Company Quick10K Filing
Tata Motors
20-F 2020-03-31 Filed 2020-08-13
20-F 2019-03-31 Filed 2019-07-30
20-F 2018-03-31 Filed 2018-07-31
20-F 2017-03-31 Filed 2017-07-28
20-F 2016-03-31 Filed 2016-07-28
20-F 2015-03-31 Filed 2015-07-30
20-F 2014-03-31 Filed 2014-08-01
20-F 2013-03-31 Filed 2013-08-02
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.
Part III
Item 17. Financial Statements.
Item 18. Financial Statements.
Item 19. Exhibits.
EX-4.2 d570474dex42.htm
EX-7.1 d570474dex71.htm
EX-8.1 d570474dex81.htm
EX-12.1 d570474dex121.htm
EX-12.2 d570474dex122.htm
EX-13 d570474dex13.htm

Tata Motors Earnings 2013-03-31

Balance SheetIncome StatementCash Flow

20-F 1 d570474d20f.htm FORM 20-F Form 20-F
Table of Contents

As filed with the Securities and Exchange Commission on August 2, 2013

 

 

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, 2013

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)

 

Republic of India  

Bombay House

24, Homi Mody Street

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.2 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. — 2,708,156,151 Ordinary Shares and 481,959,620 ‘A’ Ordinary Shares, including 498,041,255 Ordinary Shares represented by 99,604,051 American Depositary Shares (ADS) outstanding as of March 31, 2013. (Each ADS now represents five Ordinary Shares).

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 five shares 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; references to “GBP” are to the lawful currency of the United Kingdom; references to “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” and “Chinese Renminbi” are to the lawful currency of China;

 

   

References to “US GAAP” are to accounting principles generally accepted in the United States; 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 five of our Ordinary Shares of Rs.2/- each, and references to an “ADR” are to an American Depositary Receipt evidencing one or more ADSs;

 

   

References to “Share” and “Ordinary Share” are to the Ordinary Shares and the ‘A’ Ordinary Shares unless otherwise specifically mentioned to the contrary;

 

   

References to light commercial vehicles, or LCVs, refer to vehicles that have gross vehicle weight, or GVW, of up to 7.5 metric tons while references to medium and heavy commercial vehicles, or M&HCVs refer to vehicles that have GVW, of over 7.5 metric tons;

 

   

References to passenger cars are to vehicles that have a seating capacity of up to five persons, including the driver that are further classified into the following market segments: Micro — length of up to 3,200 mm; Mini — length of between 3,200 mm and 3,600 mm; Compact — length of between 3,600 mm and 4,000 mm; Super Compact — length of between 4,000 mm and 4,250 mm; Mid-size — length of between 4,250 mm and 4,500mm; Executive — length of between 4,500mm and 4,700 mm; Premium — length of between 4,700 mm and 5,000mm; Luxury — length of above 5,000 mm; Coupe — Roadster- 2 Doors; 2/4 Seater, retractable/firm roof; and Exotics — price greater than Rs.10 million;

 

   

References to utility vehicles, or UVs, and multi-purpose vehicles, or MPVs and Vans, are to vehicles that have a seating capacity of five to ten persons, including the driver;

 

   

References to premium cars and sports utility vehicles, or 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 2012”, 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 tons” 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, the United States, the United Kingdom and the 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 

        
  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      1   
    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      17   
    C.   Organizational Structure      41   
    D.   Property, Plants and Equipment      44   
  Item 4A.     Unresolved Staff Comments      48   
  Item 5.     Operating and Financial Review and Prospects      48   
    A.   Operating Results      48   
    B.   Liquidity and Capital Resources      62   
    C.   Research and Development, Patents and Licenses, etc.      73   
    D.   Trend Information      73   
    E.   Off-balance Sheet Arrangements      74   
    F.   Tabular Disclosure of Contractual Obligations      74   
  Item 6.     Directors, Senior Management and Employees      74   
    A.   Directors and Senior Management      74   
    B.   Compensation      79   
    C.   Board Practices      80   
    D.   Employees      82   
    E.   Share Ownership      84   
  Item 7.     Major Shareholders and Related Party Transactions      85   
    A.   Major Shareholders      85   
    B.   Related Party Transactions      87   
    C.   Interests of Experts and Counsel      88   
  Item 8.     Financial Information      88   
    A.   Consolidated Statements and Other Financial Information      88   
    B.   Significant Changes      88   
  Item 9.     The Offer and Listing      88   
    A.   Offer and Listing Details      88   
    B.   Plan of Distribution      88   
    C.   Markets      89   
    D.   Selling Shareholders      91   
    E.   Dilution      91   
    F.   Expenses of the Issue      91   
  Item 10.     Additional Information      91   
    A.   Share Capital      91   
    B.   Memorandum and Articles of Association      93   
    C.   Material Contracts      98   
    D.   Exchange Controls      98   
    E.   Taxation      102   
    F.   Dividends and Paying Agents      105   
    G.   Statement by Experts      105   
    H.   Documents on Display      105   
    I.   Subsidiary Information      106   
  Item 11.     Quantitative and Qualitative Disclosures about Market Risk      106   
  Item 12.     Description of Securities Other than Equity Securities      106   

 

iii


Table of Contents

Part II

         
  Item 13.      Defaults, Dividend Arrearages and Delinquencies      107   
  Item 14.      Material Modifications to the Rights of Security Holders and Use of Proceeds      107   
  Item 15.      Controls and Procedures      107   
  Item 16A.      Audit Committee Financial Expert      108   
  Item 16B.      Code of Ethics      108   
  Item 16C.      Principal Accountant Fees and Services      108   
  Item 16D.      Exemptions from the Listing Standards for Audit Committees      109   
  Item 16E.      Purchases of Equity Securities by the Issuer and Affiliated Purchasers      109   
  Item 16F.      Change in Registrant’s Certifying Accountant      109   
  Item 16G.      Corporate Governance      109   

Part III

         
  Item 17.      Financial Statements      110   
  Item 18.      Financial Statements      110   
  Item 19.      EXHIBITS      110   

 

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, 2013, 2012, 2011, 2010, and 2009 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, 2013, 2012 and 2011 and for each of the Fiscal years ended March 31, 2013, 2012, and 2011 are derived from our audited IFRS consolidated financial statements included in this annual report. The selected IFRS consolidated financial data as of March 31, 2010 and 2009 and for each of the Fiscal years ended March 31, 2010 and 2009 are derived from our audited IFRS consolidated financial statements not included in this annual report.

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,  
     2013     2013     2012     2011     2010     2009  
    

(In US$ millions,

except share

and per share
amounts)

    (in Rs. millions, except share and per share amounts)  

Revenues

     34,260.8        1,859,847.0        1,640,512.5        1,209,902.6        904,465.9        702,636.0   

Finance revenues

     552.9        30,013.3        24,340.4        22,231.5        21,796.9        20,170.3   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     34,813.7        1,889,860.3        1,664,852.9        1,232,134.1        926,262.8        722,806.3   

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

     (555.5     (30,158.0     (25,770.1     (18,874.7     (9,343.9     15,793.3   

Purchase of products for sale

     2,369.3        128,615.8        124,295.9        121,000.6        96,839.1        71,260.2   

Raw materials and consumables

     20,407.0        1,107,792.4        1,001,950.8        694,097.9        531,209.4        401,679.9   

Employee cost

     3,058.6        166,038.8        122,130.2        92,249.6        87,944.9        75,199.7   

Depreciation and amortization

     1,358.1        73,723.2        54,435.1        43,445.7        36,636.6        28,039.8   

Other expenses

     7,039.1        382,119.6        309,380.5        232,341.7        180,807.7        175,613.6   

Expenditure capitalized

     (1,877.5     (101,919.7     (82,659.8     (57,433.1     (46,046.7     (45,310.9

Gain on sale of controlling equity interest in subsidiary

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

Other (income) / loss (net)

     (221.5     (12,024.0     (9,407.1     8,218.0        418.6        (14,294.8

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

     —          —          —          —          —          (6,569.6

Foreign exchange (gain)/loss (net)

     288.1        15,640.0        11,154.2        (3,090.0     (16,045.3     48,142.8   

Interest income

     (142.9     (7,759.8     (5,426.8     (3,669.5     (2,570.1     (3,097.2

Interest expense (net)

     750.7        40,751.8        38,290.4        36,853.5        40,396.0        34,222.3   

Impairment in equity accounted investees

     —          —          4,981.0        —          —          —     

Share of (profit)/loss of equity accounted investees

     (31.9     (1,733.5     351.1        458.4        1,229.3        3,464.0   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income /(loss) before tax

     2,372.1        128,773.7        121,147.5        86,536.0        52,352.7        (59,932.1

Income tax expense

     (721.9     (39,190.5     (4,707.1     (12,787.3     (14,771.6     (841.8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income /(loss) after tax

     1,650.2        89,583.2        116,440.4        73,748.7        37,581.1        (60,773.9
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income/(loss) attributable to equity holders

     1,633.9        88,697.0        115,659.1        73,401.8        38,028.7        (60,142.3

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

     16.3        886.2        781.3        346.9        (447.6     (631.6

 

1


Table of Contents
     For each of the years ended March 31,  
     2013      2013      2012      2011      2010      2009  
    

(In US$ millions,

except share

and per share
amounts)

     (in Rs. millions, except share and per share amounts)  

Dividends per share

   US$ —           Rs. 4.0         Rs. 20.0         Rs. 15.0         Rs. 6.0         Rs. 15.0   

Dividends per share ‘A’ Ordinary Shares

   US$ —           Rs. 4.1         Rs. 20.5         Rs. 15.5         Rs. 6.5         Rs. —     

Weighted average equity shares outstanding:

                 

Basic

     2,706,014,707         2,706,014,707         2,691,542,867         2,588,800,690         2,318,682,314         2,065,267,345   

Diluted

     2,706,507,429         2,706,507,429         2,797,890,724         2,590,872,227         2,319,432,171         2,065,267,345   

Weighted average ‘A’ equity shares outstanding:

                 

Basic

     481,958,717         481,958,717         481,900,898         396,669,199         320,880,139         137,142,495   

Diluted

     482,206,515         482,206,515         482,206,416         397,166,848         321,380,820         137,142,495   

Earnings per share:

                 

Basic

   US$ 0.5         Rs. 27.8         Rs. 36.4         Rs. 24.6         Rs. 14.4         Rs. (27.3

Diluted

   US$ 0.5         Rs. 27.8         Rs. 36.0         Rs. 24.5         Rs. 14.4         Rs. (27.3

Earnings per share of ‘A’ Ordinary Shares:

                 

Basic

   US$ 0.5         Rs. 27.9         Rs. 36.5         Rs. 24.7         Rs. 14.5         Rs. (27.3

Diluted

   US$ 0.5         Rs. 27.9         Rs. 36.1         Rs. 24.6         Rs. 14.5         Rs. (27.3

The face value of shares was sub-divided with effect from September 14, 2011. Post sub-division, Ordinary Shares and ‘A’ Ordinary Shares have each been sub-divided from having face value of Rs.10 each into five shares having face value of Rs.2 each.

Dividend per share and Dividend per ‘A’ Ordinary Share, as given above for Fiscal 2012, 2011, 2010 and 2009 are before the subdivision of Ordinary Shares and ‘A’ Ordinary Shares.

Weighted average equity shares and ‘A’ equity shares outstanding and earnings per share of previous years have been adjusted retrospectively, to make them comparable, pursuant to sub-division of shares.

 

     As of March 31,  
     2013      2013      2012      2011      2010      2009  
     (in US$ millions,
except number of
shares)
     (in Rs. millions, except number of shares)  

Balance Sheet Data

                 

Total Assets

     30,739.8         1,668,695.4         1,434,536.2         1,031,526.9         908,410.2         782,629.4   

Long term debt, net of current portion

     5,995.3         325,457.5         287,148.1         201,471.3         198,897.4         116,185.9   

Total shareholders’ equity

     6,887.9         373,905.7         331,343.6         211,259.3         102,222.8         38,725.8   

Number of Equity shares outstanding

                 

-Ordinary Shares

     2,708,156,151         2,708,156,151         2,691,613,455         538,272,284         506,381,170         449,832,659   

-’A’ Ordinary Shares

     481,959,620         481,959,620         481,933,115         96,341,706         64,176,374         64,175,655   

During Fiscal 2012, Ordinary Shares and ‘A’ Ordinary Shares have each been subdivided from having face value of Rs.10 each into five shares having face value of Rs.2 each. Consequently, the number of shares as at March 31, 2011, 2010 and 2009 are not comparable to the number of shares as at March 31, 2013 and 2012.

Exchange Rate Information

For convenience, some of the financial amounts presented in this annual report have been translated from Indian rupee amounts into US dollar amounts at the rate of Rs.54.2850 = US $1.00, based on the fixing rate in the city of Mumbai as published by the Foreign Exchange Dealers’ Association of India on March 30, 2013. However, such translations do not imply that the Indian rupee amounts have been could have been, or could be converted into US dollars at that or any other rate.

 

2


Table of Contents

The following table sets forth, for the Fiscal years ended March 31, 2013, 2012, 2011, 2010 and 2009 information with respect to the exchange rate between the Indian rupee and the US dollar (Rs. per US dollar) as published by Bloomberg L.P.

 

Fiscal year ended March 31,

   Period End      Period
Average
     High      Low  

2013

     54.28         54.44         57.16         50.72   

2012

     50.88         47.95         53.72         44.08   

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   

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

 

Month

   Period End      Period
Average
     High      Low  

January 2013

     53.23         54.27         55.23         53.23   

February 2013

     54.36         53.81         54.48         53.14   

March 2013

     54.28         54.42         54.93         54.03   

April 2013

     53.81         54.38         54.89         53.81   

May 2013

     56.51         55.05         56.51         53.82   

June 2013

     59.39         58.38         60.73         56.45   

July 2013

     60.37         59.75         60.62         59.04   

Source: Bloomberg L.P

As of August 1, 2013, the value of the Indian rupee against the US dollar was Rs.60.4437 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 fiscal cliff in the United States, the European sovereign debt crisis and economic challenges in the United Kingdom and Europe continues to be a cause of concern despite concerted efforts to contain the adverse effect of these events on global recovery.

In addition to India, we have automotive operations in the United Kingdom, South Africa, South Korea, Spain and Thailand, and have established a presence in Indonesia. The Indian automotive industry is affected materially 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, or 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 followed by several interest rate hikes by RBI in 2011.

 

3


Table of Contents

With inflation moderating in 2012, RBI reduced the repo rate and reverse repo rate by 100 basis points in Fiscal 2013 (50 basis points in April 2012, 25 basis points in January 2013 and further 25 basis points in March 2013). However, muted industrial growth along with continuing higher inflation and interest rates still pose 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 materially and adversely affect our automotive sales in India and results of operations.

Our Jaguar Land Rover operations have significant presence in the United Kingdom, North America, continental Europe and China, as well as sales operations in many major countries across the globe. The global economic downturn significantly impacted the global automotive markets, particularly in the United States and Europe, including the United Kingdom, 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. Our Jaguar Land Rover business, while increasing its investments towards products, capacity expansion and other initiatives, is also exploring opportunities to reduce its 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. While markets in the United States have shown signs of recovery and stability, the United Kingdom and Europe continue to struggle. If industry demand softens because of the impact of the debt crisis, or lower or negative economic growth in key markets, including China, or other factors, our results of operations and financial condition could be materially and adversely affected.

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 and/or result in increased costs. 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.

In Fiscal 2013, we were in breach of two financial covenants relating to our ratio of total outstanding liability to tangible networth and the other relating to our debt service coverage ratio in bank guarantees relating to our 2009 non-convertible Indian rupee debentures, which would potentially increase cost. We have requested and obtained waivers of our obligations to pay additional costs as a consequence of such breaches. However, we cannot assure you that we will succeed in obtaining consents or waivers in the future from our lenders or guarantors, or that our lenders and guarantors will not impose additional operating and financial restrictions on us, or otherwise seek to modify the terms of our existing loan agreements in ways that are materially adverse to us. See “Item 5. Operating and Financial Review and Prospects — B. Liquidity and Capital Resources — Loan Covenants.”

 

4


Table of Contents

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 include the results of Jaguar Land Rover for the period commencing from June 2, 2008 to March 31, 2009. 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 financial crisis in 2009, 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 materially and 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 Japanese Yen and the Indian rupee. In particular, as of August 1, 2013, the value of the Indian rupee against the US Dollar was Rs. 60.4437 per US$1.00, as published by Bloomberg L.P., a depreciation of approximately 11.4%, as compared to Rs.54.2850 = US $1.00, based on the fixing rate in the city of Mumbai as published by the Foreign Exchange Dealers’ Association of India on March 30, 2013.

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 exchange rate exposure considering our vehicle sales in the U.S., Europe and China. In addition, Jaguar Land Rover sources a significant portion of input material from European suppliers.

 

5


Table of Contents

As compared to the previous year, the GBP has, on average, weakened against the US dollar, and strengthened against the Euro, which has positively influenced the results of our operations The depreciation of the Indian rupee against the US dollar adversely impacted our borrowing cost and consequently, our results of operations. Our Jaguar Land Rover operations have outstanding foreign currency denominated debt in US dollars and are sensitive to fluctuations in foreign currency exchange rates.

Although we engage in currency hedging in order to decrease our foreign exchange risks, 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.

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 the 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, environmental impact and perception thereof, 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 favor 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.

 

6


Table of Contents

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 in India.

We are subject to risks associated with our automobile financing business. During Fiscal 2013, in order to support the sale of our vehicles, our automobile financing business has increased its market share. Any default by our customers or inability to repay installments as due, could adversely affect our business, results of operations and cash flows. In addition, any downgrade 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 downgrade, 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.

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.

Natural disasters and man-made accidents, adverse economic conditions, decline in automobile demand, and lack of access to sufficient financing arrangements, among others, could have a negative financial impact on our suppliers and distributors in turn impairing timely availability of components to us or increasing the costs of such components. Similarly, impairments to the financial condition of our distributors may adversely 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 effect 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 services could have a material adverse effect on our operations and financial condition.

Increases in input prices may have a material adverse effect on our results of operations.

In Fiscal 2013 and 2012, consumption of raw materials, components and aggregates and purchase of products for sale constituted approximately 63.8% and 66.1% respectively, of total revenues. Prices of commodity items used in manufacturing automobiles, including steel, aluminum, copper, zinc, rubber, platinum, palladium and rhodium have become increasingly volatile in recent years. Further price movements would closely depend on the evolving economic scenarios across the globe. 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.

Deterioration in the performance of any 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 any of these subsidiaries and affiliates deteriorates, the value of our investments may be adversely affected.

 

7


Table of Contents

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 72% 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. 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, 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 effect 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. Markets in China tend to show higher demand for vehicles around the Chinese New Year. 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, or Tata Sons. 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.

 

8


Table of Contents

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. 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, the United States, Africa, 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 and challenges, 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, participate 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. Also, 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 adversely affected.

 

9


Table of Contents

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 United States 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 benefit from excise duty exemptions for manufacturing facilities in the State of Uttarakhand and other incentives such as subsidies or loans from 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. 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 may be affected by any disagreement between certain state governments, which could create uncertainty. The timeline of the proposed transition is uncertain as at the date hereof.

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 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 disruption or delay 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, rules, 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, Securities and Exchange Board of India, or SEBI, regulations, New York Stock Exchange, or NYSE, listing rules and Indian stock market listing regulations. New or changed laws, rules, 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.

 

10


Table of Contents

In addition, new laws, rules, regulations and standards regarding corporate governance may make it more difficult for us to obtain director and officer liability insurance. Further, our Board members, Executive Directors and 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, rules, 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 Government of India. Since 1991, successive governments have pursued policies of economic liberalization and financial sector reforms.

The Government of India 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 Government of India 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 Government of India’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. 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. 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.

 

11


Table of Contents

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

We are a limited liability company incorporated under the laws of India. The majority of our directors and Executive Officers named in this annual report are residents of India and 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 RBI, the central bank of India, 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 Indian 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.

Fluctuations in the exchange rate between the Indian rupee and the US dollar will affect, among others things, the US dollar equivalents of the price of the Shares in Indian 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 Indian rupees received on the Shares represented by the ADSs and the dollar equivalent of the proceeds in Indian rupee of a sale of Shares in India.

The exchange rate between the Indian rupee and the US dollar has changed materially in the last two decades and during last year in particular, and may materially fluctuate in the future. The value of the Indian rupee against the US dollar was Rs.60.4437 = US$1.00 as of August 1, 2013.

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.

 

12


Table of Contents

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 Amended and Restated Deposit Agreement (as amended). 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 the 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 we form the Tata Motors Group. Please see Item 4.C “— Organizational Structure” 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.

We offer a broad portfolio of automotive products, ranging from sub-1 ton to 49 ton 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. We are India’s leading automobile company and rank as the fifth largest truck manufacturer (6 ton plus) and fourth largest bus manufacturer in the world in each case, as measured by volume of vehicles produced in 2012.

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 four passenger vehicle manufacturers in terms of units sold in India during Fiscal 2013. We estimate that around 7.5 million vehicles produced by us are being operated in India as of the date hereof.

 

13


Table of Contents

We operate six 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, Sanand in the state of Gujarat and at Dharwad in the state of Karnataka. We also operate three principal automotive manufacturing facilities in the United Kingdom through our Jaguar Land Rover business: at Solihull in the West Midlands, Castle Bromwich in the West Midlands and at 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% equity interest in Hispano Carrocera S.A. (renamed as Tata Hispano Motors Carrocera S.A.), or Hispano, a Spanish bus and coach manufacturer. During Fiscal 2010, we acquired the remaining 79% of the remaining equity interests 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, or Fiat Group 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 Fiat Linea, Fiat Punto, Tata Manza, Tata Indica and Tata Indica Vista vehicles as well as components for such vehicles, such as engines and transmissions. During May 2012, both the joint-venture partners decided to re-align their Indian joint-venture. Accordingly, in March 2013, we and Fiat Group have signed a Restructuring Framework Agreement, or RFA. As per the revised agreement –

 

  a) Joint venture shall manufacture and assemble Fiat products, Tata products and any new products (including for third parties) in accordance with the terms and conditions settled in the RFA. The current third party orders shall continue as per current terms.

 

  b) The distribution company, owned by Fiat Group shall be responsible for distribution of the Fiat vehicles and parts from April 1, 2013.

 

   

In May 2006, we entered into a joint venture agreement with Brazil-based Marcopolo S.A., or Marcopolo, to manufacture and assemble fully-built buses and coaches in India, wherein we have a 51% ownership, with the remainder held by Marcopolo. The joint venture, Tata Marcopolo Motors Limited, or Tata Marco Polo, 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, 2013, we own 90.82% of the joint venture, while Thonburi owns the remaining 9.18%. 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 commenced in 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 Ltd, or TMSA, a joint venture company in which we hold a 60% equity interest with the remaining 40% equity interest being held by Tata Africa Holdings (SA) (Pty.) Ltd, 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 product portfolio of award winning luxury performance cars and premium all-terrain vehicles, brand specific global distribution networks and 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.

 

   

In October 2010, we 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 meet global standards. Trilix offers design and engineering services in the automotive sector, including styling, architecture, packaging, surfacing, macro- and micro-feasibility studies and detailed engineering development.

 

14


Table of Contents
   

In December 2011, PT Tata Motors Indonesia was established as our subsidiary, with the objective and purpose of conducting business activities of import, assembly and wholesale distribution of vehicles in Indonesia and to neighboring countries.

We produce a wide range of automotive products, including:

 

   

Passenger Cars. Our passenger cars range includes the Tata Nano, Indica, Tata Indica Vista in the hatch segment, sub-4m Tata Indigo eCS and mid sized Tata Indigo Manza in the sedan category. We have expanded our car lines with several variants and fuel options to suit various customer preferences. In October 2012, we refreshed the styling of the Tata Indica eV2, the most fuel efficient hatchback in its class, and also refreshed the Tata Indigo Manza with technological features such as a touch screen multimedia interface and a built-in GPS. In January 2013, we launched the Tata Vista D90 in the premium hatchback segment, powered by quadrajet diesel engine with Variable Geometry Turbocharger, or VGT technology. We launched the Tata Indigo Manza in South Africa in September 2012.

Jaguar has an established presence in the premium car segment. Jaguar currently produces three car lines, including the Jaguar XK sports car (coupe and convertible), the Jaguar XF sedan and the Jaguar XJ sedan. The 2013 Model Year Jaguar XF range includes for the first time an all-wheel drive version of the new V6 gasoline engine for the United States and European markets and a 2.0-liter gasoline version for the United States and Chinese markets. The 2013 Model Year for Jaguar XJ includes an all-wheel drive version and a 3.0-liter V6 gasoline version for the United States and European markets and a 2.0-liter gasoline version for the Chinese market, which benefits from lower custom duties in that market. In September 2012, the Jaguar F-TYPE was at the Paris Motorshow, a two-seat sports car that was inspired by the 2011 C-X16 concept car. The Jaguar F-TYPE has an all-aluminum structure and combines technological features such as all-aluminum double wishbone suspension and stop/start fuel economy measures with the power of Jaguar’s latest 3.0-liter V6 and 5.0-liter V8 engines. The Jaguar F-TYPE was made available to retail customers from April 2013 in select markets.

 

   

Utility Vehicles. We manufacture a number of UVs, including the Sumo, an SUV, Tata Safari, and recently launched Safari Storme, the lifestyle pickup, the Xenon XT, the newly launched premium crossover vehicle, the Tata Aria, and the multipurpose utility vehicle, or MPV, the Venture. The Safari, the Sumo and the Xenon XT meet different consumer preferences such as the Safari DICOR 2.2 VTT range, powered by a new 2.2 L Direct Injection Common Rail, or DICOR, engine, the Tata Safari Storme 2.2L VariCOR engine, the Sumo Grande, an SUV with the comforts of a family car, and the new Sumo Gold, which features a BS4 3.0L diesel CR4 engine, delivering 85 PS power which was launched in November 2011. Tata Aria is India’s first four-wheel drive crossover, a luxurious creation with the finesse of a sedan and the horsepower of an SUV blended in one car. We expanded the existing range of Aria with the launch of Tata Aria Pure LX in December 2012 & the SUV range with the launch of Tata Safari Storme in October 2012.

Land Rover produces six 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, Range Rover Sport and Range Rover Evoque, and the Land Rover brand comprises the Defender, Discovery 4 and Freelander 2 vehicles. The Freelander 2 was significantly enhanced for the 2013 Model Year with the introduction of a turbocharged 2.0-liter gasoline engine, offering superior performance to the 3.2-liter engine it replaces while also reducing CO2 emissions. At the 2013 New York International Auto Show, Land Rover debuted the new 2014 Model Year Range Rover Sport built on a weight saving aluminum architecture. The Range Rover Sport’s new aluminum architecture achieves a weight saving of up to 420kg, and when combined with a TDV6 engine, allows for improved agility and performance, with 15 per cent. CO2 reduction and 24 per cent. improved fuel economy. The new Range Rover Sport is the fastest, most agile and most responsive Land Rover ever. The new aluminum Range Rover was launched in the third quarter of Fiscal 2013. A diesel hybrid Range Rover is currently being developed for introduction later in 2013. The new Range Rover was declared the world’s top SUV by The Sunday Times, won Top Gear magazine’s “Luxury Car of the Year” and was recently awarded the maximum 5-star safety rating by Euro NCAP.

 

   

Light Commercial Vehicles. We manufacture a variety of LCVs, including pickup trucks, trucks and buses with a GVW (including payload) of between 1.2 tons and 7.5 tons. This also includes the Tata Ace, India’s first indigenously developed mini-truck with a 0.75 ton payload with 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 Tata Ace platform, and the Winger.

 

15


Table of Contents
 

We showcased at the New Delhi Auto Expo 2012, the Tata Ultra, our new LCV and ICV range that comprises a series of variants from 5 to 14 tons. In October 2012, we launched the 1-ton diesel mini truck, the Tata Super ACE, in South Africa.

 

   

Medium and Heavy Commercial Vehicles We manufacture a variety of M&HCVs, which include trucks, tractors, buses, tippers, and multi-axled vehicles with GVW (including payload) 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 ‘Tata Prima’ line, to our customers in India and 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 showcased at the New Delhi Auto Expo 2012, the Tata LPT 3723, India’s first 5-axle rigid truck, the Tata Paradiso G7 Multi-axle Coach, jointly developed by Tata Motors and Tata Marcopolo Motors Limited, and the Tata Starbus Fuel Cell Concept (Hydrogen). In September 2012, Tata Motors Limited launched 6 first-of-its-kind heavy trucks and an intelligent vehicle and driver management solution – Tata FleetMan Telematics Services. The Tata Prima range has now been further extended with the launch of two new engine capacities of 380HP and 230HP. In the 380HP range, two new models have been launched – the Prima 4938 tractor and the Prima 3138K tipper. The new 230HP LX range has two new products – the Prima 4923 and the Prima 4023 tractors. The Tata Motors Construck range has been further supplemented with the launch of the versatile Tata LPK 3118 tipper. We also introduced a telematics and fleet management service, branded Tata FleetMan. Targeted at commercial vehicle fleet owners and large consigners of goods, the service offers advanced telematics solutions, which will help in increasing productivity and profitability. During Fiscal 2013, in the SIAM International Bus & Utility Vehicles Show, at Greater Noida, we showcased two new exciting applications from our line-up of buses for the MCV market for intercity transportation and staff transportation: including a 45-seater front-engine luxury air-conditioned intercity coach and a luxury non-airconditioned 41-seater staff bus. Other new vehicles on display included the luxurious Divo Coach, Semi Deluxe Starbus Ultra Contract Bus, the all new Starbus Ultra intended for use as school transportation and an ambulance based on the Tata Venture platform. The new MCV buses are fully built offerings catering to both airconditioned and non-airconditioned contract and intercity applications. The world-class body has been built to meet international standards by Tata Motors Marcopolo Limited, on tested Tata LPO 1618 and LPO 1512 chassis, which are reliable and provide strong performance. In January 2013, we introduced a warranty of 4 years, on our entire range of heavy trucks with 25 tons and higher GVW.

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 this understanding into desirable 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 rapid 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.

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 72.32% owned subsidiary, is engaged in providing specialized engineering and design services, product lifecycle management, or PLM, 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 subsidiary companies and one joint venture as at March 31, 2013. The consolidated revenue for TTL was Rs.20,324 million in Fiscal 2013 (including revenue from Tata Motors Group), growth of 24.8% from Rs.16,291 million in Fiscal 2012, as worldwide automotive and aerospace markets showed volume traction. TTL recorded profit after tax of Rs.3,008 million in Fiscal 2013, representing an increase of 42.8% over Rs.2,107 million in Fiscal 2012 contributed by higher offshore revenues and cost reduction measures that were implemented.

 

16


Table of Contents

TML Distribution Company Limited, or TDCL, our wholly-owned subsidiary, was incorporated on March 28, 2008. TDCL provides distribution and 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, and commenced business in Fiscal 2008.

As of March 31, 2013, our operations included 64 consolidated subsidiaries and 25 equity method affiliates, in respect of which we exercise significant influence.

As of March 31, 2013, we had approximately 62,716 permanent employees, including approximately 32,751 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 developed markets such as the United Kingdom, the United States and Europe as well as in growing markets like China, Russia and Brazil, where we were not present earlier. Going forward, we expect to focus on profitable growth opportunities in our global automotive business, through new products and market expansion. Within our automotive operations we continue to focus on integration and synergy through sharing of resources, platforms, facilities for product development and manufacturing, sourcing strategy and mutual sharing of best practices.

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

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

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, with Thonburi in Thailand and Tata Africa Holdings (SA) (Pty.), Ltd in South Africa, Trilix Srl., Turin (Italy), and TMETC in the United Kingdom and our relationship with Fiat, will enable us to expand our product range and extend our geographical reach.

 

17


Table of Contents

The launches of Tata Divo Luxury Coach and Tata Starbus Ultra in Fiscal 2012 using body designs from Hispano and Tata Marcopolo demonstrate continued leveraging of our capabilities. In Fiscal 2012, we showcased at the New Delhi Auto Expo 2012: (i) the Tata Ultra, a new LCV and ICV range platform, allowing flexibility of multiple wheel bases and multiple payload points, (ii) the Tata LPT 3723, India’s first 5-axle rigid truck (launched in September 2012) and the Tata Paradiso G7 multi-axle coach, jointly developed by Tata Motors and Marcopolo and (iii) our alternate fuel technology capability through the following concept vehicles - the Tata Starbus Fuel Cell (hydrogen) and the Tata Magic Iris CNG. Our portfolio already includes CNG-electric hybrid buses. During Fiscal 2013, in the SIAM International Bus & Utility Vehicles Show, at Greater Noida, we showcased two new exciting applications from our line-up of buses for the MCV market for intercity transportation and staff transportation: including a 45-seater front-engine luxury air-conditioned intercity coach and a luxury non-airconditioned 41-seater staff bus. Other new vehicles on display included the luxurious Divo Coach, Semi Deluxe Starbus Ultra Contract Bus, the all new Starbus Ultra intended for use as school transportation and an ambulance based on the Tata Venture platform. The new MCV buses are fully built offerings catering to both air conditioned and non-air conditioned contract and intercity applications. The body has been built to meet international standards by Tata Motors Marcopolo Limited, on tested Tata LPO 1618 and LPO 1512 chassis, which are reliable and provide strong performance.

In September 2012, we launched six first-of-its-kind heavy trucks. The Tata Prima range has now been further extended with the launch of two new engine capacities of 380HP and 230HP. In the 380HP range, two new models have been launched – the Prima 4938 tractor and the Prima 3138K tipper. The new 230HP LX range has two new products – the Prima 4923 and the Prima 4023 tractors. The Tata Motors Construck range has been further supplemented with the launch of the versatile Tata LPK 3118 tipper. We also introduced an intelligent vehicle and driver management telematics solution, branded Tata FleetMan. Targeted at commercial vehicle fleet owners and large consigners of goods, the service offers advanced telematics solutions, which will help in increasing productivity and profitability. In January 2013, we introduced a warranty of four years on our entire range of heavy trucks with GVW of 25 tons or higher.

Our product portfolio of Tata brand vehicles includes the Nano, Indica, Indica Vista, Indigo, Indigo Manza, Sumo, Sumo Grande, Safari, Safari Storme, Aria and Venture, enables us to compete in various market segments. As discussed above, the Company also showcased its alternate fuel technology capability at the New Delhi Auto Expo 2012 by displaying the Tata Nano CNG and the Tata Indigo Manza diesel-electric hybrid concept vehicles. In 2012, we developed the Tata Indica Vista electric vehicle, a fully electric car, in conjunction with the technology from TMETC.

We have continued modernizing our facilities to meet increasing demand for our vehicles. Our Jamshedpur plant, which manufactures our entire range of M&HCVs, including the Tata Prima, both for civilian and defense applications, was our first, set up in 1945, to manufacture steam locomotives. It led the Company’s foray into commercial vehicles in 1954. The Jamshedpur plant has been modernized through the decades, with a particularly intense scale in the last 10 years. In Fiscal 2013, the Jamshedpur plant produced its two millionth truck. In June 2012, our plant at Dharwad became operational, producing the Tata ACE Zip and the Tata Magic IRIS, a move integral to maintaining market share in the commercial vehicles market, particularly in the growing LCV market.

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 programs, 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. 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. In India, we improved our Customer Service Index, or CSI, score to 796 in 2012 from 779 in 2011. We improved in ranking to 6th in the 2012 J.D. Power India Customer Service Index survey from 7th in 2011. We continue to focus on high quality customer satisfaction. We believe our extensive sales and service network has also enabled us to provide quality and timely customer service. We are driving focused initiatives at both sales and service touch points to enhance customer experience and thrive to be best in class.

Jaguar and Land Rover collectively received over 110 awards from leading international motoring writers, magazines and commentators in 2012, reflecting the strength of its design capabilities and distinctive model line-up. The Jaguar XF is Jaguar’s best-selling model across the world by volume and has received more than 100 international awards since its launch, including being named “Best Executive Car” by What Car? Magazine for four consecutive years. The Jaguar XJ has received more than 20 international awards since its launch, including “Best Luxury Car” from China’s Auto News in 2010, “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.

 

18


Table of Contents

Products and environmental performance: Our strategy is to invest in products and technologies that position our products ahead of expected stricter environmental regulations and ensure that we benefit 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 also committed to investing in automotive research and development in the United Kingdom. We believe that we are the leader in development of 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. For example, the Jaguar Range-e plug-in hybrid demonstration vehicle achieved 89g CO2/km and won the 2011 Society of Moto Manufacturers and Traders Award For Automotive Innovation. The Jaguar C-X75 hybrid supercar was developed in partnership with Williams Advanced Engineering. Its 1.6-litre engine generates an 502bhp and is matched with 390bhp electric motors that give the Jaguar C-X75 a 220mph top speed but also an all-electric range of 60 kilometers and emissions below 89g/km. In addition to these vehicle level projects, Jaguar Land Rover has a number of collaborative research and development projects in systems such as electric motors, power electronics and energy storage. Jaguar Land Rover is also the lead OEM partner in the UK Energy Storage Centre, developing capability in next generation battery technology and alternative mobile energy storage.

Our Jaguar Land Rover business has started to introduce a new premium lightweight architecture for its products, initially launched on the new Range Rover and Range Rover Sport 2. This architecture includes a host of environmentally-friendly technologies including new aluminum alloys, down-sized power trains, sustainable materials, best CO2 navigation routes, electronic power steering, aerodynamic features and many more technologies. These technologies enable the delivery of luxurious and high-performance products combined with low CO2 and laid the foundations for efficient hybridization of the platform. Jaguar Land Rover’s initial full-hybrid program is also in advanced stages. Our Jaguar Land Rover business already offers five aluminum vehicles, the Jaguar XJ, Jaguar XK, new Jaguar F-TYPE, the new Range Rover and the new Range Rover Sport and plans to continue to deploy its core competency in aluminum construction across more models in its range. We are also developing more efficient vehicle technologies. Our current product line-up is the most fuel-efficient it has ever been. The all-aluminum Jaguar XJ 3.0 V6 twin-turbo diesel has CO2 emissions rated at 159 g/km. The most efficient version of the Range Rover Evoque emits less than 130 g/km. The new 3.0-liter TDV6 Range Rover offers similar performance to the previous 4.4-liter TDV8 Range Rover while fuel consumption and CO2 emissions have been reduced to 196 g/km from (TDV6 figure) from 253 g/km (TDV8). The new “downsized” 2.0-liter turbocharged gasoline engine options in the Range Rover Evoque, the 2013 Model Year Freelander 2, and the Jaguar XF and Jaguar XJ also offer improved fuel efficiency. In the case of the latest Freelander Si4, fuel consumption and CO2 emissions have been reduced over the outgoing 3.2-liter Freelander Si6. Equipped with stop-start and an 8-speed automatic transmission, the Jaguar XF 2.2-liter diesel, already the most fuel efficient Jaguar vehicle ever, was further improved for the 2013 Model Year with CO2 emissions rate at 135 g/km.

In Fiscal 2011, some of the plug-in hybrid projects of Jaguar Land Rover were completed and have provided the technical foundation for a production development program for plug-in hybrid vehicles on a parallel basis along with traditional gasoline vehicles. In addition, Jaguar Land Rover has made significant progress on a number of ongoing collaborative research and development programs investigating a wide range of CO2 reduction technologies. These include radical combustion engine downsizing/pressure charging, alternative power sources for hybrids, flywheel kinetic energy recovery systems and other waste energy recovery systems.

Our Jaguar Land Rover business is also taking measures to reduce emissions, waste and the use of natural resources from all of its operations. Jaguar Land Rover recognizes the need to use resources responsibly, produce less waste and reduce its carbon footprint. Against our Environmental Innovation, or Ei strategy baseline year of 2007, a 21% reduction in operational CO2 has been achieved despite significant project work to expand our facilities. Water use was reduced by 12.7% per unit and waste to landfill was reduced by 75% per unit versus the 2007 baseline. Jaguar Land Rover has implemented life cycle techniques so that we can evaluate and reduce our environmental footprint throughout the value chain. Jaguar Land Rover has been certified to the international environmental management standard, ISO14001, since 1998. As part of its integrated CO2 management strategy, Jaguar Land Rover has one of the largest voluntary CO2 offset programs and has provided customer programs to enable its customers to offset the emissions from vehicle use.

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 offering a wide range of products in diverse 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.

 

19


Table of Contents

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 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 category, in terms of unit sales in Ukraine in Fiscal 2013. We have also further consolidated our market share in most segments of commercial vehicles in some SAARC countries like Bangladesh, Nepal and Sri Lanka.

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. 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. The joint venture company, Tata Motors (SA) Proprietary Limited, commenced operations in July 2011.

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 this 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 to engineer a new variant for use in the Ace platform, which helped to reduce the project cost. 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 and Land Rover brands.

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 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 is 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 PLM 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.

 

20


Table of Contents

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 a 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, and Trilix, together with the two advanced engineering and design centers of Jaguar Land Rover, have increased our capabilities in product design and engineering. 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.

Maintaining financial strength: Our cash flow from operating activities in Fiscal 2013 and 2012 was Rs.222,933 million and Rs.218,227 million, respectively. The improved position in our operating cash flows is primarily due to an increase in volumes at our Jaguar Land Rover business, 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 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, Jaguar, Range Rover and Land Rover are highly regarded, and will be nurtured and promoted. At the same time, we will continue to build new brands such as the newly launched Ultra range of LCVs to further enhance our brand equity.

Automotive Operations

We sold 1,191,179, 1,269,483, and 1,078,814 vehicles in Fiscal 2013, 2012 and 2011 respectively, consisting of 819,923 units of Tata and other brand vehicles and 372,062 units of Jaguar Land Rover vehicles in Fiscal 2013. In terms of units sold our largest market is India where we sold 758,175 and 880,825 units during Fiscal 2013 and 2012, (constituting 63.6% and 69.4% of total sales in Fiscal 2013 and Fiscal 2012, respectively) followed by China in Fiscal 2013 where we sold 79,458 units and 54,532 units in Fiscal 2013 and Fiscal 2012 respectively (constituting 6.7% and 4.3% of total sales) (In Fiscal 2012 the United Kingdom was our second largest market where we sold 58,558 units and 61,796 units in Fiscal 2013 and Fiscal 2012 respectively). 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 2013, 2012 and 2011 are set forth in the table below:

 

Category

   Fiscal 2013     Fiscal 2012     Fiscal 2011  
     Units      %     Units      %     Units      %  

Passenger Cars

     236,260         19.8     352,981         27.8     322,149         29.9

Utility Vehicles

     361,822         30.4     316,589         24.9     243,934         22.6

Light Commercial Vehicles

     428,708         35.9     365,677         28.8     311,167         28.8

Medium and Heavy Commercial Vehicles

     165,189         13.9     234,236         18.5     201,564         18.7

Total

     1,191,179         100.0     1,269,483         100.0     1,078,814         100.0

Revenues from our automotive operations were Rs.1,878,571 million, Rs.1,654,903 million and Rs.1,223,547 million in Fiscal 2013, 2012 and 2011, respectively. Tata and other brand vehicles (including spares and financing thereof) constituted 27.3% of our total automotive revenues before inter-segment elimination in Fiscal 2013 while Jaguar Land Rover constituted 72.7%.

 

21


Table of Contents

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

We sold 819,923, 955,233, and 835,469 units of Tata and other brand vehicles in Fiscal 2013, 2012 and 2011 respectively. Of the 819,923 units sold in Fiscal 2013, 755,681 units were sold in India while 64,248 units were sold outside of India, compared to 878,551 units and 76,682 units respectively for Fiscal 2012. Our share of the Indian four-wheeler automotive vehicle market (i.e. automobile vehicles other than two and three wheeler categories) decreased from 25.1% in Fiscal 2012 to 22.0% in Fiscal 2013. We maintained our leadership position in the commercial vehicle segment in an industry which experienced increased competition during the year. The passenger vehicle market also continued to be subject to intense competition.

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

 

Category

   Fiscal 2013     Fiscal 2012     Fiscal 2011  
     Units      %     Units      %     Units      %  

Passenger Cars

     178,494         21.8     298,991         31.3     269,194         32.2

Utility Vehicles

     47,532         5.8     56,329         5.9     53,544         6.4

Light Commercial Vehicles

     428,708         52.3     365,677         38.3     311,167         37.2

Medium and Heavy Commercial Vehicles

     165,189         20.1     234,236         24.5     201,564         24.2

Total

     819,923         100.0     955,233         100.0     835,469         100.0

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

 

Category@

   Fiscal 2013     Fiscal 2012     Fiscal 2011  

Passenger Cars*

     9.5     13.6     14.4

Utility Vehicles**

     7.1     10.9     13.2

Light Commercial Vehicles***

     62.2     60.2     63.2

Medium and Heavy Commercial Vehicles

     53.3     59.3     60.1

Total Four-Wheel Vehicles

     22.0     25.1     24.3

 

@ Passenger cars, UV and LCV market share for the Fiscal 2013 and Fiscal 2012 are not comparable with the data for Fiscal 2011 due to changes in the Industry classification by SIAM.
* Passenger cars market shares include sales of Fiat vehicles distributed by us and Jaguar Land Rover vehicles sold in India. Furthermore, passenger cars market share for Fiscal 2013 and Fiscal 2012 is based on the total cars sold in the industry, while passenger cars market shares for Fiscal 2011 are based on the segments where we offered products (i.e., small cars and midsize segments) and does not include the super compact segment where we did not offer any products.
** UV market share for Fiscal 2013 and Fiscal 2012 includes the market share for Vans V1 segment (i.e. Tata Venture) and excludes Vans V2 segment (i.e. Tata Ace Magic), while UV market shares for Fiscal 2011 are based on the segments where we are present.
*** LCV market shares include the market shares for Vans V2 segment (i.e. Tata Ace Magic) in accordance with SIAM’s classification of passenger vehicles.

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

Passenger cars: The domestic passenger cars industry grew by 0.9% in Fiscal 2013 compared with an increase of 3.6% in Fiscal 2012. Domestic passenger vehicle sales were impacted by rising interest rates, fuel price hikes and inflationary pressures.

Customer preference for diesel vehicles over gasoline vehicles continued. Marketing initiatives and network actions continued with weak industry trends. Our performance within the industry was also impacted unfavorably. During Fiscal 2013, we recorded sales of 172,824 vehicles in the domestic market; a decline of 33.2% over last year. The overall market share was lower at 8.9% as compared to 13.0% during the last fiscal year. In Fiscal 2013, we sold 48,122 Nano cars, compared with 77,394 in Fiscal 2012. We continue to focus on expanding the market penetration of the Nano, including initiatives to appeal to younger customers such as our ‘Art in motion’ and ‘Campus Brand Ambassador’ programs. Furthermore, we continue to identify new markets for the Nano. We are evaluating markets in South Asia, in addition to the current markets in Nepal and Sri Lanka. We also continue to offer products at a low price point in the entry level mid-size sedan market through a portfolio including the old Indigo and the Indigo eCS.

The distribution business of Fiat cars through Tata-Fiat dealer network, which started in March 2006, entered its seventh and final year of operation in Fiscal 2013. During Fiscal 2013, we sold 5,179 Fiat cars, including the Grande Punto and Linea, through our joint venture with Fiat in India. Fiat stood in the 13th position by sales volume among the major car players in India. The Tata-Fiat dealer network was operating through 170 dealer facilities across 129 cities as of March 31, 2013. Fiat was ranked 7th in the J.D. Power 2012 India Customer Service Index Survey. During May 2012, both the joint-venture partners decided to re-align their Indian joint-venture and the management control of distributing and marketing Fiat branded cars, and related commercial activities. With effect from April 1, 2013, FIAL has been restructured to a manufacturing company that manufactures vehicles, powertrains and related spare parts for us and the Fiat Group.

 

22


Table of Contents

The new distribution company of the Fiat Group will be responsible for distribution and marketing of Fiat branded vehicles. However, we are continuing to provide service support at 82 cities across India until September 30, 2013, where Fiat was unable to establish a network by March 31, 2013.

Since the commencement of distribution of Jaguar and Land Rover vehicles through our exclusive dealerships in India in June 2009, the brands have witnessed positive market responses. The sales volumes in Fiscal 2013 have grown approximately 10% to 2,494 vehicles compared to Fiscal 2012 despite the adverse impact of an increase in customs duty on imported premium cars in the March 2012 Union Budget. We commenced the local assembly of the Jaguar XF model in our facility at Pune in October 2012. We expect that additional efforts towards dealership network expansion and local assembly of Jaguar Land Rover products will enable us to further penetrate the premium/luxury automotive passenger car market in India.

Utility Vehicles: Although, the utility vehicles market recorded a healthy growth of 51.5% in Fiscal 2013, we registered decline, mainly attributable to absence of a product in the fast growing soft roader utility vehicle segment. The Safari Storme was launched in Fiscal 2013, and has received a positive response from the market.

Commercial Vehicles: The commercial vehicles market in India in Fiscal 2013 recorded a modest growth of 1.7% which resulted in sales of 594,737 units in Fiscal 2013. The M&HCV market segment decreased by 23.3% in Fiscal 2013, compared to a growth of 6.5% in Fiscal 2012. The ban on mining in the Indian states of Karnataka and Goa, coupled with the slowdown in infrastructure spending, curtailed growth, especially in M&HCV. Slowed industrial growth across many key segments adversely impacted demand. However, we registered a marginal increase in sales in Fiscal 2013, growing by 1.0% to 536,491 units, as focus shifted to growing and consolidating presence in the LCV segment.

Light Commercial Vehicles (including pickups): Our range of LCVs includes small commercial vehicles, pickup trucks, trucks and commercial passenger carriers with a GVW (including payload) of between 1.2 tons and 7.5 tons. The LCV market segment grew by 17.9% in Fiscal 2013, mainly aided by the continuing expansion of the small commercial vehicle segment. Our sales increased by 21.5% to 393,726 units from 324,069 units in Fiscal 2013.

In the LCV segment, finance offerings were launched to target specific customer segments. This had tremendous success and is being used selectively to further sales of key models going forward. The new generation LCV Starbus Ultra was launched in March 2012

We made good progress in the high growth pickup truck market, with new product offerings addressing gaps in the portfolio and financing packages.

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 142,765 units during Fiscal 2013, resulting in a market share of 53.3%. We launched several new products and variants in this segment in 2013, one of which was the five axle rigid truck, the LPT 3723. Furthermore, we launched a four year warranty for our M&HCV products, to underscore the quality and reliability of our offerings.

Tata and other brand vehicles — Sales and Distribution:

Our sales and distribution network in India as of March 2012, comprises approximately 2,600 sales contact points for our passenger and commercial vehicle business. In line with our growth strategy, we formed a 100% owned subsidiary, 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 have completed the initial rollout of a new customer relations management system, or 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 CRM initiative supports users both within our Company and among our distributors in India and abroad.

Through our vehicle financing division and wholly owned subsidiary, 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. TMFL, disbursed Rs.111,800 million and Rs.105,047 million during Fiscal 2013 and 2012 respectively. During Fiscal 2013 and 2012, approximately 33% and 27%, 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, 2013 and 2012 amounted to Rs.198,219 million and Rs.171,241 million respectively.

 

23


Table of Contents

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.

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.

In Fiscal 2013, we also introduced Tata FleetMan. Targeted at commercial vehicle fleet owners and large consigners of goods, the service offers advanced telematics solutions, which will help in increasing productivity and profitability. The Tata FleetMan has been designed to address pressing concerns of the transport industry, targeted at the commercial vehicle fleet owner.

Through advanced telematics solutions like fuel management, driver management and remote diagnostics, Tata FleetMan combines information technology and telecommunications equipment and software, with Tata Motors Limited expertise in automobile technology, providing features like real time fleet tracking, SMS alerts, geo-fencing and trip management.

We believe that the reach of our sales, service and maintenance network provides us with a significant advantage over our competitors.

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 have attracted 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, and as a result, 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. The vehicles have also been designed to 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 develop 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 Government of India’s 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 decreased by 22.1% in Fiscal 2013 to 48,145 units from 61,835 units in Fiscal 2012 supported by economic improvement in our major international markets such as the Indian sub-continent and Africa.

In Fiscal 2013, our top five export destinations from India accounted for approximately 51% and 92% 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 6.1% increase in its overall vehicle sales to 10,080 units in Fiscal 2013 from 9,500 units in Fiscal 2012. In the South Korean market, TDCV’s unit sales in the M&HCV category in Fiscal 2013 decreased by 17.6% to 5,400 units compared to 6,552 units in Fiscal 2012, mainly due to a decrease in overall industry demand as a result of the economic slowdown. However, TDCV’s export performance in Fiscal 2013 increased by 58.8% to 4,680 units compared to 2,948 units in Fiscal 2012. TDCV’s sales increased significantly in several of its traditional export markets like Algeria, Russia, Laos, South Africa, and Vietnam. TDCV vehicles were also sold into some new markets like Indonesia, Ecuador, and Ghana.

 

24


Table of Contents

Jaguar Land Rover

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

The strengths of the Jaguar Land Rover business 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 2013, 2012 and 2011 are set forth in the table below:

 

     Fiscal 2013     Fiscal 2012     Fiscal 2011  
     Units      %     Units      %     Units      %  

Jaguar

     57,766         15.5     53,990         17.2     52,955         21.8

Land Rover

     314,290         84.5     260,260         82.8     190,390         78.2

Total

     372,056         100.0     314,250         100.0     243,345         100.0

Jaguar:

Jaguar’s principal products are the Jaguar XK sports car (coupe and convertible), Jaguar XF sedan and the Jaguar XJ sedan.

The Jaguar XK is Jaguar’s premium luxury performance, GT, car, launched in 2006 with a high aluminum content to deliver fuel and CO2 efficiency, and is available in coupe and convertible models. The Jaguar XK was significantly updated in 2009 with a new engine and exterior and interior design enhancements and further revised in 2011. The Jaguar XKR-S coupe and convertible models are the sporting flagships for Jaguar Land Rover’s revitalized XK line-up. The Jaguar XKR-S is the fastest and most powerful production sports GT that Jaguar has ever built.

The Jaguar XF, launched in 2008, is a premium executive car that merges sports car styling with the sophistication of a luxury sedan. The Jaguar XF is Jaguar’s best-selling model across the world by volume and has received more than 100 international awards since its launch, including being named “Best Executive Car” by What Car? Magazine for four consecutive years. In 2009, the Jaguar XF underwent a significant engine upgrade, and in 2011, we made fundamental design changes to the front and rear of the Jaguar XF, which we believe is now closer to the original C-XF concept car. In addition, the Jaguar 2012 Model Year line-up included a new four cylinder 2.2-liter diesel version of the Jaguar XF with Intelligent Stop-Start Technology, making it the most fuel-efficient Jaguar yet and allowing Jaguar to compete more effectively with competitors in the United Kingdom and European fleet and company car markets. At the Geneva Motor Show in March 2012, we unveiled the Jaguar XF Sportbrake, with the versatility of an estate car and the spirit of a sports car. The 2013 Model Year Jaguar XF range also includes for the first time an all-wheel drive version of the new V6 gasoline engine for the U.S. and European markets and a 2.0-liter gasoline version for the U.S. and Chinese markets. We started selling the 2013 Model Year Jaguar XF and Jaguar XF Sportbrake at the end of the third quarter of Fiscal 2013.

The Jaguar XJ is Jaguar’s largest luxury sedan, powered by a range of supercharged and naturally aspirated 5.0-liter V8 gasoline engines and a 3.0-liter diesel engine. Using Jaguar’s aerospace inspired aluminum body architecture, the new Jaguar XJ’s lightweight aluminum body provides improved agility and fuel and CO2 efficiency. The Jaguar XJ has received more than 20 international awards since its launch, 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. In 2011, the Jaguar XJ was upgraded to include a new Executive Package and a Rear Seat Comfort Package, to provide an executive limousine experience. The 2013 Model Year also includes an all-wheel drive version and a 3.0-liter V6 gasoline version for the U.S. and European markets and a 2.0-liter gasoline version for the Chinese market, which benefits from lower custom duties in that market. We started selling the 2013 Model Year Jaguar XJ in the second quarter of Fiscal 2013.

In September 2012, Jaguar unveiled the Jaguar F-TYPE at the Paris Motor show, a two-seat sports car that was inspired by the 2011 C-X16 concept cars. Like the Jaguar XK and Jaguar XJ, the Jaguar F-TYPE has an all-aluminum structure and all-aluminum double wishbone suspension and stop/start fuel economy measures, with the power of Jaguar’s latest 3.0-liter V6 and 5.0-liter V8 engines. The Jaguar F-TYPE has been available to retail customers since April 2013.

 

25


Table of Contents

Land Rover:

Land Rover’s principal products are the Defender, Freelander 2 (LR2), Discovery 4 (LR4), Range Rover Evoque, Range Rover Sport and Range Rover. Land Rover products offer a range of powertrains, including turbocharged V6 diesel, V6 gasoline engines and V8 naturally aspirated and supercharged gasoline engines, with manual and automatic transmissions.

The Defender is one of Land Rover’s most capable SUVs, and targets extreme all-terrain capabilities and payload/towing capability. Work has begun on developing a successor to this vehicle.

The Freelander 2 is a versatile vehicle for active lifestyles, matching style with sophisticated technology and off-road capability. The Freelander 2 was significantly enhanced for the 2013 Model Year with the introduction of a turbocharged 2.0-liter gasoline engine, offering superior performance to the 3.2-liter engine it replaces while also reducing CO2 emissions.

The Discovery 4 is a mid-size SUV that features genuine all-terrain capability and versatility, including full seven-seat capacity. Recent power train innovations for the 2012 Model Year have delivered an improvement in CO2 for the 3.0-liter LR-TDV6 engine. The Discovery has won more than 200 awards since its introduction in 1989.

The Range Rover Evoque is the smallest, lightest and most fuel-efficient Range Rover to date. The Evoque is available in 5-door and coupe body styles and, depending on the market, in both front-wheel drive and all-wheel drive derivatives. Since its launch in September 2011, consumer interest and demand have been consistent across the globe. In its first full year of sales, we sold 103,269 total retail units of the Range Rover Evoque. The Evoque has also won over 120 international awards since its launch, reflecting its blend of design and capability.

The Range Rover Sport combines the performance of a sports tourer with the versatility of a Land Rover. The 2012 Model Year Range Rover Sport introduced a new version of the TDV6 diesel engine with an eight-speed transmission to reduce CO2 emissions. At the 2013, New York International Auto Show, Land Rover debuted the new 2014 Model Year Range Rover Sport built on a weight saving aluminum architecture. The Sport’s all-new, aluminum architecture achieves a weight saving of up to 420kg (as with the TDV6 engine) to bring agility and exceptional performance, with 15 per cent CO2 reduction and 24 per cent improved fuel economy. The new Range Rover Sport is the fastest, most agile and most responsive Land Rover ever.

The Range Rover is the flagship product under the Land Rover brand with a unique blend of British luxury, classic design, high-quality interiors and outstanding all-terrain ability. The new all-aluminum version was launched in the third quarter of Fiscal 2013, the world’s first SUV with a lightweight all-aluminum body, the new Range Rover has enhanced performance and handling on all terrains, and significant advances in environmental sustainability. The all-aluminum body shell has helped reduce the weight of the car substantially. A diesel hybrid Range Rover is currently being developed for introduction later in 2013. The new Range Rover was declared the world’s top SUV by The Sunday Times, won Top Gear magazine’s “Luxury Car of the Year” and was recently awarded the maximum 5-star safety rating by Euro NCAP.

Jaguar and Land Rover achieved relatively strong sales during Fiscal 2013, as total unit sales (wholesales) increased to 372,056 units from sales of 314,250 units in Fiscal 2012, reflecting an increase of 18.4%. Jaguar volumes increased to 57,766 units during Fiscal 2013 from 53,990 units in Fiscal 2012 reflecting an increase of 7.0%. Land Rover volumes increased to 314,290 units in Fiscal 2013 from 260,260 units in Fiscal 2012, reflecting an increase of 20.8%, as a result Range Rover Evoque and Freelander sales. The Jaguar Land Rover exported 301,534 units in Fiscal 2013 compared to 250,180 units in Fiscal 2012, an increase of 20.5%.

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

United States

The U.S. economy has recovered more favorably than other developed economies since the economic downturn, with GDP growth and falling unemployment, although the position remains fragile.

United States retail volumes for Fiscal 2013 for the combined brands totaled 62,959 units. Jaguar retail volumes for Fiscal 2013 fell by 6% compared to Fiscal 2012, leading to a decrease in market share. Despite Land Rover retail volumes for Fiscal 2013 increasing by 13% compared to Fiscal 2012, market share declined slightly.

United Kingdom

In Fiscal 2013, there was little growth in the economy in the United Kingdom, although recent economic data suggests better news ahead. Trading conditions in the United Kingdom remain difficult, although the automotive market has grown in the period.

 

26


Table of Contents

UK retail volumes for Fiscal 2013 for the combined brands totaled 72,270 units. Jaguar retail volumes for Fiscal 2013 increased by 10% compared to Fiscal 2012, broadly maintaining market share. Land Rover retail volumes for Fiscal 2013 increased by 24% compared to Fiscal 2012, increasing market share.

Europe (excluding Russia)

The European economy continues to struggle, with austerity measures in place in a number of countries. The economic situation and recent bail out actions continue to create uncertainty around European zone stability, the Euro and borrowing costs. Credit continues to be difficult to obtain for customers and the outlook remains volatile.

European retail volumes for Fiscal 2013 for the combined Jaguar Land Rover brands totaled 80,994 units, representing a 18% increase compared to Fiscal 2012. Jaguar retail volume for Fiscal 2013 grew by 5%, and Land Rover retail volume for Fiscal 2013 increased by 21% compared to Fiscal 2012.

China

The Chinese economy has continued to grow strongly throughout Fiscal 2013. GDP growth is likely to slow in future, although projected remain above 7.5% according to general economic consensus from market commentators.

The joint venture established to manufacture cars in China with Chery Automobile Co., Limited, or Chery Automobile, a Chinese automotive manufacturer, was approved by the National Development and Reform Commission of the People’s Republic of China in October 2012 and GBP 71 million was invested in Fiscal 2013. Jaguar Land Rover and Chery Automobile will now accelerate plans to build a joint venture manufacturing plant in Changshu, near Shanghai, as part of a 10.9 billion RMB investment that will also include a new research and development center and engine production facility. The project includes the creation of a new partnership brand to assemble models tailored specifically for the Chinese market, including the marketing and distribution. The two companies plan to complete the Changshu facility in Jiangsu province during 2014. Construction of a new engine plant for production of fuel efficient engines is also contemplated in the joint venture partnership agreement.

The China retail volumes for Fiscal 2013 for the combined brands totaled 77,075 units. Jaguar retail volume for Fiscal 2013 increased by 28% compared to Fiscal 2012, improving market share. Land Rover retail volume for Fiscal 2013 increased by 51% compared to Fiscal 2012, again improving market share.

Asia Pacific

The Asia Pacific region main markets are Japan, Australia and New Zealand. These regions were less affected by the economic crisis compared to the United States, the United Kingdom and Europe, and recovered more favorably during Fiscal 2013, often due to increased trade with China and other growth economies.

The Asia Pacific retail volumes for Fiscal 2013 for the combined brands totaled 17,849 units. Jaguar retail volume for Fiscal 2013 increased by 27% compared to Fiscal 2013. Land Rover retail volume for Fiscal 2013 increased by 34% compared to Fiscal 2012.

Other markets

The major constituents of the other markets category are Russia, South Africa and Brazil, along with the rest of Africa and South America. These economies were not affected as significantly by the economic crisis as more developed economies and have had continued GDP growth in recent years, partially due to increased commodity and oil prices.

The other markets retail volumes for Fiscal 2013 for the combined Jaguar and Land Rover brands totaled 63,489 units, reflecting an increase of 19% from Fiscal 2012. Jaguar retail volumes for Fiscal 2013 increased 17% from 5,460 units in Fiscal 2012 to 6,402 in Fiscal 2013, while Land Rover retail volume increased 19% from 47,919 units in Fiscal 2012 to 57,087 in Fiscal 2013.

Jaguar Land Rover — Sales & Distribution:

We market Jaguar Land Rover products in 178 markets, through a global network of 17 national sales companies, or NSCs, 85 importers, 62 export partners and 2,485 franchise sales dealers, of which 689 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 Land Rover has 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 United Kingdom.

 

27


Table of Contents

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.

Jaguar Land Rover — Seasonality:

Jaguar Land Rover sales volume 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 concentration 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 in the US market. Additionally in the US market there is some seasonality around the purchase of vehicles in northern states where the purchase of Jaguar vehicles is concentrated in the spring /summer months, and the purchase of 4x4 vehicles is concentrated in the autumn/winter months. In China there is an increase in vehicle purchases during the fourth Fiscal quarter, which includes 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 ERC, established in 1966, is one of the few in-house automotive research and development centers in India recognized by the Government of India. ERC is integrated with all of the Tata Motors global automotive product design and development centers in South Korea, Spain, Italy and the United Kingdom. In addition to this, we leverage key competencies through various engineering service suppliers and design teams of our suppliers.

We have a crash test facility for evaluating occupant safety, which includes a vehicle level crash test facility, a sled test facility for simulating the crash environment on subsystems, a pedestrian safety testing facility, a pendulum impact test facility for goods carrier vehicles and other equipment and facilities that aid us in developing products that comply with various safety norms. This facility is also supported with computer-aided engineering infrastructure to simulate tests in a digital environment. We have a hemi-anechoic chamber testing facility for developing vehicles with lower noise and vibration levels and an engine emission and performance development facility that aid us in developing products meeting international standards. We also have an eight poster road load simulator for validation of the structural durability of M&HCVs. Other key facilities include a full vehicle environmental testing facility, heavy duty dynamometers and aggregate endurance test rigs.

Our product design and development centers are equipped with sophisticated hardware, software and other information technology infrastructure, designed to create a digital product development and virtual testing and validation environment, resulting in reduction of product development cycle-time. These centers are growing with increased vehicle development programs in breadth and depth of technology. 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 capabilities especially in the areas of product development through computer-aided design, computer-aided manufacturing, computer-aided engineering, knowledge-based engineering, PLM and specific engineering review processes like digital mockup. In order to track various issues arising in vehicle design and development processes, we have institutionalized ‘issue tracking’ work flow based systems in various domains to manage such issues effectively.

In addition, our research and development activities focus on developing vehicles running on alternative fuels, including CNG, liquefied petroleum gas, bio-diesel and compressed air and electric cars. We are continuing to develop green-technology vehicles and are presently developing an electric vehicle on the Indica Vista platform. We are also pursuing alternative fuel options such as ethanol blending for development of vehicles fueled by hydrogen.

 

28


Table of Contents

We are also pursuing various initiatives, such as the introduction of premium lightweight architecture, to enable our business to comply with the existing and evolving emissions legislation in the developed world, which we believe will be a key enabler of both reduction in CO2 and further efficiencies in manufacturing and engineering.

Initiatives in the area of vehicle electronics such as engine management systems, in-vehicle network architecture and multiplexed wiring, electronic stability programs, automated and automatic transmission systems, telematics for communication and tracking and other emerging technological areas are also being pursued, which could possibly be deployed on our future range of vehicles. Likewise, various new technologies and systems that would improve safety, performance and emissions of our product range are being implemented in our passenger cars and commercial vehicles.

We are developing an enterprise level vehicle diagnostics system for achieving faster diagnostics of complex electronics in our vehicles in order to provide prompt service to customers. Furthermore, our initiative in telematics has spanned into a fleet management, driver information and navigation system, as well as a vehicle tracking system using Global Navigation Satellite Systems, or GNSS.

We established a wholly-owned subsidiary, TMETC, in 2006, to augment the abilities of our ERC with an objective to obtain access to leading technologies to support our product development activities. 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 which is now a part of the Tata Motors design organization.

Our Jaguar Land Rover research and development operations currently consist of a single engineering team, operating within co-managed engineering facilities, sharing premium technologies, power train designs and vehicle architecture. 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. 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 United Kingdom, have identified areas to leverage the facilities and resources to enhance the product development process and achieve economies of scale.

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 Fiscal 2011, we launched the Tata Aria, India’s first premium crossover and the Tata Venture, a multipurpose van in India. In Fiscal 2013, we launched the Indigo Manza Club Class, the Vista D90, and the Safari Storme in the passenger cars segment and launched the Xenon Pickup, the Tata LPT 3723, and the Prima tipper and tractor variants in the commercial vehicle segment.

Intellectual Property

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

We own a number of patents and have applied for new patents which are pending for grant 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 we expect will be effective in other countries going forward. We also obtain new patents as part of our ongoing research and development activities.

We own registrations for a number of trademarks 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. We believe that establishment of the Tata word mark and logo mark in India and around the world is material to our operations. As part of our acquisition of TDCV, we have rights to the perpetual and exclusive use of the “Daewoo” brand and trademarks in South Korea and overseas markets for the product range of TDCV.

 

29


Table of Contents

As part of the acquisition of Jaguar Land Rover business, ownership (or co-ownership, as applicable) of core intellectual property associated with Jaguar Land Rover was transferred to us. Additionally, perpetual royalty free licenses to use other essential intellectual property have been granted 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.

License(s)

On February 22, 2013, RBI released the final guidelines on granting new banking licenses in line with the Indian government’s aim to allow more companies to participate in the banking sector. On July 1, 2013, Tata Group applied to the RBI for a banking license. Tata Group, and in turn, the Company, may be required to reorganize the holding structure of its finance business in order to meet the eligibility requirements for obtaining a banking license, including by way of a divestment by the Company of its interest in TMFL. Any such reorganization or divestment of its financing business could have a material adverse effect on the Company’s financial condition and results of operations. As of the date of this annual report, RBI’s review of Tata Group’s application remains ongoing.

Components and Raw Materials

The principal materials and components required by us for use in Tata and other brand vehicles are steel sheets (for in-house stampings) and plates; iron and steel castings and forgings; items such as alloy wheels, tires, fuel injection systems, batteries, electrical wiring systems, electronic information systems and displays; 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 aggregates like axles, engines, gear boxes and cabs for our vehicles, which are manufactured in-house or by our subsidiaries, affiliates and strategic suppliers. We have long term purchase agreements for some critical components such as transmissions and engines. We have established contracts with some commodity suppliers to cover our own as well as our suppliers’ requirements in order to moderate the effect of volatility in commodity prices. We have also undertaken special initiatives to reduce material consumption through value engineering and value analysis techniques.

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 also use external agencies as third party logistic providers. This has resulted in space and cost savings. Our initiatives to leverage information technology in supply chain activities have resulted in improved efficiency through real time information exchange and processing with our suppliers.

We have an established supplier quality improvement process in order to ensure quality of outsourced components. 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, as well as an ongoing dialogue with workers to reduce production defects. Further, we have established a Strategic Sourcing Group to consolidate, strategize and monitor our supply chain activities with respect to major items of purchase as well as major inputs on new technology and services. The Strategic Sourcing Group is responsible for recommending the long-term strategy, purchase decisions, and negotiations and relationships with vendors with regard to these items. In addition, the Strategic Sourcing Group is responsible for formulating and overseeing our purchasing policies and norms, 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.

 

30


Table of Contents

We are also exploring opportunities for increasing the global sourcing of parts and components from low cost countries, and have in place a vendor management program that includes vendor base rationalization, vendor quality improvement and vendor satisfaction surveys. We have begun to include our supply chain in our initiatives on social accountability and environment management activities, including supply chain carbon footprint measurement and knowledge sharing on various environmental aspects.

The principal materials and components required by us for use in our Jaguar and Land Rover vehicles are steel and aluminum sheets (for in-house stamping) or externally pre-stamped form, aluminum castings and extrusions, iron and 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 critical components such as axles, engines and gear boxes for our vehicles, which are mainly manufactured by external suppliers. We have long term purchase agreements for critical components with key suppliers. The raw materials used in our cars include steel, aluminum, copper, platinum and other commodities. We have entered into contracts with certain commodity suppliers to cover our own and our suppliers’ requirements to mitigate the effect of volatility in commodity prices. 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 programs to ensure that externally purchased raw materials and components are monitored and meet its quality standards. Such programs include on-site engineers from Jaguar Land Rover who regularly interface with suppliers and carry out visits to supplier sites to ensure that they adhere to applicable quality standards. On-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 on-site engineers and the Jaguar Land Rover plants.

 

31


Table of Contents

Suppliers

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

Our associate company Tata AutoComp Systems Ltd., or TACO, manufactures automotive components and encourages the entry of internationally acclaimed automotive component manufacturers into India by setting up joint ventures with them. Some of these joint ventures includes : Tata Toyo Radiators Ltd for radiator assemblies, which supply components for our products in India.

Our other suppliers include some of the large Indian automotive supplier groups with multiple product offerings, such as the Anand Group, the Sona Group, and the TVS Group, as well as large multinational suppliers, such as Bosch, Continental, Delphi and Denso, Tata Johnson Controls Limited for seats, Tata Yazaki AutoComp Limited for wiring harnesses. We continue to work with our suppliers for our Jaguar Land Rover business to optimize procurements and enhance our supplier base, including the sourcing of certain of our raw material and component requirements from low cost countries. Additionally co-development of a few aggregates is also being evaluated which we believe may lead to the development of a low cost supplier base for Jaguar Land Rover.

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, thereby reducing logistics and inventory costs as well as reducing 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.

As part of our pursuit of continued improvement in procurement, we have integrated our system for electronic interchange of data with our suppliers with the Enterprise Resource Planning. This has facilitated real time information exchange and processing, which enables us to manage our supply chain more effectively.

We have established processes to encourage improvements via knowledge sharing among our vendors 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. The Vendor Council works on four critical aspects of engagement between us and the 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 learning from the global financial crisis and its cascading effect on the financial health of our suppliers, we have commenced efforts to assess supplier financial risk.

Suppliers are appraised based on or long term requirements through a number of platforms such as Vendor Council meetings, council regional chapter meetings, national vendor meets and location-specific vendor meets.

Capital and Product Development Expenditures

Our capital expenditure totaled Rs.210,956 million, Rs.147,164 million and Rs.90,719 million during Fiscal 2013, 2012 and 2011, respectively. Our capital expenditure during the past Fiscal years related primarily to new product development and capacity expansion for new and existing products to meet market demand as well as investments towards improving quality, reliability and productivity that are each aimed at increasing operational efficiency.

 

32


Table of Contents

We intend to continue to invest in our business units in general, and in research and product development in particular, over the next several years in order to improve our existing product range, develop new products and platforms and to build and expand our portfolio in the passenger vehicle and commercial vehicle categories. We believe this would strengthen our position in the Indian automotive market and help us to grow our market share internationally.

As 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 individual growth plans and related capital expenditure 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.

Other Operations

In addition to our automotive operations, we are also involved in other business activities, including information technology services. Net revenues, before inter-segment elimination, from these activities totaled Rs.22,179 million, Rs.18,905 million and Rs.14,916 million in Fiscal 2013, 2012 and 2011, respectively, representing nearly 1.2%, 1.1% and 1.2% of our total revenues before inter-segment elimination in the corresponding Fiscal periods.

Information Technology Services:

As of March 31, 2013, we owned a 72.32% equity interest in our subsidiary, TTL. TTL, founded in 1994 and a part of Tata Group, is a global leader in Engineering Services Outsourcing, and product development IT services solutions for 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, ERM and CRM systems. 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 United Kingdom (Coventry). TTL has a combined global workforce of around 6,000 professionals serving clients worldwide from facilities in the North America, Europe and Asia-Pacific regions. TTL responds to customers’ needs through its subsidiary companies and through its three offshore development centers. TTL had eight functional subsidiary companies and one joint venture as of March 31, 2013.

The consolidated revenues of TTL for Fiscal 2013 were Rs.20,324 million (including sales to Tata Motors Group) reflecting a growth of 24.8% against Rs.16,291 million in the previous with traction in the automotive and aerospace markets. TTL recorded profit after tax of Rs.3,008 million in Fiscal 2013, reflecting growth of 42.8% over Rs.2,107 million in Fiscal 2012 resulting From higher offshore revenues and cost reduction measures implemented by TTL.

 

33


Table of Contents

Government Regulations

Indian Automotive Sector

Automotive Mission Plan, 2006-2016

The automotive mission plan, or Plan 2006, promulgated 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 policies to attract more investment into the automobile industry, the improvement of power infrastructure to facilitate faster growth of the automotive sector both domestically and internationally, policy initiatives such as encouragement of collaboration between the automotive industry and 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 the creation of special automotive component parks in special economic zones and the 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 partnerships 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 of the Ministry of Heavy Industries and Public Enterprises consisting of all stakeholders including representatives of the Ministry of Finance, and of other interested parties relating to road transport, the environment, commerce, industrial policy and promotion, labor, shipping, railways, human resource development, science and technology, new and renewable energy, petroleum and natural gas and the automotive industry, will monitor the implementation and progress of Plan 2006.

Plan 2006 is being reviewed by Ministry of Heavy Industries and Public Enterprises of the Government of India.

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 aims, among others, of promoting a globally competitive automotive industry that would emerge as a global source for automotive components, establishing an international hub for manufacturing small, affordable passenger cars, ensuring a balanced transition to open trade at a minimal risk to the Indian economy and local industry, encouraging modernization of the industry and facilitating indigenous design, research and development, as well as developing domestic safety and environment standards on 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) are in effect in the rest of India. Our vehicles comply with these norms. The next change in emission regulations remains to be discussed by Government of India.

The Ministry of Road Transport and Highways of Government of India has set up a new task force to review the Auto Fuel policy.

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, gasoline, liquefied petroleum gas and diesel.

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 Center 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.

 

34


Table of Contents

In case of CNG fitments by vehicle manufacturers on new gasoline vehicles, each model manufactured must be of 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.

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

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 encourage export of automobiles from India.

India has been a signatory to the 1998 UNECE Agreement on Global Technical Regulations since April 22, 2006 and has voted in favor of all eleven Global Technical Regulations. We work 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 CMV Rules and the Motor Vehicles Act. Vehicles manufactured in India must comply with applicable Indian standards and automotive industry standards. In January 2002, the Indian Ministry of Road Transport and Highways has finalized plans on implementing on automobile safety standards. The plans are based on 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, authorizes the Government of India, 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 defense 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. In order to achieve these objectives, Pollution Control Boards, or 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 Government of India’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 effluents at our plants and have made significant investments towards lowering the emissions from our products.

 

35


Table of Contents

In addition, the Ministry of Environment and Forests conducts environment impact assessments. The Ministry receives proposals for expansion, modernization and establishment of projects and the impact of such projects on the environment are 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.

Automobiles and automotive components may, 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. As a general matter, cars, UVs and SUVs in completely built up, or CBU, condition may be imported at 60% basic customs duty. However, cars with CIF value more than US$40,000 or with engine capacity more than 3000 cc for diesel variant and 2500 cc for petrol variant, may be imported at 100% basic customs duty. Commercial vehicles may be imported at basic customs duty of 10% and components may 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 “— Taxation” for additional information relating to our taxation.

Excise Duty:

The Government of India imposes excise duty on cars and other motor vehicles and their chassis, which rates vary from time to time and across vehicle categories reflecting the policies of the Government of India. The chart below sets forth a summary of historical changes and the current rates of excise duty.

 

Change of Tax Rate

   Excise Duty (per vehicle or chassis)
   Small
cars*
    Cars other
than small
cars**
   Motor
vehicles
for more
than 13
persons
    Chassis fitted
with engines
for vehicles of
more than 13
persons
  Trucks     Chassis with
engines
fitted for
trucks
  Safari,
SUVs and
UVs

March 2008

     12   22% or

22% +

Rs. 15,000*

     12   12% + Rs.

10,000

    14   14% + Rs.

10,000

  20% + Rs.

20,000

December 2008

     8   -      8   8% + Rs.

10,000

    10   10%+ Rs.

10,000

  -

March 2009

     -      -      -      -     8   8% + Rs.

10,000

  -

July 2009

     -      -      -      -     -      -   20% + Rs.

15,000

February 2010

     10   -      10   10% + Rs.

10,000

    10   10% + Rs.

10,000

  22% + Rs.

15,000

March 2012

     12   24% or

27%*

     12   15%     12   15%   27%

May 2012

     -      -      -      -     -      14%   -

March 2013

     -      -      -      -     -      13%   27% or
30%

 

* Small cars - cars with length not exceeding 4,000mm and an engine capacity not exceeding 1,500cc for cars with diesel engines and not exceeding 1,200cc for cars with gasoline engines. The higher rate is applicable if engine capacity exceeds 1,500cc.
** Cars other than small cars - motor vehicles for transport of more than 13 persons, trucks, jeeps, SUVs and UVs and chassis fitted with such engines.
(-) indicates no change during the relevant year.

 

36


Table of Contents

All vehicles / chassis are subjected to Automobile Cess assessed at 0.125%, Education Cess assessed at 2% and Secondary and Higher Education Cess assessed at 1% in addition to the excise duty indicated above. Certain vehicles are also subject to National Calamity Contingent Duty, or NCCD, assessed 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 of India, thereby eliminating the cascading effect of taxation. Two main brackets of 5% and 12.5%, along with special brackets of 0%, 1%, 3%, 4%, 13.5%, 14% 14.5%, 15%, 20% and 23% have been announced for various categories of goods and commodities sold in the country and certain states have also introduced additional VAT of 1% to 3% on specified commodities, including automobiles. In some of the states, surcharge of 5% to 10% on VAT has been introduced on automobiles. Since its implementation, VAT has had a positive impact on us. Prior to the implementation of VAT, a major portion of sales tax paid on purchases formed part of our total cost of materials. However, the implementation of VAT has resulted in savings on the sales tax component, as VAT paid on inputs may generally be set-off against tax paid on outputs.

In addition to VAT, a Central Sales Tax, however, continues to exist, although it is proposed to be abolished in a phased manner. In the Indian Union Budget 2008-09, the Central Sales Tax rate was reduced to 2% which remained unchanged for Fiscal 2013.

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 consumption 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 on domestically manufactured goods is expected to decrease along with prices on such goods.

We have benefitted and continue to benefit from excise duty exemptions for manufacturing facilities in the state of Uttarakhand and other incentives such as subsidies or loans from other 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 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 are 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 our subsidiaries.

Jaguar Land Rover has global insurance coverage which we consider 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 we believe is in accordance with commercial industry standards and statutory requirements.

Economic Stimulus Package and Incentives:

In January 2009, the Government of India announced an economic stimulus package targeting the automotive industry. Public sector banks were encouraged to fund the automotive sector along with providing a line of credit to non-bank financial companies, specifically aimed at commercial vehicles. The states were to be provided a onetime assistance to purchase 15,000 buses for their urban transport systems.

 

37


Table of Contents

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 rate 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 was restored to 10% since April 1, 2010 and was further revised to 12% with effect from March 16, 2012. Cenvat for chassis which was increased from 12% to 14% in the budget for the fiscal year 2012-2013, has since been revised to 13% in the budget for the fiscal year 2013-2014.

In the United Kingdom, 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, Portugal, Spain and Italy. Continued high unemployment 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.

In June 2010, the Chinese government announced a subsidy program of RMB3,000 for each energy-conserving passenger vehicle with an engine capacity of 1.6 liters or less. The Government of China also provided a subsidy for private purchases of new energy vehicles (hybrid electric vehicle up to RMB 50,000 and battery electric vehicle up to RMB 60,000) along with additional subsidy from local government. Furthermore, a ten-year Development Plan for the Energy-Saving and New Energy Vehicle Industry was approved and will be the blueprint for China automotive industry development until 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 in and accelerate development of smaller and more fuel efficient vehicles for the Chinese automotive market.

The Government of India has launched a National Electric Mobility Mission plan 2020, or NEMMP, to encourage reliable, affordable and efficient Electric Vehicles that meet consumer performance and price expectations. Through collaboration between the government and industry for promotion and development of indigenous manufacturing capabilities, required infrastructure, consumer awareness and technology, the NEMMP aims to help India to emerge as a leader in the Electric Vehicle market in the world by 2020 and contribute towards National Fuel security.

The Government of India’s plan to encourage India’s transition to hybrid / electric mobility consists of the following initiatives:

 

  a) Demand Side: Mandate use of electric vehicles in areas such as public transportation and government fleets in order to create initial demand for OEMs and provide incentives for the sales of electric vehicles to consumers.

 

  b) Supply Side: Link incentives to localization of the production of key components of electric vehicle in a phased manner.

 

  c) Research & Development: Fund research and development, or R&D, programs along with OEMs / component suppliers to develop optimal solutions for India at low cost.

 

  d) Infrastructure support: Roll out pilot programs to support hybrid/electric vehicles and test their effectiveness and make modest investments to build public charging infrastructure to support electric vehicles (especially for buses).

Environmental, Fiscal and Other Governmental regulations around the world:

Our Jaguar Land Rover business has significant operations in the United States 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. Similarly, the U.S. federal government imposes greenhouse gas emissions standards that apply to 2012-2016 model year vehicles. In addition, many other markets either have or will shortly define similar greenhouse gas emissions standards (some of these include Canada, China, Japan, Korea, Switzerland, Australia, and South Africa). In Europe, implementation of LCV CO2 standards would impact the Defender and a small number of Freelander and Discovery vehicles. In India, fuel efficiency labeling legislation is being finalized by the Ministry of Road Transport and Highways and the Bureau of Energy Efficiency, under the Ministry of Power. This matter is also being discussed under the Auto Policy committee in order to create a framework for implementation in 2025.

 

38


Table of Contents

In Europe, monetary fines are imposed as penalties for non-compliance with emissions standards. In the United States, noncompliance results in monetary fines and can result in market exclusion.

California is currently developing a new zero emissions vehicle regulation mandating increased penetration of electric and plug in hybrid electric vehicles from 2018 Model Year above that are more stringent than the requirements of the U.S. federal greenhouse gas standards.

Jaguar Land Rover undertakes technology deployment plans directed to achieving these standards. These plans include the use of lightweight materials, including aluminum, 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 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 European Union 5, or EU5 regulations and planned EU6 and EU7 regulations in Europe, and existing Low Emission Vehicle 2, or LEV2 regulations and planned LEV3 regulations in California, 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 that increase the base costs of our power trains. The stringency of such evaporative emissions regulations 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 United States). While Europe and California lead the implementation of these emissions programs, other nations and states tend to follow with adoption of these regulations within a short period thereafter.

To comply with the current and future environmental laws, rules, regulations and standards, 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 Government of India 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. Further new regulations on advanced safety systems are to be introduced. The European Commission plans to require (i) new model cars from 2011 to have electronic stability control systems; (ii) to introduce regulations relating to low-rolling resistance tires in 2013; (iii) to require tire pressure monitoring systems starting in 2012; and (iv) 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.

In the United States, the National Highway Traffic Safety Administration, or 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 pending investigations relating to alleged safety defects or potential compliance issues 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 Act; and

 

   

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

 

39


Table of Contents

Furthermore, the Cameron Gulbransen Kids Transportation Safety Act of 2007, or Kids and Cars Safety Act, passed into law in 2008, and 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 creates complexity and increases costs such that the development of a common product that meets the country regulatory requirements of all countries is not possible. Global Technical Regulations, 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, Global Technical Regulations on electronic stability control, head restraints and pedestrian protection, were adopted by the UN World Forum for the Harmonization of Vehicle Regulations, and are now in different stages of national implementation. While global harmonization is fundamentally supported by the automobile industry in order to reduce complexity, national implementation may still introduce subtle differences into the system.

At present, India is a signatory of the 1998 UNECE Agreement on Global Technical Regulations, which makes the global technical regulations alternate standards to national regulations. The transition of finalized global technical regulations into national standards remains in progress.

Export Promotion Capital Goods: Since Fiscal 1997, we have benefited from participation in the Export Promotion Capital Goods Scheme, or the EPCG Scheme, which permits us to import capital equipment under a special license at a substantially reduced customs duty. Our participation in this scheme is subject to us fulfilling an obligation to export goods manufactured or produced by the use of capital equipment imported under the EPCG Scheme to the value of a multiple of the cost plus insurance and freight value of these imports or customs duty saved over a period of 6, 8 and 12 years from the date of obtaining the special license. We currently hold 92 licenses which require us to export our products of a value of approximately Rs.71.71 billion between the years 2002 to 2019, and we carefully monitor our progress in meeting our incremental milestones. After fulfilling some of the export obligations as per provisions of Foreign Trade Policy, as on March 31, 2013 we have remaining obligations to export products of a value of approximately Rs.4.66 billion by March 2019. In the event that the export obligation under the EPCG Scheme is not fulfilled, we would have to pay the differential between the reduced and normal duty on the goods imported along with interest. In view of our past record of exceeding our export milestones, and our current plans with respect to our export markets, we do not currently foresee any impediments to meeting our export obligation in the required time frame.

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 where appropriate. 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 33 to our consolidated financial statements included in this annual report. Certain claims that are below Rs.200 million in value pertain to indirect taxes, labor and other civil cases. There are other claims against us which pertain to motor accident claims in India (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.

In June 2011, the newly elected state government of West Bengal, or the West Bengal State Government, enacted legislation to cancel our land lease agreement entered into for the purpose of establishing a manufacturing facility for automobiles at Singur. We subsequently challenged the legal validity of the legislation. In June 2012, the High Court of Calcutta, or the Calcutta High Court, ruled against the validity of the legislation and restored our rights under the land lease agreement. The West Bengal State Government appealed to the Supreme Court of India. Proceedings at the Supreme Court are continuing as of the date of this annual report, and a hearing has been scheduled for August 13, 2013. We expect that the Calcutta High Court’s judgment, which we believe to be based on an established position of law, will be upheld.

In South Korea, our union employees had filed a lawsuit to include some elements of non-ordinary salary and bonus as part of ordinary wages. The district court ruled in favor of the union employees on January 2013 and ordered TDCV to pay the employees KRW 17.2 billion and interest, upto the period of lawsuit. We have recoded a provision of Rs.2,124 million (through March 31, 2013) in Fiscal 2013 in respect of this lawsuit. TDCV has filed an appeal against the order.

 

40


Table of Contents

We believe that none of the contingencies, 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 holds equity interests 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$96.79 billion for Fiscal 2013. 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 have its origins in the trading business founded by Mr. 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 Indian Hotels Company Limited (1902), Tata Steel Limited, or Tata Steel (1907), which became the sixth largest steel maker in the world after it acquired Corus, Tata Power Company Limited (1910), Tata Chemicals Limited, or Tata chemicals (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 Land Rover in 2008. Tata Motors Limited 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, or Tata Global Chemicals (1962), which is the second largest branded tea company in the world, through its UK-based subsidiary Tetley.

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 of India’s nationalization program. Tata Consultancy Services Limited, or TCS, is Asia’s leading software services provider and the first Indian software firm to exceed sales of US$4 billion. TCS has delivery centers in the United States, the United Kingdom, Hungary, Brazil, Uruguay and China, as well as India. In 1999, Tata Sons also invested in several telephone 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 society.

We have for many years been a licensed user of the “Tata” brand owned by Tata Sons, 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 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 has lowered the subscription fee, considering its requirement of outlay for activities related to brand promotion and protection. In Fiscal 2012 and 2013, Tata Motors Limited 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, 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 upon our breach of the agreement and our failure to remedy the same, or by Tata Sons upon providing six months’ notice for reasons to be recorded in writing. The agreement can also be terminated by Tata Sons upon the occurrence of certain specified events, including liquidation.

 

41


Table of Contents

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. 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 India.

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, which under our Articles of Association has the right to appoint one director to the Board, Tata Sons 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 15.38% equity interest in Tata Services Ltd, a 12.47% equity interest in Tata International Limited, 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.

 

42


Table of Contents

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, 2013 are set forth in the chart below:-

 

LOGO

With respect to certain subsidiaries and affiliates, where the Company has a joint venture partner, voting on certain items of business may be based on affirmative voting provisions and Board participation clauses in the relevant joint venture agreement(s).

 

1) Holding of 99.59% in its newly formed subsidiary, PT Tata Motors Distribusi Indonesia, incorporated with effect from February 11, 2013.

 

43


Table of Contents
2) These subsidiaries are based in many countries abroad.
3) Jaguar Land Rover PLC changed its name to Jaguar Land Rover Automotive PLC with effect from December 28, 2012.
4) Liquidated its 71.69% holding in its Norway-based subsidiary Miljobil Grenland AS with effect from August 30, 2012.
5) The holdings in these subsidiaries range from 72.32% to 72.52%.
6) Holding in Tata Hispano Motors Carrocerries Maghreb subsidiary based in Morocco is 100%.
7) Holding in its subsidiary, TDCV, is 100%.
8) A joint venture with Chery Automobile Company Limited incorporated with effect from November 16, 2012.
9) Is an affiliate of TTL.
10) Telco Construction Equipment Co. Ltd. changed its name to Tata Hitachi Construction Machinery Company Limited with effect from November 23, 2012. The holdings in these affiliates ranges from 18.14% to 39.99%.
11) Out of the 9 subsidiaries, 4 are presently in the process of liquidation and out of the 7 affiliates, 2 are currently in the process of liquidation. The holdings in these affiliates range from 15.80% to 31.61%.

D. Property, Plants and Equipment.

Facilities: We operate six 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 the second facility in 1966 (with production commencing in 1976) at Pune, in the State of Maharashtra in western India, the third facility in 1985 (with production commencing in 1992) at Lucknow, in the State of Uttar Pradesh in northern India, the fourth at Pantnagar in the State of Uttarakhand, India, which commenced operations in Fiscal 2008, the fifth at Sanand in Gujarat in western India for manufacturing of the Nano, which commenced operations in June 2010, and the sixth plant for manufacturing Tata Marcopolo buses under our joint venture with Marcopolo and LCV’s at Dharwad in Karnataka (which buses are also produced at Lucknow). The Jamshedpur, Pune, Sanand, Pantnagar and Lucknow manufacturing facilities have been accredited with ISO/TS 16949:2000(E) certification.

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, or IATF, accredited certification body. It is the first South Korean automobile original equipment manufacturer to be awarded an ISO/TS 16949 certification.

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

Tata Motors (Thailand) Limited is our joint venture with Thonburi, and has a manufacturing facility located in Samutprakarn province, Thailand. The facility is used for the manufacture and assembly of pickup trucks.

Our 100% equity interest in Hispano provides us with access to two manufacturing units, one in Spain and another 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 two product development facilities in the United Kingdom at Gaydon and Whitley. Most of these facilities are owned as freehold estates or are held through long-term leaseholds, generally with nominal rents. A new advanced engine facility is being established at Wolverhampton in the United Kingdom’s Midlands area to manufacture low-emission engines.

Jaguar Land Rover and Chery Automobile intend to accelerate plans to build a joint venture manufacturing plant for the Chery Jaguar Land Rover Automotive Co. Limited joint venture in Changshu, near Shanghai, as part of a RMB 10.9 billion investment that will also include a new research and development center and engine production facility. The two companies plan to complete the Changshu facility in Jiangsu province in 2014. Construction of a new engine plant for production of fuel efficient engines is also contemplated under the joint venture agreement.

Jaguar Land Rover’s new Engine Manufacturing Centre in the UK is essential to support the Company’s long-term strategic growth plans and will be the home for a new generation of technologically advanced, lightweight 4-cylinder low emission diesel and gasoline engines. Reinforcing Jaguar Land Rover’s commitment to manufacturing and innovation in the United Kingdom, we will increase its investment in the facility to in excess of GBP 500 million from GBP 355 million. This will almost double the number of highly skilled engineering and manufacturing jobs at the plant, taking the total number of people who will be employed at the site to almost 1,400. The facility is the first in the Jaguar Land Rover’s history to be entirely designed and specified by Jaguar Land Rover. With an area of almost 100,000 square meters, the plant will include an engine testing center alongside the manufacturing and assembly halls.

 

44


Table of Contents

The facility will endeavor to meet the highest standards of sustainable production and will feature a variety of energy efficiency technologies. The new Engine Manufacturing Centre is expected to open later this year with the first engines expected to be produced in 2015.

TMSA, our joint venture with Tata Africa Holdings (SA) (Pty.) Limited for the manufacture and assembly operations of our LCVs and M&HCVs in South Africa, owns and operates a manufacturing facility located in Rosslyn, South Africa.

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

Tata Motors Limited:

As with other participants in the automobile industry around the world, we are exposed to regulatory risks related to climate change. The design and development of fuel efficient vehicles and vehicles 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 greenhouse gas emitting vehicles, as an integral part of our product development and manufacturing strategy.

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

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 greenhouse gas 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 the design and development of fuel efficient and alternative energy vehicles, in addition to implementing new advanced technologies to increase efficiency of our internal combustion engines. We have manufactured CNG versions of buses, LCVs, and the ACE Xenon, as well as an LPG version of the Indica passenger vehicle.

In September 2010, Tata Motors Limited presented CNG-Electric hybrid low-floor Starbuses to the Delhi Transport Corporation. This was the first time in India that hybrid buses would 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. Furthermore, we have developed a fuel cell powered bus which will undergo road trials shortly.

Moreover, we are using refrigerants such as R134A in our products in order to minimize our contribution towards greenhouse gas emissions. We also ensure that no refrigerant is released to atmosphere during any service, repair and maintenance of the air-conditioning systems of our vehicles by first recovering the refrigerant charge before the system is serviced and recharged. In addition, since 2009, we have voluntarily disclosed fuel efficiency information for our passenger vehicles in India in accordance with a decision by SIAM. We are also continually in the process of developing products to meet the current and future emission norms in India and other countries. For example, we offer products which meet the BS III and BS IV norms in India and Euro V norms in International markets.

We also strive to increase the proportion of energy sourced from renewables. As one of our prime objectives, we have incorporated environmentally sound practices in our processes, products and services. Our manufacturing facilities at Pune, Jamshedpur, Lucknow, Sanand, Dharwad and Pantnagar in India, each have an Environmental Management System, or EMS, in place and have achieved ISO-14001 certification. We have been implementing various Environment Management Programs, or EMPs, on energy conservation such as reduction in electricity and fuel consumption with resulting reductions in greenhouse gas emissions. We are actively working towards a shift to gas fuels to meet process heat requirements.

 

45


Table of Contents

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 needs 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, 1997 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 program.

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 plants 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, 2013 and production levels by plant and product type in Fiscal 2013 and 2012:

 

    Fiscal Year ended March 31,  
    Production
Capacity
    Production (Units)  
      2013     2012  

Tata Motors Plants in India*

     

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

    1,623,000        773,238        877,809   

Jaguar Land Rover**

     

Utility Vehicles, Passenger Cars

    514,000        385,787        320,882   

Other Subsidiary companies plants (excluding Jaguar Land Rover)***

     

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

    59,088        28,272        27,843   

 

* This refers to 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 South Korea, Spain, Morocco, South Africa 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.

 

46


Table of Contents

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, 2013. 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, Pune    Tata Motors Ltd./Concorde Motors (India) Ltd./Tata Motors Finance Ltd.    Automobile sales & service and vehicle financing
Nagpur(1)    TAL Manufacturing Solutions Ltd.    Production of Advanced Composite Floor Beams including machining of metal fittings for Boeing 787 Dreamliner
In the State of Jharkhand      
Jamshedpur    Tata Motors Ltd.    Automotive vehicles, components & R&D
Jamshedpur    TML Drivelines Ltd.    Axles and 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.    Automotive vehicles & Components, 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 Ltd.    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, Delhi    Concorde Motors (India) Ltd    Automobile sales and service
Various other properties in India    Tata Motors Ltd./Tata Motors Finance Ltd.    Vehicle financing business (office/ residential)
Outside India      
Singapore    Tata Technologies Pte Ltd    Software consultancy and services
Republic of Korea    Tata Daewoo Commercial Vehicle Co. Ltd.    Automotive vehicles, Components and Research & Development
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      

- Solihull

   Jaguar Land Rover    Automotive vehicles & components

- Castle Bromwich

   Jaguar Land Rover    Automotive vehicles & components

- Halewood

   Jaguar Land Rover    Automotive vehicles & components

- Gaydon

   Jaguar Land Rover    Research & Product Development

- Whitley

   Jaguar Land Rover    Headquarters and Research & 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
South Africa    Tata Motors (SA) (Proprietary)    Manufacture and assembly operations of vehicles
Rest of the world    Tata Technologies Group of Companies    Software consultancy and services
   Jaguar Land Rover    National sales companies
      Regional sales offices

 

47


Table of Contents

Notes:

 

(1) Land at each of these locations is held under an operating lease.
(2) Some of the facilities are held 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 except those in the United Kingdom, 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 in various locations around the world for limited manufacturing, sales offices, and dealer training and testing. The majority of these are housed within leased premises.

Capital work in progress, as at March 31, 2013 includes building of Rs.3,098.8 million on leased land located in the State of West Bengal in India for the purposes of manufacturing automobiles. As a result of the decision to relocate and construct a similar manufacturing facility at, another location, the management was in the process of evaluating several options, under all of which no adjustments to the carrying amount of the buildings was considered necessary. In June 2011, the newly elected Government of West Bengal (referred to as “State Government”) enacted legislation to cancel the land lease agreement.

The Company challenged the legal validity of the legislation. In June 2012, the High Court of Calcutta (referred to as the “High Court”) ruled against the validity of the legislation and restored the Company’s rights under the land lease agreement. The State Government has filed an appeal in the Supreme Court of India. As of the date of the authorization of the financial statements, the Supreme Court has not concluded on the State Government appeal.

The Company reasonably expects that the High Courts’ judgment, based on established law, will be upheld by the Supreme Court. For further details regarding the current legal proceedings with respect to the leased land please refer to Item 4.B “— Business Overview — Legal Proceedings” of this annual report.

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 2013, our total revenue (net of excise duties) including finance revenues increased by 13.5% to Rs.1,889,860 million from Rs.1,664,853 million in Fiscal 2012. We recorded a net income (attributable to shareholders of the Company) of Rs.88,697 million in Fiscal 2013, representing a decline of 23.3% or Rs.26,962 million over net income in Fiscal 2012 of Rs.115,659 million.

 

48


Table of Contents

Automotive operations

Automotive operations are our most significant segment, accounting for 99.4%, 99.4 % and 99.3% of our total revenues for Fiscal 2013, 2012, and 2011, respectively. For Fiscal 2013, revenue from automotive operations before inter-segment eliminations was Rs.1,878,571 million as compared to Rs.1,654,903 million for Fiscal 2012 and Rs.1,223,547million for Fiscal 2011.

Our automotive operations include:

 

   

All activities relating to the 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 segment is further divided into Tata and other brand vehicles including spares and financing thereof and the Jaguar Land Rover business. For Fiscal 2013, Jaguar Land Rover contributed 72.7% (63.1% for Fiscal 2012) of our total automotive revenue (before intra segment elimination) and the remaining 27.3% (36.9% or Fiscal 2012) was contributed by Tata and other brand vehicles.

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

India is the major market for Tata and other brand vehicles (including spares and financing thereof). During Fiscal 2013, there was a significant deterioration in terms of macro-economic factors leading to volume contraction and competitive pressures across all major products.

The Indian economy continued to deteriorate in Fiscal 2013, recording a lower GDP growth of 5%, compared to 6.2% for Fiscal 2012 (based on data from the Ministry of Statistics and Programme Implementation). In Fiscal 2011, the inflationary pressures started mounting and the RBI started tightening monetary policy, which impacted growth. During Fiscal 2013, the moderation in growth was primarily attributable to weakness in industry. Furthermore, as the pace of growth started slowing down, government revenues started shrinking, exposing the economy to a higher fiscal deficit. The current account deficit also widened. Beginning in Fiscal 2012, corporate and infrastructure investment started slowing down mainly due to investment bottlenecks and tight monetary policy. Government expenditure on infrastructure and other key sectors declined. With the continued high interest rates and inflation, households were forced to spend more on essentials and discretionary spending was reduced, leading to the deferral of significant purchase decisions. The continued stagnation of industrial growth mainly in the areas of mining and quarrying, and manufacturing and infrastructure, adversely impacted the domestic auto industry. As a result, as compared to prior years, the domestic auto industry recorded an insignificant growth on an overall basis.

Sales of our commercial vehicles in India increased marginally by 1.0% to 536,491 units in Fiscal 2013 from 531,228 units in Fiscal 2012. The demand in the M&HCV category fell by 23.3% from Fiscal 2012, due to lower industrial growth and a significant reduction in infrastructure spending. However, the LCV category grew by 17.9% in Fiscal 2013, largely supported by demand for small commercial vehicles driven by certain niche segments. We also improved LCV volume performance in the pickup truck segment realizing sales of 393,726 units, an increase of 21.5% over 324,069 units sold in Fiscal 2012. Sales of the Tata Ace continued to increase year-on-year.

We launched several products and variants in the M&HCV category in Fiscal 2013, one of which was the first in class five axle rigid truck, the LPT 3723. The new generation LCV Ultra bus was launched during Fiscal 2013. A micro-segmentation effort was used to further grow market share in key markets.

Our passenger vehicle (including UV) sales in India decreased to 219,190 units in Fiscal 2013 from 347,323 units in Fiscal 2012. Domestic passenger vehicle sales were impacted by rising interest rates, fuel price hikes, inflationary pressures and intense competition. We sold 48,123 Nano cars in Fiscal 2013, a decrease of 37.8% over 77,394 units in Fiscal 2012. We have taken many initiatives to generate demand for the Nano, through Special Nano Access Points and ensuring availability of finance. We continue to offer products in the entry level, mid-size sedan market, through a portfolio including the original Indigo, the Indigo eCS, the Indigo Manza and the Indigo Manza club class. Our sales in the mid-size category reduced in Fiscal 2013, as competition severely intensified with multiple new launches from other players in this segment.

In the UV category, we sold 46,366 units in Fiscal 2013, representing a decrease of 16.6% from 55,592 units in Fiscal 2012. The decrease was mainly due to absence of appropriate products in the fast growing soft road UV segment, although this category of the automotive industry in India grew by 51.5% in Fiscal 2013.

 

49


Table of Contents

Our overall sales in international markets decreased by 16.2% to 64,242 units in Fiscal 2013, as compared to 76,682 units in Fiscal 2012. Our exports of vehicles manufactured in India decreased by 22.1% in Fiscal 2013 to 48,145 units from 61,835 units in Fiscal 2012. The decrease in exports was attributable to the recent unrest in the Middle East and parts of Africa. For Tata Motors, traditionally strong markets in South Asia, such as Bangladesh, also were affected by internal conflict and unrest. Regulatory changes in certain other key markets, such as Sri Lanka, where the duties and taxes increased by approximately 20% to 100% depending on the type of product, introduced by the Sri Lankan Government to curb the imports, also affected our sales.

TDCV, our subsidiary company engaged in design, development and manufacturing of M&HCVs, recorded a 5% increase in its overall vehicle sales to 9,974 units in Fiscal 2013, from 9,500 units in Fiscal 2012. TDCV exported 4,700 units in Fiscal 2013, compared to 2,948 units in Fiscal 2012, an increase of 59.4%. TDCV’s sales increased significantly in some of its traditional export markets like Algeria, Russia, Laos, South Africa, and Vietnam. TDCV has also commenced offering its products in some new markets like Indonesia, Ecuador, and Ghana with a view to diversify its market. In the South Korean market, TDCV’s sales decreased by 17.6% from 6,552 units in Fiscal 2012 to 5,400 units in Fiscal 2013, primarily as a result of a slowdown in the South Korean economy.

Our overall vehicle sales decreased by 14.2% to 819,923 units in Fiscal 2013 from 955,233 units in Fiscal 2012, resulting in a revenue (before inter-segment elimination) decrease of 15.9% to Rs.513,817 million in Fiscal 2013, compared to Rs.611,048 million in Fiscal 2012. The decrease was mainly attributable to significant reduction in volumes on account of adverse economic factors in India and further accentuated by intense competitive pressures.

There was an increase in spares and after sales activity by 10.2% to Rs.38,802 million in Fiscal 2013, compared to Rs.35,221 million in Fiscal 2012.

Revenue from our vehicle financing operations increased by 23.3% to Rs.30,013 million in Fiscal 2013 as compared to Rs.24,340 million in Fiscal 2012. In response to significant competitive pressures, we focused on market penetration, resulting in volume growth of Rs.3,789 million. Revenues from our vehicle financing operations were also favorably impacted by increasing interest rates.

Earnings before other income, interest and tax before inter-segment eliminations from Tata and other brand vehicles/spares and financing thereof decreased by 73.8% to Rs.10,701 million in Fiscal 2013, compared to Rs.40,884 million in Fiscal 2012. Our reduced profitability was mainly a consequence of lower operating margins resulting from the decrease in revenues and the incurrence of fixed costs which were spread over lower volumes. Further, there was an increase in depreciation expense as a result of additions to plant / facility in recent years, and in amortization expense in respect of new products launched.

Automotive operations - Jaguar Land Rover

Jaguar Land Rover had a successful year of continued growth in all markets, including 48% year on year growth in China retail sales. Jaguar Land Rover also significantly improved sales in more developed economies, where, despite uncertain trading conditions, it has increased volumes in all major markets. The volume growth has been driven by a full year of Range Rover Evoque sales, new Jaguar product lines and increasing sales of our existing models.

Retail volumes in Fiscal 2013 were 374,636 units, an increase of 22% compared to the prior year. Retail volumes were 58,593 units for Jaguar and 316,043 units for Land Rover, growth of 8% and 26%, respectively. Retail volumes in Europe were 80,994, a 18% increase on the prior year. Retail volumes in the United Kingdom were 72,270 units, a 20% increase on the prior year, while the North American retail volumes were 62,959, representing an increase of 9%. Retail volumes in key growth markets increased significantly, with China retail volumes of 77,075, a 48% increase, with Asia Pacific of 17,849, a 27% increase and with other markets of 63,489, a 19% increase, respectively, compared to the previous year.

Wholesale volumes for Jaguar in Fiscal 2013 were 57,766 units, representing an increase of 7.0% as compared to 53,990 units sold in Fiscal 2012. Wholesale volumes for Land Rover in Fiscal 2013 were 314,290 units, representing an increase of 20.8% over sales of 260,260 units in Fiscal 2012.

Revenues (before inter-segment eliminations) for Jaguar Land Rover were Rs.1,365,620 million for Fiscal 2013, compared to Rs.1,044,533 million for Fiscal 2012, representing a 30.7% increase over Fiscal 2012. The increase was primarily driven by demand for both brands as well as a strong product and market mix, supported by favourable exchange rates. The revenues were also positively impacted by translation gain, of approximately Rs.140,655 million.

 

50


Table of Contents

For Fiscal 2013, the Jaguar Land Rover business reported earnings before other income, interest and tax before inter-segment eliminations of Rs.150,687 million, as compared to Rs.118,895 million for Fiscal 2012, representing an increase of 26.7% over Fiscal 2012. The improvement in profitability was mainly attributable to an increase in volumes, introduction of the new Range Rover, a full year of the Range Rover Evoque and the new variants of the Jaguar XF as well as the continued strength of the Range Rover Sport. Further, the performance was also supported by the positive impact of the continuing strength of the US dollar against the GBP and the Euro, improving its revenues against the backdrop of a largely GBP and Euro cost base. The reported earnings before other income, interest and tax also have an element of foreign currency translation gain.

Other Operations

Our other operations business segment includes information technology services and machine tools and factory automation solutions. Our revenue from other operations before inter-segment eliminations was Rs.22,179 million in Fiscal 2013, an increase of 17.3% from Rs.18,905 million in Fiscal 2012. Revenues from other operations represented 1.2%, 1.1% and 1.2% of our total revenues, before inter-segment eliminations, in Fiscal 2013, 2012 and 2011, respectively. Earnings before other income, interest and tax before inter-segment eliminations, were Rs.3,294 million, Rs.2,443 million and Rs.1,487 million in Fiscal 2013, 2012 and 2011, respectively.

Geographical breakdown

We have pursued a strategy of increasing exports of Tata and other brand vehicles to new and existing markets. Improved market sentiment and a strong portfolio of Jaguar Land Rover products during Fiscal 2013, have enabled us to increase our share in international markets. Further, Jaguar Land Rover also experienced a change in market mix, in particular the continued strengthening of business in China, which is our second largest single market, after India. The performance of our subsidiary in South Korea, TDCV, and successful operations of INCAT and its subsidiaries following acquisitions by TTL, facilitated further increase in our revenue from international markets. TDCV’s major export markets are Algeria, Russia, Vietnam, South Africa 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 76.1% and 66.8% for Fiscal 2013 and Fiscal 2012, respectively.

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

 

     Fiscal 2013     Fiscal 2012     Fiscal 2011  

Revenue

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

India

     451,652         23.9     552,513         33.2     464,676         37.7

China

     445,645         23.6     296,923         17.8     116,459         9.4

United Kingdom

     224,604         11.9     179,866         10.8     136,906         11.1

United States of America

     189,007         10.0     157,855         9.5     147,428         12.0

Rest of Europe

     220,489         11.7     190,057         11.4     150,148         12.2

Rest of the World

     358,464         18.9     287,640         17.3     216,517         17.6
  

 

 

      

 

 

      

 

 

    

Total

     1,889,860           1,664,853           1,232,134      
  

 

 

      

 

 

      

 

 

    

Rest of Europe is geographic Europe excluding United Kingdom. Rest of the World is any region not included above.

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 other participants in the automotive industry, are materially 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”.

 

   

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”.

 

51


Table of Contents
   

Our competitive position in the market. For a detailed discussion regarding our competitive position, see Item 4.B “— Business Overview — Automotive Operations — Tata and other brand vehicles — 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 applicable environmental and safety laws, rules, regulations and standards will have a significant bearing on 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 in India”.

 

   

Foreign Currency Rates. Our operations and our financial position are quite sensitive to fluctuations in foreign currency rates. 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. 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.”

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 2013     Fiscal 2012     Fiscal 2011     2012 to 2013      2011 to 2012  

Total revenues

     100     100     100     13.5         35.1   

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

     63.8        66.1        64.6        9.6         38.2   

Employee cost

     8.8        7.3        7.5        36.0         32.4   

Other expenses

     20.2        18.6        18.9        23.5         33.2   

Depreciation and amortization

     3.9        3.3        3.5        35.4         25.3   

Expenditure capitalized

     -5.4        -5.0        -4.7        23.3         43.9   

Other (income)/ loss (net)

     -0.6        -0.6        0.7        27.8         214.5   

Interest income

     -0.4        -0.3        -0.3        43.0         47.9   

Interest expense (net)

     2.2        2.3        3.0        6.4         3.9   

Foreign exchange (gain) / loss (net)

     0.8        0.7        -0.3        40.2         -461.0   

Impairment in equity accounted investees

     —          0.3        —         -100.0         100.0   

Share of (profit) / loss of equity accounted investees

     -0.1        —       —       -593.7         -23.4   

Net income before tax

     6.8        7.3        7.1        6.3         40.0   

Income tax expense

     -2.1        0.3        1.0        732.6         -63.2   

Net income

     4.7        7.0        6.1        -23.1         57.9   

Net income attributable to shareholders of Tata Motors Limited

     4.7        7.0        6.1        -23.3         57.6   

Net income attributable to non-controlling interests

     —       —       —       13.4         125.2   

 

* Less than 0.1

 

52


Table of Contents

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 2013     Fiscal 2012     Fiscal 2011     2012 to 2013     2011 to 2012  

Total Revenues (Rs. million)

    1,878,571        1,654,903        1,223,547        13.5        35.3   

Earnings before other income, interest and tax
(Rs. million)

    161,388        159,779        124,419        1.0        28.4   

Earnings before other income, interest and tax (% to total revenue)

    8.6     9.7     10.2    

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 2013     Fiscal 2012     Fiscal 2011     2012 to 2013      2011 to 2012  

Total revenues (Rs. million)

     22,179        18,905        14,916        17.3         26.7   

Earnings before other income, interest and tax (Rs. million)

     3,294        2,443        1,487        34.8         64.3   

Earnings before other income, interest and tax (% to total revenue)

     14.9     12.9     10.0     

Fiscal 2013 Compared to Fiscal 2012

Revenues

Our total consolidated revenues (net of excise duty, where applicable) including finance revenues were Rs.1,889,860 million in Fiscal 2013, an increase of Rs.225,007 million or 13.5%, from Rs.1,664,853 million in Fiscal 2012.

The increase in revenues was primarily driven by our Jaguar Land Rover business, where revenues increased by 30.7%, from Rs.1,044,533 million in Fiscal 2012 to Rs.1,365,620 million in Fiscal 2013. The increase in revenues was primarily a result of volume increases across products and markets. The revenues also reflect an increase on account of currency translation from GBP to INR of Rs.140,655 million. Rs.150,630 million, or 14.4% of the aggregate increase in revenues of Rs.180,432 million (excluding translation impact) was mainly attributable to an increase in sales of the Range Rover Evoque from 59,948 units in Fiscal 2012 to 115,529 units in Fiscal 2013.

The increase in revenues at our Jaguar Land Rover business was partly offset by a decrease in revenue for Tata and other brand vehicles including financing thereof by 15.9% from Rs.611,048 million in Fiscal 2012, to Rs.513,817 million in Fiscal 2013. The decrease was mainly due to challenging market conditions and competition. In particular, the decrease in revenues resulted from a significant reduction in the vehicle sales volumes in several vehicle categories, including M&HCV in India, which decreased from Rs.246,079 to Rs.168,363 million and passenger cars, which decreased by 37.8% from Rs.81,330 million to Rs.50,551 million.

The above decrease in revenues was offset by:

 

   

an increase in finance revenue by 23.3% from Fiscal 2012, which resulted from increased volume of financing.

 

   

an increase in spares sales activity by 10.2% from Fiscal 2012

 

   

an increase in vehicle sales in LCV category, in India by 17.6% from Rs.95,805 million in Fiscal 2012 to Rs.112,631 million in Fiscal 2013, which was largely supported by demand for small commercial vehicles driven by certain niche segments and our market penetration.

 

   

an increase in vehicle sales of TDCV by 24.1% from Rs.29,808 million in Fiscal 2012 to Rs.36,992 million in Fiscal 2013, primarily as a result of significant sales increase in some of the Company’s traditional export markets like Algeria, Russia, Laos, South Africa, and Vietnam. TDCV has also commenced introducing its products in some new markets like Indonesia, Ecuador, and Ghana with a view to diversify its market.

 

53


Table of Contents

Revenues (net of excise duty, where applicable) before inter-segment eliminations, from other operations were Rs.22,179 million in Fiscal 2013, an increase of 17.3% from Rs.18,905 million in Fiscal 2012. The increase in revenues from other operations was mainly attributable to traction in the automotive and aerospace markets. Revenues from other operations represent 1.2% and 1.1% of our total revenues, before inter-segment eliminations, in Fiscal 2013 and 2012, respectively.

Cost and Expenses

Raw Materials and Purchase of Products for Sale (including change in stock): Raw material costs for Fiscal 2013 were Rs.1,206,250 million compared to Rs.1,100,477 million in Fiscal 2012, reflecting an increase of 9.6%, or Rs.105,773 million, from Fiscal 2012. The increase in raw material costs was mainly attributable to an increase volumes at our Jaguar Land Rover business as further discussed below. The increase was also partially attributable to the effect of currency translation from GBP to Indian rupees, which resulted in an increase of Rs.88,851 million. This was partly offset by decrease at our India operations, due to reduction in volumes. Raw material costs as a percentage of revenues (excluding finance revenues) decreased to 64.9% in Fiscal 2013 as compared to 67.1% in Fiscal 2012.

At our Jaguar Land Rover operations, raw material costs for Fiscal 2013 were Rs.850,372 million compared to Rs.671,043 million in Fiscal 2012, reflecting an increase of Rs.179,329 million from Fiscal 2012 (net of translation increase of Rs.90,478 million). The raw material cost as a percentage of revenues decreased to 62.8% in Fiscal 2013, as compared to 64.6% in Fiscal 2012. The raw material cost increased by GBP 896 million (Rs.77,081 million) due to increase in volume and increase in duties by GBP 213 million (Rs.18,314 million) mainly due to increase in sales to China by 32.7%. The decrease in material cost as a percentage to revenue was mainly due to cost reduction programs undertaken by Jaguar land Rover of approximately GBP 117 million (Rs.10,060 million) and positive movement of foreign currency rates applicable for sourcing countries of GBP 185 million (Rs.15,907 million).

At our India operations, raw material costs for Fiscal 2013 were Rs.329,621 million compared to Rs.397,023 million in Fiscal 2012, reflecting a decrease of Rs.67,402 million from Fiscal 2012. The reduction represent volume impact of M&HCV Rs.56,419 million and passenger cars by Rs.27,882 million. This was partly offset by increase in volumes of LCV by Rs.13,273 million. The raw material cost as a percentage of revenues increased to 73.5% in Fiscal 2013, as compared to 72.7% in Fiscal 2012 (before inter-segment eliminations). The percentage increase was due to change in proportion of products – lower M&HCV volumes (high contribution models) and higher LCVs (low contribution models).

Employee Cost: Our employee cost was Rs.166,038 million in Fiscal 2013, as compared to Rs.122,130 million in Fiscal 2012 and has gone up by 36.0% or Rs.43,908 million. Our permanent headcount increased by 7% as at March 31, 2013 to 62,716 employees, as compared to 58,618 employees as at March 31, 2012.

The employee cost at Jaguar land Rover was Rs.114,591 million in Fiscal 2013, as compared to Rs.77,813 million in Fiscal 2012, which reflects an increase of 47.3% or Rs.36,778 million. This includes currency translation of Rs.12,379 million. The employee cost as a percentage to revenue was 8.4% for Fiscal 2013 and 7.5% for Fiscal 2012. Jaguar Land Rover increased its permanent and agency headcount to support volume increases, as well as new launches and product development projects. The permanent headcount increased by 9.5% as at March 31, 2013 to 17,832 employees, as compared to 16,313 employees as at March 31, 2012. The average temporary headcount increased by 40.5% for Fiscal 2013 to 7,081 employees, as compared to 5,041 employees for Fiscal 2012. The increase in cost was also attributable to a wage agreement in November 2012, resulting in an increase of 4.5% increase in salary. Further increase in cost was due to higher pension charge by GBP 34 million (Rs.2,889 million), due to change in actuarial assumptions, such as discount rate and inflation and other benefits/costs to employees by GBP 40 million (Rs.3,412 million), on account of increase in salaries in Fiscal 2013.

In South Korea, our union employees had filed a lawsuit demanding inclusion of some elements of non-ordinary salary and bonus as part of ordinary wages, which has been decided by the district court in their favor. We have made a provision of Rs.2,124 million in Fiscal 2013 in respect of this lawsuit. We have filed an appeal against the order.

For our India operations (Tata brand vehicles) the employee cost was Rs.31,784 million in Fiscal 2013, as compared to Rs.30,079 million in Fiscal 2012, which reflects an increase of 5.7% or Rs.1,705 million. The permanent headcount increased by 4.5% as at March 31, 2013 to 36,522 employees, as compared to 34,593 employees as at March 31, 2012, mainly due to commencement of operations of Dharwad plant in March 2012 and increased product development activity. The increase was due to yearly increments (Rs.1,661 million for Tata Motors) and wage revision at one of the major location (increase of Rs.409 million), due in Fiscal 2013, which was partly offset by reduction in variable pay, due to performance factors (Rs.764 million for Tata Motors).

 

54


Table of Contents

Other Expenses: Other expenses increased by 23.5% to Rs.382,120 million in Fiscal 2013 from Rs.309,381 million in Fiscal 2012. This increase mainly reflects the impact of an increase in volumes at Jaguar Land Rover and currency translation of Rs.29,450 million. As a percentage of total revenues, these expenses represented 20.2% in Fiscal 2013, as compared to 18.6% in Fiscal 2012. The major components of expenses are as follows:

 

     Year ended March 31,      Increase/
(Decrease)
 
     2013      2012     
     (Rs. in millions)  

Freight and transportation expenses

     55,851         45,891         9,960   

Works operation and other Expenses

     143,224         110,719         32,505   

Publicity

     66,315         53,931         12,384   

Allowance for trade and other receivables, and finance receivables

     10,569         6,745         3,824   

Warranty and product liability expenses

     41,869         35,815         6,054   

 

i) The increase in freight and transportation expenses relates to increase in volumes at our Jaguar Land Rover operations, predominantly for China sales.

 

ii) Our works operation and other expenses represented 7.6% and 6.7% of total revenue for Fiscal 2013 and 2012, respectively. These mainly relate to volume related expenses at Jaguar Land Rover.

 

iii) Publicity expenses were 3.5% of our revenues for Fiscal 2013, same as Fiscal 2012. In addition to routine product and brand campaigns, we incurred expenses relating to new product introduction campaigns, namely the all-new aluminum Range Rover that went on sale during September 2012 as well as the Jaguar all-wheel drive and smaller engine variants and 2013 Model Year launches of other vehicles. In India we launched the Safari Storme and the Tata LPT 3723.

 

iv) Consequent to increase in level of financing activity and evaluation of defaults/overdues, the allowances for finance receivables have increased by Rs.3,681 million.

 

v) Warranty and product liability expenses represented 2.3% and 2.2% of our revenues for Fiscal 2013 and Fiscal 2012, respectively. These expenses are accrued based on historical information on the nature, frequency and average cost of claims and management estimates. Please refer to Critical Accounting Policies included in Item 5.A of this annual report for further details.

Expenditure capitalized: These represent employee costs, stores and other manufacturing supplies and other works expenses incurred towards product development projects and also include costs attributable to internally constructed capital items. Considering the nature of our industry, we have to continually invest in the development of new products and also address safety, emission and other regulatory norms. The increase reflects expenditure on new products and other major product development plans, including for example, with respect to the new Range Rover, the Range Rover Sport, future LCVs, World Truck and passenger car models.

Depreciation and Amortization: Our depreciation and amortization expenses increased by Rs.19,288 million to Rs.73,723 million in Fiscal 2013, compared to Rs.54,435 million in Fiscal 2012. The increase on account of currency translation is Rs.5,401 million. The increase in depreciation expenses from Rs.31,849 million in Fiscal 2012 to Rs.38,088 million in Fiscal 2013, is on account of asset addition in Fiscal 2013 and plant and equipment (mainly towards capacity and new products) installed in Fiscal 2012 (production facility for Evoque at Halewood and plant at Dharwad), the full effect of which is reflected in the current year. The increase in amortization of product development cost from Rs.22,586 million in Fiscal 2012 to Rs.35,635 million in Fiscal 2013, reflects amortization cost of products capitalized and introduced during Fiscal 2012 and Fiscal 2013, primarily, the Range Rover Evoque and Safari Storme.

Other income (net): There was a net gain of Rs.12,024 million in Fiscal 2013, as compared to Rs.9,407 million in Fiscal 2012 an increase of Rs.2,617 million.

 

  i. There was a gain of Rs.3,933 million on fair value of prepayment option on Senior Notes.

 

55


Table of Contents
  ii. As compared to Fiscal 2012 there was reduction in gain on fair value of conversion option relating to convertible foreign currency notes by Rs.1,630 million in Fiscal 2013.

For further details refer note 30 to our consolidated financial statements included elsewhere in this annual report.

Interest expense (net): Our interest expense (net of interest capitalized) increased by 6.4% to Rs.40,752 million in Fiscal 2013, compared to Rs.38,290 million in Fiscal 2012. As a percentage of total revenues, interest expense represented 2.3% in Fiscal 2013 compared to 2.2% in Fiscal 2012. The gross interest expense increased by 16.7% to Rs.54,112 million in Fiscal 2013, compared to Rs.46,377 million in Fiscal 2012. Consequent to increase in financing activity and the rate change interest expense increased by Rs.3,765 million.

Foreign exchange (gain)/loss (net): We had a net foreign exchange loss of Rs.15,640 million in Fiscal 2013, compared to Rs.11,154 million in Fiscal 2012. This was primarily due to the following factors:

 

  i. Jaguar Land Rover incurred an exchange loss of Rs.12,680 million in Fiscal 2013 as compared to Rs.759 million in Fiscal 2012. There was a loss of Rs.5,047 million on cash flow hedges in Fiscal 2013 as compared to a gain of Rs.1,615 million in Fiscal 2012. We incurred a net exchange loss on Senior Notes of Rs.3,405 million in Fiscal 2013, as compared to Rs.924 million in Fiscal 2012.

 

  ii. For India operations, due to depreciation of the Indian rupee against all major currencies, we incurred exchange losses on foreign currency payments and borrowings. There was a net exchange loss of Rs.5,467 million in Fiscal 2013 as compared to Rs.9,672 million in Fiscal 2012. The reduction of Rs.4,205 million, attributable to reduction in foreign currency denominated borrowings (Zero Coupon Convertible Alternative Reference Securities and Foreign Currency Convertible Notes).

Income Taxes: Our income tax expense was Rs.39,191 million in Fiscal 2013, compared to Rs.4,707 million in Fiscal 2012. In Fiscal 2012. The main reason are

 

  i. In Fiscal 2012, we recognized all previously unrecognized unused tax losses and other temporary differences pertaining to Jaguar Land Rover operations resulting in tax credit of Rs.29,528 million.

 

  ii. During Fiscal 2013, we recognised Rs.4,133 million tax expense on distribution of dividend from an overseas subsidiary and there was increase of Rs.1,113 million in tax provision on undistributed earnings of subsidiaries / associates (due to increase in National Sales company profits of Jaguar Land Rover, mainly China).

 

  iii. There was an increase of Rs.1,533 million towards additional tax liability on the rate change and Rs.1,850 million Consequent to increase in income.

For further details refer to note 16 to our consolidated financial statements included elsewhere in this annual report.

Non-controlling Interests in Consolidated Subsidiaries and Share of profit of equity accounted investees, net of tax: In Fiscal 2013, our share of profit of equity accounted investees reflected a gain of Rs.1,734 million, as compared to loss of Rs.351 million in Fiscal 2012. In Fiscal 2013,

 

56


Table of Contents
   

our share of profits increased by Rs.1,101 million in one of equity accounted investees, which recorded gain on divestment of certain joint ventures investment by the affiliate.

 

   

in another affiliate our share of earning was Rs.1,538 million (loss of Rs.619 million in Fiscal 2012) consequent to revision in business model and pricing basis.

 

   

loss of Rs.1,017 million in the China JV due to start-up cost.

In Fiscal 2013, our share of non-controlling interest reflected a gain of Rs.886 million, as compared to Rs.781 million in Fiscal 2012, primarily due to increased profitability of our subsidiaries, mainly Tata Technologies Ltd.

Net Income

Our consolidated net income for Fiscal 2013 excluding share of non-controlling interests decreased by 23.3% to Rs.88,697 million from Rs.115,659 million in Fiscal 2012. Net income as a percentage of total revenues also decreased to 4.7% in Fiscal 2013 from 7.0% in Fiscal 2012. This decrease was the result of the following factors:

 

   

Revenues from the domestic market (India) decreased by 18.3% to Rs.451,652 million in Fiscal 2012 from Rs. 552,513 million in Fiscal 2012, resulting in earnings before other income, interest and tax of Rs.10,701 million in Fiscal 2013 for Tata and other brand vehicles including financing thereof, as compared to Rs.40,844 million in Fiscal 2012; and

 

   

higher income tax expense.

Which was offset by

 

   

Revenues from market outside India increased by 29.3% to Rs.1,438,238 million in Fiscal 2013 from Rs.1,112,340 million in Fiscal 2012, mainly attributable to our Jaguar Land Rover business. The earnings before other income, interest and tax for Jaguar Land Rover business was Rs.150,687 million in Fiscal 2013 as compared to Rs.118,895 million in Fiscal 2012; and

 

   

increase in other income, mainly due to gain on the fair value of prepayment option.

Fiscal 2012 Compared to Fiscal 2011

Revenues

Our total consolidated revenues (net of excise duty, where applicable) including finance revenues were Rs.1,664,853 million in Fiscal 2012, an increase of Rs.432,719 million or 35.1%, from Rs.1,232,134 million in Fiscal 2011. The growth was driven by volumes across all markets and more particularly growth in volumes by 29.1% in premium car segment, supported by new products and significant performance improvement of our Jaguar Land Rover in the Chinese market.

The revenue from Tata and other brand vehicles increased by 16.0% (the figures are before inter-segment eliminations), primarily due to:

 

   

15.3% increase in vehicle unit sales in India (mainly M & HCV by Rs.43,327 million);

 

   

21.5% increase in spares and after sales activity; and

 

   

9.5% increase in automotive financing revenues.

Revenues for the Jaguar Land Rover business increased by 49.3% to Rs.1,044,533 million. The increase is attributable to the launch of the Range Rover Evoque and an increase in sales volumes by 36.7% particularly in China, Russia, South Africa and Brazil. The increase on account of currency translation was Rs.80,712 million.

Revenues (net of excise duty, where applicable) before inter-segment eliminations, from other operations were Rs.18,905 million in Fiscal 2012, an increase of 26.7% from Rs.14,916 million in Fiscal 2011. Revenues from other operations represent 1.1% and 1.2% of our total revenues, before inter-segment eliminations, in Fiscal 2012 and 2011, respectively.

Cost and Expenses

Raw Materials and Purchase of Products for Sale (including change in stock): Raw material costs for Fiscal 2012 were Rs.1,100,477 million compared to Rs.796,224 million in Fiscal 2011, reflecting an increase of Rs.304,253 million or 38.2% from Fiscal 2011, mainly attributable to increase in volumes. The increase in raw material cost was also partly attributable to the effect of currency translation from GBP to Indian rupees, which resulted in an increase of Rs.54,570 million.

Raw material costs as a percentage of revenues (excluding finance revenues) increased to 67.1% in Fiscal 2012 as compared to 65.8% in Fiscal 2011.

At our Jaguar Land Rover operations, raw material costs for Fiscal 2012 were Rs.671,043 million compared to Rs.438,484 million in Fiscal 2011, reflecting an increase of Rs.232,559 million from Fiscal 2011 mainly due to increased volumes. The raw material cost as a percentage of revenues increased to 64.6% in Fiscal 2013, as compared to 62.7% in Fiscal 2012. Duty expense have increased in Fiscal 2012 by GBP 848 million (Rs.65,162 million), mainly due to increase in volumes at China by 137.8%. The raw material cost increased as a percentage to revenue due to exchange loss by GBP 51 million (Rs.3,919 million), change of price of major material cost, namely Steel, Aluminum, copper etc. by GBP 29 million (Rs.2,228 million) and other market related (mix and options) increase by GBP 146 million (Rs.11,219 million).

 

57


Table of Contents

At our India operations, raw material costs for Fiscal 2012 were Rs.397,023 million compared to Rs.340,668 million in Fiscal 2011, reflecting an increase of Rs.56,355 million from Fiscal 2012. The raw material cost as a percentage of revenues increased to 72.7% in Fiscal 2012, as compared to 72.4% in Fiscal 2011 (before inter-segment eliminations).

Employee Cost: Our employee cost was Rs.122,130 million in Fiscal 2012, an increase of 32.4% or Rs.29,880 million as compared to Rs.92,250 million in Fiscal 2011.

Our employee cost as a percentage of total revenues reduced marginally to 7.3% in Fiscal 2012 from 7.5% in Fiscal 2011, due to revenue growth.

Our permanent headcount increased by 12.2% as at March 31, 2013 to 58,618 employees, as compared to 52,244 employees as at March 31, 2011.

The employee cost at Jaguar Land Rover was Rs. 77,813 million in Fiscal 2012, as compared to Rs.55,923 million in Fiscal 2011, an increase of 39.1% or Rs.21,890 million. Jaguar Land Rover increased its permanent and agency headcount to support volume increases. The permanent headcount increased by 7.0% as at March 31, 2012 to 16,313 employees, as compared to 15,240 employees as at March 31, 2011. Further, Jaguar Land Rover employed temporary headcount 5,041 employees on average during Fiscal 2012. The increase was also due to higher pension charge by Rs.4,388 million on account of change in assumptions. The increase was also partially attributable to the effect of currency translation from GBP to Indian rupees, which resulted in an increase of Rs.5,874 million.

For our India operations, increase was due to normal annual increases (Rs. 2,791 million for Tata Motors) and increase in headcount. The permanent headcount increased as at March 31, 2012 to 34,593 employees, as compared to 30,871 employees as at March 31, 2011. The average temporary headcount increased by 11.7% for Fiscal 2012 to 35,122 employees, as compared to 31,455 employees for Fiscal 2011, to support the volumes. As a consequence of above the employee cost was Rs.30,079 million in Fiscal 2012, as compared to Rs.25,069 million in Fiscal 2011, which reflects an increase of Rs.5,010 million.

Other Expenses: Other expenses increased by 33.2% to Rs.309,381 million in Fiscal 2012 from Rs.232,342 million in Fiscal 2011. The increase mainly relates to increase in volume, size of operations and inflation. As a percentage of total revenues these expenses represented 18.6% in Fiscal 2012, as compared to 18.9% in Fiscal 2011. The major components of expenses are as follows:

 

     Year ended March 31,      Increase/
(Decrease)
 
     2012      2011     
     (Rs. in millions)  

Freight and transportation expenses

     45,891         30,886         15,005   

Works operation and other expenses

     110,719         79,765         30,954   

Publicity

     53,931         40,453         13,478   

Allowance for trade and other receivables, and finance receivables

     6,745         5,972         773   

Warranty and product liability expenses

     35,815         29,334         6,481   

 

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

 

ii) Our works operation and other expenses represented 6.7% and 6.5% of total revenue for Fiscal 2012 and 2011, respectively. The increase was mainly due to external cost (mainly contract jobs) incurred to support the volumes.

 

iii) The increase in publicity related expenses mainly relate to new product introduction campaigns. In addition to routine product and brand campaigns, we incurred expenses relating to new product introduction campaigns, namely Range Rover Evoque in September 2011 with a world-wide roll out in December 2011. In India we launched the Indigo eCS, Sumo Gold and Tata Ultra Bus.

 

iv) The warranty expenses are accrued based on historical information on the nature, frequency and average cost of claims and management estimates and represented 2.2% and 2.4% of our revenues for Fiscal 2012 and Fiscal 2011, respectively.

Expenditure capitalized: These represent employee costs, stores and other manufacturing supplies and other works expenses incurred 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. Considering the nature of our industry, we have to continually invest in the development of new products and also introduce new models to address changing safety, emission and other regulatory norms.

 

58


Table of Contents

Depreciation and Amortization: Our depreciation and amortization cost increased by 25.3% to Rs.54,435 million in Fiscal 2012, compared to Rs.43,446 million in Fiscal 2011. The increase in depreciation expenses from Rs.29,382 million in Fiscal 2011 to Rs.31,849 million in Fiscal 2012 was on account of plant and equipment addition (mainly towards capacity and new products). The increase from Rs.14,064 million in Fiscal 2011 to Rs.22,586 million in Fiscal 2012 in amortization of product development cost is consequent to commencement of commercial production of new products mainly Range Rover Evoque and new products in Indian market.

Other income (net): There was a net gain of Rs.9,407 million in Fiscal 2012, representing a swing of Rs.17,625 million, as compared to net loss of Rs.8,218 million in Fiscal 2011.

 

  i. There was a gain on fair value of conversion option in respect of certain loans of Rs.2,432 million in Fiscal 2012, as compared to loss of Rs.13,850 million for Fiscal 2011. The gain has arisen due to certain options nearing maturity (July 2012) and marginal change in equity price movement as compared to significant increase in Fiscal 2011.

 

  ii. Miscellaneous income increased by Rs.1,728 million.

For further details refer note 31 to our consolidated financial statements included elsewhere in this annual report.

Interest expense (net): Our interest expense (net of interest capitalized) increased by 3.9% to Rs.38,290 million in Fiscal 2012, compared to Rs.36,854 million in Fiscal 2011. The increase represents increase in borrowing cost at Jaguar Land Rover consequent to issue of GBP 1,500 million Senior Notes by Rs.1,527 million and increase in financing activity by Rs.1,778 million.

Foreign exchange (gain)/loss (net): We had a net foreign exchange loss of Rs.11,154 million in Fiscal 2012, compared to gain of Rs.3,090 million in Fiscal 2011. Due to steep depreciation of Indian rupee against all major currencies, we incurred exchange loss on foreign currency payments and borrowings. A portion of the exchange loss in the Fiscal 2012 was on year end valuation of foreign currency borrowings of Rs.9,672 million as compared a net exchange gain to Rs.644 million in Fiscal 2011.

Impairment of equity accounted investees: In Fiscal 2012, we recognized an impairment loss Rs.4,981 million in respect of its investment in an associate, triggered by economic slowdown and increased competition from new entrants. The associate is engaged in the business of manufacture and sale of construction equipment. The recoverable amount of the investment is determined based on value in use.

Income Taxes: The income tax expense was Rs.4,707 million in Fiscal 2012, compared to Rs.12,787 million in Fiscal 2011.

The net decrease of Rs.8,080 million comprises mainly the following:

a) On account of increased profits the incremental tax liability is Rs.9,310 million.

b) There was an increase of Rs.2,366 million in tax on undistributed earnings of subsidiaries and associates (Jaguar Land Rover subsidiaries)

c) The above increases were offset by the following credits:

 

  i. In Fiscal 2012, we recognized all previously unrecognized unused tax losses and other temporary differences pertaining to the subsidiary company in the United Kingdom. There was a net additional credit of Rs.12,458 million on account of utilization / credit of unrecognized tax losses / depreciation.

 

  ii There has been a reduction in overall marginal tax rates applicable to entities in Fiscal 2012 to 26.9% from 27.8% in Fiscal 2011 (Rs.778 million).

 

  iii. We availed higher tax benefit on research and product development cost – tax effect of Rs.7,501 million for Fiscal 2012 as compared to Rs.5,584 million for Fiscal 2011.

 

  iv. There was reduction in amounts for items considered as inadmissible on account of interest, loss on conversion option and other expenses; net decrease in tax of Rs.5,847 million, as compared to Fiscal 2011. This is because during the year there has been a gain on conversion option compared to loss in Fiscal 2011.

For further details refer note 16 to our consolidated financial statements included elsewhere in this annual report.

Non-controlling Interests in Consolidated Subsidiaries and Share of profit of equity accounted investees, net of tax: In Fiscal 2012, our share of profit of equity accounted investees reflected a loss of Rs.351 million, as compared to loss of Rs.458 million in Fiscal 2011. The increase in profit of some associates was offset due to loss incurred by an associate, engaged in construction equipment business on account of deterioration in the market and competition in India. In Fiscal 2012, share of non-controlling interest reflected a gain of Rs.781 million, as compared to gain of Rs.347 million in Fiscal 2011, primarily due to increased profitability of our subsidiaries.

 

59


Table of Contents

Net Income

Our consolidated net income for Fiscal 2012 excluding share of non-controlling interests was Rs.115,659 million, compared to Rs.73,402 million in Fiscal 2011. Net income as a percentage of total revenues increased to 7.0% in Fiscal 2012 from 6.1% to total revenues in Fiscal 2011. This increase was the result of the following factors:

 

   

Revenues from the domestic market (India) increased by 18.9% to Rs.552,513 million in Fiscal 2012 from Rs.464,676 million in Fiscal 2011, resulting in earnings before other income, interest and tax of Rs.40,844 million in Fiscal 2012 for Tata and other brand vehicles including financing thereof, as compared to Rs.48,916 million in Fiscal 2011;

 

   

Revenues from market outside India increased by 44.9% to Rs.1,112,340 million in Fiscal 2012 from Rs.767,458 million in Fiscal 2011, mainly attributable to our Jaguar Land Rover business. The earnings before other income, interest and tax for Jaguar Land Rover business was Rs.118,895 million in Fiscal 2012 as compared to Rs.75,673 million in Fiscal 2011;

 

   

increase in other income, mainly due to gain on the fair value of conversion option; and

 

   

lower income tax expense.

Recent Accounting Pronouncements

Please refer to Note 2 (v) to our consolidated financial statements included elsewhere in this annual report for adopted and yet to be adopted accounting pronouncements as of March 31, 2013.

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. The actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis and at each balance sheet date. Revisions to accounting estimates are recognized 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 are included in the following notes:

Impairment of Goodwill

Cash generating units 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. Please refer to Note 13 to our consolidated financial statements included elsewhere in this annual report for assumptions used for goodwill impairment.

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 at each balance sheet date, 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.

 

60


Table of Contents

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 income statement.

Impairment of equity accounted investees

In Fiscal 2012, the Company had recognized an impairment loss of Rs.4,981 million in respect of its investment in an associate on account of economic slowdown and increased competition from new entrants. The associate is engaged in the business of manufacture and sale of construction equipment. The recoverable amount of the investment is determined based on value in use.

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 when 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/convertible alternative reference securities 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.

 

61


Table of Contents

Financial instruments and fair valuation of prepayment options in Senior Notes

Fair valuation of prepayment options and other financial instruments requires judgment around the valuations.

Property, plant and equipment

Capital work in progress, as at March 31, 2013 includes building of Rs.3,098.8 million on leased land located in the State of West Bengal in India for the purposes of manufacturing automobiles. As a result of the decision to relocate and construct a similar manufacturing facility at, another location, the management was in the process of evaluating several options, under all of which no adjustments to the carrying amount of the buildings was considered necessary. In June 2011, the newly elected Government of West Bengal (referred to as “State Government”) enacted legislation to cancel the land lease agreement.

The Company challenged the legal validity of the legislation. In June 2012, the High Court of Calcutta (referred to as the “High Court”) ruled against the validity of the legislation and restored the Company’s rights under the land lease agreement. The State Government has filed an appeal in the Supreme Court of India. As of the date of the authorization of the financial statements, the Supreme Court has not concluded on the State Government appeal.

The Company reasonably expects that the High Courts’ judgment, based on established law, will be upheld by the Supreme Court. For further details regarding the current legal proceedings with respect to the leased land please refer to Item 4.B “— Business Overview — Legal Proceedings” of this annual report.

B. Liquidity and Capital Resources.

We finance our capital requirements through cash generated from operations, debt and equity funding. We also raise funds through sale of investments including divestment in stakes of subsidiaries on a selective basis.

Our business segments are (i) automotive operations and (ii) all other operations. We provide financing for vehicles sold by dealers in India. Our automotive operations segment is further divided into Tata and other brand vehicles (including spares and financing thereof) and Jaguar Land Rover. Given the nature of our industry and competition, we are required to make significant investments in product development on an ongoing basis.

Principal Sources of Funding Liquidity

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

See Note 35 to our audited consolidated financial statements included elsewhere in this annual report 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:

 

     Fiscal 2013      Fiscal 2012  
     (Rs. in millions)  

Total short-term debt (excluding current portion of long-term debt)

     116,218         111,180   

Total current portion of long-term debt

     115,139         109,795   

Long-term debt net of current portion

     325,457         287,148   
  

 

 

    

 

 

 

Total Debt

     556,814         508,123   

During Fiscal 2013 and 2012, the effective weighted average interest rate on our long-term debt was 8.9% and 9.7% per annum, respectively.

 

62


Table of Contents

The following table sets forth a summary of the maturity profile for our outstanding long-term debt obligations as of March 31, 2013.

 

Payments Due by Period*

   Rs. in millions  

Within one year

     143,383   

After one year and up to two years

     86,783   

After two year and up to five years

     135,010   

After five year and up to ten years**

     221,045   

Total

     586,221   

 

* Including interest
** Jaguar Land Rover has only Senior Notes as long-term debt obligations as of March 31, 2013, which are due for payment after five years.

We believe that we have sufficient liquidity available to meet our planned capital requirements. However, our sources of funding could be adversely affected by an economic slowdown, as was witnessed in Fiscal 2009, or other macroeconomic factors in India and abroad, such as in the United Kingdom, the United States, Europe and China, which are beyond our control. A decrease in the demand for our vehicles could lead to an inability to obtain funds from external sources on acceptable terms or in a timely manner.

We plan to continue investing in product development and manage our operations to pursue further growth opportunities and address competitive positioning. Additionally, in the Jaguar Land Rover business, we will be investing in augmenting capacity at the UK plants, developing a new engine facility and establishing the China JV. Further, we are exploring opportunities to expand the manufacturing base in the Jaguar Land Rover business. We expect to meet the part of such investments out of operating cash flows and cash and liquidity available to us. In order to meet the balance requirements, we may be required to raise funds towards the long term plans via additional bank loan markets and capital markets access from time to time, as deemed necessary.

At Tata Motors India operations, we have plan to raise long term funds through debt and equity, to refinance current debt and invest in Product development and plant and equipment.

In order to refinance our acquisition related borrowings and for supporting long term funding needs, we continued to raise funds in Fiscal 2012 and Fiscal 2013. We had in the past issued convertible notes