22,827        11,416       

Cash and cash equivalents, end of the year

     90,671        63,463        22,827       

See consolidated statement of cash flows on Pages F-8 to F-11 for details.

2011 compared to 2010

Net cash provided by operating activities was Rs. 141,976 million and Rs. 128,365 million in Fiscal 2011 and 2010 respectively. Our net income as adjusted for non-cash and other items increased to Rs. 183,379 million in Fiscal 2011 from Rs. 102,324 million in Fiscal 2010. This reflects a strong growth in revenue and profitability in Fiscal 2011.

There was net change in operating assets and liabilities of Rs. 27,510 million in Fiscal 2011 resulting cash outflow, mainly due to increase in working capital consequent to improved volumes. In Fiscal 2010 there was a cash inflow on this account of Rs. 38,365 million.

 

   

There was increase in inventory of Rs. 27,570 million , which relates to volume growth in Fiscal 2011 ( Rs. 15,855 million increase in Fiscal 2010).

 

   

During Fiscal 2010, net trade receivables/ finance receivables had increased by Rs. 18,699 million which was offset by net increase in accounts payables, acceptances and other current assets of Rs. 60,561 million.

Net cash used in investing activities was Rs. 74,988 million in Fiscal 2011 as compared to Rs. 75,981 million in Fiscal 2010.

 

   

Net cash used for purchase of Property, Plant and Equipment and Intangible Assets was Rs. 81,714 million for Fiscal 2011 against Rs. 81,404 million for Fiscal 2010. Our capital expenditure relates mostly to capacity expansion, introduction of new products, product development costs for proposed / new product launches as well as on quality and reliability improvement projects.

 

   

In Fiscal 2010, Rs. 11,145 million were realized from the sale of 20% of the shares in our subsidiary (Telcon) and we sold available for sale investments, which released Rs.10,057 million, this mainly represent sale of our shares in Tata Steel.

 

   

In Fiscal 2011, we made purchase of available for sale and other investments of Rs. 1,471 million as against Rs. 9,896 million in Fiscal 2010.

Net cash outflow from financing activities was Rs. 42,999 million and Rs. 5,966 million for Fiscal 2011 and Fiscal 2010 respectively. The following are the major changes in financing during Fiscal 2011.

 

   

We raised Rs. 32,479 million by way of issue of shares through QIP issue (net of issue expenses) resulted in cash inflow. During Fiscal 2010 we had raised equity of Rs. 17,231 million through GDS issue.

 

   

Net repayment of short term borrowings was Rs. 25,925 million in Fiscal 2011 as compared to net Rs. 45,527 million in Fiscal 2010. Net repayment of long term borrowing was Rs. 5,414 million in Fiscal 2011 as compared to Rs. 60,418 million in Fiscal 2010. We have lowered our debt through substitution by equity and deployment of cash generated in operations.

 

   

We paid interest of Rs. 33,967 million. (Rs. 34,842 million in Fiscal 2010).

 

   

We paid dividend of Rs. 10,042 million. (Rs. 3,637 million in Fiscal 2010).

 

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2010 compared to 2009

Our cash flow statement for Fiscal 2009 includes activities pertaining to acquired businesses of Jaguar Land Rover, Serviplem S.A and Comoplesa Lebrero S.A from the respective dates of acquisition and are not comparable to that extent with Fiscal 2010.

Net cash provided by operating activities was Rs. 128,365 million and Rs. 25,194 million in Fiscal 2010 and 2009 respectively. Our net income as adjusted for non-cash and other items increased to Rs. 102,324 million in Fiscal 2010 from Rs. 29,328 million in Fiscal 2009. This was largely due to a strong growth in revenue and profitability in Fiscal 2010.

There was net change in operating assets and liabilities of 38,365 million in Fiscal 2010 which has contributed to cash increase. For Fiscal 2009, there was a net cash decrease of Rs. 1,535 million.

 

   

In Fiscal 2010, the accounts payable and acceptances increased by Rs. 69,156 million, mainly due to increase in manufacturing activity and production volumes and the finance receivables lowered by Rs. 6,833 million primarily due to improvement in the processes relating to disbursement and collections. These changes contributed to cash increase.

 

   

The above increase in cash was partly offset by increase in the trade receivables and inventory of Rs. 25,532 million and Rs. 15,855 million in Fiscal 2010, the increase primarily relates to volume growth.

Net cash used in investing activities was Rs. 75,981 million in Fiscal 2010 as compared to Rs. 162,380 million in Fiscal 2009.

 

   

Net cash used was purchase of Property, Plant and Equipment and Intangible Assets was Rs. 81,404 million for Fiscal 2010 against Rs. 88,857 million for Fiscal 2009. Our capital expenditure relates mostly to capacity expansion of our production facilities especially extension of our Jamshedpur production facilities for Prima, upgrading the production facilities at Castle Bromwich and Solihull for new products and product development costs for proposed / new product launches as well as on quality and reliability improvement projects.

 

   

Payment made for the Jaguar Land Rover and Serviplem acquisitions during Fiscal 2009 was Rs. 98,644 million (net of cash acquired).

 

   

In Fiscal 2010, Rs. 11,145 million were realized from the sale of 20% of the shares in our subsidiary (Telcon) and we sold available for sale investments, which released Rs. 10,057 million, this mainly represent sale of our shares in Tata Steel. In Fiscal 2009 we sold investments, which released Rs. 16,125 million, these mainly represent sale of our shares in Tata Steel, TCS, Tata Teleservices.

 

   

In Fiscal 2010, we made purchase of available for sale investments of Rs. 9,896 million, mainly in mutual funds (classified as available for sale).

Net cash outflow from financing activities was Rs. 5,966 million for Fiscal 2010 and for Fiscal 2009 there was an inflow of Rs. 155,437. The following are the major changes in financing during Fiscal 2010.

 

   

Issue of equity through GDSs (net of issue expenses) resulted in cash inflow of Rs. 17,231 million. During Fiscal 2009, there was rights issue of shares of Rs. 41,097 million (net of issue expenses).

 

   

Net repayment of short term borrowings was Rs. 45,527 million in Fiscal 2010 as compared to net short term borrowing of Rs. 145,965 million in Fiscal 2009. In Fiscal 2009 the short term bridge of Rs. 127,223 million was raised, and Rs. 48,778 million was repaid during Fiscal 2009. In Fiscal 2010, Rs. 48,229 million was repaid and the tenure of the balance bridge loan was amended extending the final maturity by 18 months upto December 31, 2010. This bridge loan of Rs. 47,240 million has been fully repaid during Fiscal 2010.

 

   

We paid interest of Rs. 34,842 million.(Rs. 32,047 million in Fiscal 2009)

 

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Balance Sheet Data

Total assets were Rs. 1,031,527 million and Rs. 908,410 million as of March 31, 2011 and 2010, respectively. The 13.6% increase of Rs. 123,117 million represents the following:

Our total current assets have increased by Rs. 68,827 million representing 18.7% increase as of March 31, 2011.

Cash and cash equivalents were Rs. 90,671 million, as of March 31, 2011 compared to Rs. 63,463 million as of March 31, 2010. We hold cash and cash equivalent in Indian Rupees, GBP, and Chinese Renminbi etc. It includes Rs. 15,766 million as of March 31, 2011 ( Rs. 2,233 million as of March 31, 2010) held by a subsidiary that operates in a country where exchange control restrictions prevent the balances being available for general use by Tata Motors Limited and other subsidiaries. In addition, short term deposits with banks increased to Rs. 7,735 million as of March 31,2011 from Rs. 4,187million as of March 31,2010, mainly due to unutilized proceeds of equity funding raised through our qualified institutional placement equity issuance.

As of March 31, 2011, we had Finance receivables including non-current portion (net of allowances for credit losses) of Rs. 146,328 million as compared to Rs.147,143 million as of March 31, 2010. For further detail see “— Finance Receivables”.

Trade Receivables (net of allowance for doubtful receivables) were Rs. 67,689 million as of March 31, 2011 representing a decrease of Rs. 2,481 million. The allowances for trade and other receivables was Rs. 2,963 million as of March 31, 2011 against Rs. 3,024 millions as of March 31, 2010. In certain markets trade receivables have gone up mainly due to volumes and delays in payment by government owned transport companies. This increase was offset by a substantial reduction in receivable relating to Jaguar Land Rover operations supported by strong growth in sales.

As of March 31, 2011, inventories stood at Rs. 139,548 million compared to Rs. 110,675 million as of March 31, 2010, The increase is driven by volumes. The increase in finished goods inventory was Rs. 28,873 million which was in line with the volume growth and in terms of number of days to sales, finished goods represented 28 inventory days in Fiscal 2011 sales as compared to 32 inventory days in Fiscal 2010.

Our investments (short and long term investments) have increased from Rs. 17,240 million as of March 31, 2010 to Rs. 18,885 million as of March 31, 2011, representing an increase of 9.5%. A part of the temporary surplus is invested in debt mutual funds, where there has been net increase of Rs. 581 million and our investment in unquoted shares have increased on a net basis by Rs. 1,144 million, which includes investment made in Tata Group companies of Rs.1,095 million.

Our other current assets increased from Rs. 32,800 million as of March 31, 2010 to Rs. 40,379 million as March 31, 2011. The increase is attributable to an increase in VAT, other taxes recoverable statutory deposits and other dues from government.

Our other financial assets including non-current financial assets decreased to Rs. 26,231 million as of March 2011 from Rs. 33,532 million as of March 31, 2010. Margin money and restricted deposits representing collateral provided in exchange of guarantees provided by banks for transfer of finance receivables have come down by Rs. 8,894 million and the reduction was partly offset by an increase in fair value of derivative financial instruments of Rs.3,580 million.

The income tax assets ( both current and non-current) were Rs. 9,139 million as of March 31, 2011 as compared to Rs. 7,690 million as of March 31, 2010.

The increase (net of depreciation and amortization) in the Property, Plant and Equipment and Intangible assets was Rs. 54,302 million as of March 31, 2011. The increase mainly represents our product development projects, establishment of new facility for Nano and other additions towards capacity and upgradation of new products.

Accounts payable and Acceptances were Rs. 278,513 million as of March 31, 2011 as compared to Rs.256,012 million as of March 31, 2010. The increase reflects the volume growth in Fiscal 2011.

The provisions (current and non-current) as of March 2011 and 2010 were Rs. 50,690 million and Rs 46,280 million respectively representing an increase of Rs. 4,410 million. The provision for warranty increased by Rs 5,133 million mainly on account of volume growth which was partly offset by reduction in provision for residual risk towards guarantee of re-purchase of vehicles and product liability.

Other liabilities (non-current) have increased to Rs. 21,685 million as of March 31, 2011 as compared to Rs.7,941million as of March 31, 2010. The increase was mainly attributable to an increase on account of actuarial valuation mainly due to change in mortality assumptions in respect of certain employee pension schemes employee defined obligations of Rs.13,815 million.

Total shareholders’ equity was Rs. 211,259 million and Rs. 102,223 million as of March 31, 2011 and 2010, respectively. During Fiscal 2011, we issued shares aggregating US$ 750 million, comprising ‘A’ Ordinary Shares aggregating US$ 550 million and Ordinary Shares aggregating US$ 200 million.

 

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Consequently, we have allotted 32,165,000 ‘A’ Ordinary Shares at a price of Rs. 764 per ‘A’ Ordinary Share (including a premium of Rs. 754 per 'A' Ordinary Share) and 8,320,300 Ordinary Shares at a price of Rs.1,074 per Ordinary Share (including a premium of Rs.1,064 per Ordinary Share) resulting in increase in equity by Rs. 32,498 million.

During Fiscal 2011, 1% foreign currency convertible notes (USD) due 2011 converted into 4,134,763 equity shares. Zero coupon foreign currency convertible notes (JPY) due 2011 were converted into 11,929 equity shares. 4% foreign currency convertible notes (USD) due 2014 were converted into 19,423,734 equity shares, amounting to Rs 28,212 million (net of issue expenses of Rs. 18.7 million), thereby increasing equity.

Our reserves increased from Rs.4,224 million as of March 31, 2010 to Rs. 45,136 million as of March 31, 2011, mainly due to net income of Rs. 73,402 million for Fiscal 2011. We have accounted actuarial losses of Rs. 22,436 million in respect of pension obligations of certain subsidiary companies on account of change in mortality assumptions and restrictions of pension assets. We paid dividend of Rs. 10,053 million in Fiscal 2011.

Our other components of equity represented a loss of Rs .18,098 million as of March 31, 2011 against a loss of Rs. 25,249 million as of March 31, 2010.

Our total debt stood at Rs. 387,462 million as of March 31, 2011 as compared to Rs. 423,152 million as of March 31, 2010. Short term debt including the current portion of long-term debt was Rs. 185,991 million as of March 31, 2011 compared to Rs. 224,254 million as of March 31, 2010.

Our long-term debt, excluding the current portion, increased marginally by Rs. 2,574 million , to Rs. 201,471 million as of March 31, 2011 from Rs. 198,897 million as of March 31, 2010. However long term debt including the current portion decreased by Rs. 12,073 million to Rs. 255,318 million. The collateralized debt obligation decreased by Rs. 24,124 million as of March 31, 2011, due to repayments in Fiscal 2011. Foreign currency convertible notes (including fair value of conversion option) decreased by Rs. 11,627 million mainly due to conversion of FCCN. Further non convertible debentures increased by Rs. 7,077 million as of March 31, 2011 from Rs. 59,622 million as of March 31, 2010. Fixed deposits from public and shareholders (unsecured) and loan from banks/financial institution increased by Rs. 2,541 million and Rs. 15,431 million respectively. Certain loans from banks availed by some of the subsidiary companies carry covenants restricting repayment of intra group loans and payment of dividend.

Liabilities and Sources of Financing

We fund our short-term working capital requirements with cash generated from operations, overdraft facilities with banks, short and medium term borrowings from lending institutions, banks and commercial paper. The maturities of these short and medium term borrowings and debentures are generally matched to particular cash flow requirements. We had short-term borrowings (including the current portion of long-term debt) of Rs. 185,991 million and Rs. 224,254 million as of March 31, 2011 and 2010 respectively. We had unused short-term credit facilities of Rs. 149,946 million and Rs. 90,956 million as of March 31, 2011 and 2010, respectively. We have been successful in reducing the loans from banks and other short term borrowings by Rs. 38,263 million.

During the year the working capital limits from consortium banker have been increased to Rs. 120,000 million from previous working capital limits of Rs. 80,000 millions. The working capital limits are secured by hypothecation of existing current assets of the company viz. stock of raw material, stock in process, semi-finished goods, stores and spares not relating to plant and machinery (consumable stores and spares), bills receivables and book debts including vehicle finance receivable and all other moveable current assets except cash and bank balances, loans and advances of the company both present and future. The working capital limits are renewed annually.

On April 27, 2004, we had raised US$300 million (Rs.13,155.0 million at issue) by way of 1% convertible notes due in 2011, the US$ 2011 Notes. The noteholders had an option to convert these notes into Ordinary Shares or ADSs determined at an initial conversion price of Rs.780.40 per share at a fixed rate of conversion of Rs.43.85 per US$1.00, from and including June 7, 2004 to and including March 28, 2011. The conversion price of the notes was reset to a price of Rs.736.72 per share at a fixed rate of conversion of Rs.43.85 per US$1.00, on account of our rights issue in Fiscal 2009 and GDS issue in Fiscal 2010. Unless previously converted, redeemed or purchased and cancelled, these notes were due for redemption on April 27, 2011 at 121.781% of the principal amount. During Fiscal 2010, we offered to non-U.S. noteholders an option to convert their US$ 2011 Notes into Ordinary Shares during a limited offer period from March 23, 2010 to March 29, 2010. Noteholders, who did not participate, could continue with all the terms of their Notes as applicable prior to this limited period offer. During Fiscal 2010, as per the terms of invitation memorandum, noteholders could opt to receive shares at enhanced conversion terms. Noteholders representing 76.54% of the outstanding notes, or US$229.63 million principal amount, opted to convert their US$ 2011 Notes into Ordinary Shares. During Fiscal 2011, 69,468 US$ 2011 Notes were converted into 4,134,763 ordinary shares/ADS. The remaining 898 outstanding US$ 2011 Notes were redeemed at maturity on April 27, 2011.

On March 20, 2006, we issued JPY11,760 million (Rs.4,500.3 million) zero coupon convertible notes due in 2011, the JPY 2011 Notes. The noteholders had an option to convert these notes into Ordinary Shares or ADSs determined at an initial conversion price of Rs.1,001.39 per share with a fixed rate of exchange on conversion of Rs.1.00 per JPY2.66, from and including May 2, 2006 to and including February 19, 2011.

 

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The conversion price of the notes was subsequently reset to a price of Rs.945.34 per share at a fixed rate of conversion of Rs.1.00 per JPY2.66, on account of our rights issue in Fiscal 2009 and GDS issue in Fiscal 2010. Further, we had a right to redeem in whole, but not in part, these notes at any time on or after March 20, 2009 but prior to February 8, 2011, subject to certain conditions. In the event of certain changes affecting taxation, we have an option to redeem these notes, in whole but not in part, at any time. Unless previously converted, redeemed or purchased and cancelled, these notes were due for redemption on March 21, 2011, at 99.253% of the principal amount. In Fiscal 2009, we bought and cancelled 30 JPY 2011 Notes (principal value of JPY300 million). During Fiscal 2010, we offered to non-U.S. noteholders, an option to convert their JPY 2011 Notes into Ordinary Shares during a limited offer period from March 23, 2010 to March 29, 2010. Noteholders, who did not participate, could continue with all the terms of their Notes as applicable prior to this limited period offer. During this period, as per the terms of invitation memorandum, noteholders could opt to receive Shares at enhanced conversion terms. Noteholders representing 93.46% of the outstanding JPY 2011 Notes, or JPY 10,710 million outstanding principal amount, opted to convert their notes into Ordinary Shares. During Fiscal 2011, 3 JPY 2011 Notes were converted into 11,929 ADSs. The remaining 72 outstanding JPY 2011 Notes were redeemed at maturity on March 21, 2011.

On July 12, 2007, we raised funds aggregating US$ 490 million (Rs.19,927.1 million at issue) by issue of Zero Coupon Convertible Alternative Reference Securities, or CARS due on July 12, 2012, which allows us to give the note holders an option to convert the CARS into qualifying securities as per the terms of issue after appropriate adjustment to the conversion price. If we do not exercise this option, the conversion may be made by the note holders from and including October 11, 2011 to and including June 12, 2012, into ordinary shares or ADSs at an initial conversion price of Rs. 960.96 per share (equivalent to US$ 23.67 at a fixed rate of exchange on conversion of Rs. 40.59 per US$) which is subject to adjustment in certain circumstances. The conversion price of the notes was reset to a price of Rs 907.87 per share on account of our rights issue in Fiscal 2009 and further to a price of Rs 907.17 per share on account of our GDS issue in Fiscal 2010, at a fixed rate of conversion of Rs. 40.59 per USD. We have a right to redeem in whole, but not in part, these Notes at any time on or after October 11, 2011, subject to certain conditions. Unless previously converted, redeemed or purchased and cancelled as per the terms of issue, these will be redeemed on July 12, 2012 at 131.82% of the outstanding principal amount. During Fiscal 2009, we bought and cancelled 170 Notes (Principal value of US$ 17 million). There was no conversion during Fiscal 2010. As of March 31, 2011, 4,730 outstanding CARS may at the option of the noteholders be converted into 21,163,696 ADSs or shares at any time from and including October 11, 2011 to and including June 12, 2012.

On June 2, 2008, we completed the acquisition of Jaguar Land Rover business for purchase consideration of US$2.5 billion in an all cash transaction from Ford, which in turn contributed approximately US$600 million to the Jaguar Land Rover business pension plans. The purchase consideration paid by Jaguar Land Rover Limited was financed through a capital contribution of US$500 million and a short-term bridge loan of US$3 billion from a group of lenders. We have repaid all the US dollars and Euro tranches of the loan as of October 2009, 14 months prior to December 2010, the due date of the last tranche.

In October 2008, we raised an aggregate of Rs.41,393.3 million through a simultaneous but unlinked rights issue of (i) 64,276,164 Ordinary Shares of Rs.10 each at a premium of Rs.330/- per share aggregating Rs.21,853.9 million in the ratio of one Ordinary Share for every six Ordinary Shares; and (ii) 64,276,164 ‘A’ Ordinary Shares of Rs.10 each at a premium of Rs.295 per ‘A’ Ordinary Share aggregating Rs.19,604.2 million in the ratio of one ‘A’ Ordinary Share for every six ordinary shares. Proceeds of rights issue were used to prepay part of bridge loan drawn taken for the acquisition of the Jaguar Land Rover business.

In May 2009, we raised funds through further divestments of investments and issued secured non-convertible credit enhanced rupee debentures in four tranches, having tenors up to seven years, aggregating Rs.42,000 million on a private placement basis. Proceeds were used to prepay part of the short-term bridge loan taken for the acquisition of the Jaguar Land Rover business.

On October 15, 2009, we issued 29,904,306 new equity shares in the form of Global Depositary Shares, or GDSs, at a price of US$12.54 per GDS, aggregating US$375 million and 4% convertible notes due 2014, aggregating US$375 million (Rs.17,941.9 million at time of issue), the 4% 2014 Notes. The noteholders of the 4% notes due 2014 ,had an option, subject to the terms and conditions of the issue, to convert these notes into Ordinary Shares or GDSs or ADSs. The conversion may be made by the noteholders, in the case of Shares or GDSs, at any time during the period from and including November 25, 2009 to and including October 9, 2014 and, in the case of ADSs, at any time from and including October 15, 2010 to and including October 9, 2014, at an initial conversion price of Rs. 623.88 per Share (equivalent to USD13.48 per share at a fixed rate of exchange on conversion of Rs. Rs.46.28 = US$1.00) that is subject to adjustment in certain circumstances. The conversion price of the notes were subsequently reset to a price of Rs.613.77 per Ordinary share at a fixed rate of exchange of Rs. 46.28 = US$ 1.00 with effect from September 4, 2010, as a result of the enhanced conversion offer and payment of dividend for Fiscal 2010,. We have the right to redeem in whole, but not in part, these notes at any time on or after October 15, 2012, subject to certain conditions. In the event of certain changes affecting taxation, we have an option to redeem these 4% 2014 notes, in whole but not in part, at any time. Unless previously converted, redeemed or purchased and cancelled as per the terms of issue, these notes will be redeemed on October 16, 2014 at 108.505% of the outstanding principal amount.

 

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        We utilized the above proceeds to repay the outstanding bridge loan. There was no conversion during Fiscal 2010. During the Fiscal 2011, 2,576 Notes were converted into 19,423,734 ordinary shares/ADSs.

Following the conversion 1,174 outstanding Notes may at the option of the noteholders be converted into 8,852,293 Shares or GDSs at any time up to October 9, 2014 and into 8,852,293 ADSs at any time from and including October 15, 2010 to and including October 9, 2014.

In February 2010, Jaguar Land Rover obtained a loan of GBP 338 million from European Investment Bank (EIB). Proceeds from loan were used to finance development of micro and full hybrid drive trains and research into more energy efficient car bodies by Jaguar Land Rover. The loan is structured with guarantee support from banks.

In Fiscal 2011, we issued rated, listed, secured/unsecured non-convertible debentures of Rs. 9,000 million with maturities of 10-15 years as a step to raise long term resources and optimize the loan maturity profile.

Subsequent to March 31, 2011, Jaguar Land Rover Plc. (JLR), subsidiary of the Company has issued GBP 1,000 million equivalent Senior Notes (Notes). The Notes issued includes GBP 500 million Senior Notes due 2018 at a coupon of 8.125% per annum, USD 410 million Senior Notes due 2018 at a coupon of 7.75% per annum and USD 410 million Senior Notes due 2021 at a coupon of 8.125% per annum. The proceeds will be used to refinance existing debt and for general corporate purposes.

Principal Sources of Funding Liquidity

We access funds from debt markets through commercial paper programs, non–convertible debentures, fixed deposits from public and other debt instruments. We also constantly monitor funding options available in the debt and capital markets with a view to maintaining financial flexibility. The funding requirements are met through a mixture of equity, convertible or non-convertible debt securities and other long-term/short-term borrowings. Our policy is aimed at a combination of short-term and long-term borrowings.

We are also pursuing alternatives for meeting our long term funding requirements.

See Note 37 to our audited consolidated financial statements for additional disclosures on financial instruments related to liquidity, foreign exchange and interest rate exposures and use of derivatives for risk management purposes.

The following table sets forth our short-term and long-term debt position:

 

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