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-7.1 d762654dex71.htm
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Tata Motors Earnings 2014-03-31

Balance SheetIncome StatementCash Flow

20-F 1 d762654d20f.htm FORM 20-F Form 20-F
Table of Contents

As filed with the Securities and Exchange Commission on July 31, 2014

 

 

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, 2014

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

Email:hks@tatamotors.com

Address:

Bombay House

24, Homi Mody Street

Mumbai 400 001, India

(Name, Telephone, Facsimile number, Email 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. — 2,736,713,122 Ordinary Shares and 481,966,945 ‘A’ Ordinary Shares, including 581,630,185 Ordinary Shares represented by 116,321,835 American Depositary Shares (ADS) outstanding as of March 31, 2014. (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 on Form 20-F:

 

   

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; SCVs refer to Small commercial vehicles with GVW of upto 2 metric tons; ICVs refer to Intermediate commercial vehicles with GVW between 7.5 metric tons and 16 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” or “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.

 

   

“Companies Act” refers to the Indian Companies Act, 2013 except where it states otherwise.

 

i


Table of Contents

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 an SEC-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.

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

     14   
    A.  

History and Development of the Company

     14   
    B.  

Business Overview

     19   
    C.  

Organizational Structure

     42   
    D.  

Property, Plants and Equipment

     45   
 

Item 4A.

   

Unresolved Staff Comments

     50   
 

Item 5.

   

Operating and Financial Review and Prospects

     50   
    A.  

Operating Results

     50   
    B.  

Liquidity and Capital Resources

     64   
    C.  

Research and Development, Patents and Licenses, etc.

     75   
    D.  

Trend Information

     75   
    E.  

Off-balance Sheet Arrangements

     76   
    F.  

Tabular Disclosure of Contractual Obligations

     76   
 

Item 6.

   

Directors, Senior Management and Employees

     76   
    A.  

Directors and Senior Management

     76   
    B.  

Compensation

     80   
    C.  

Board Practices

     81   
    D.  

Employees

     84   
    E.  

Share Ownership

     86   
 

Item 7.

   

Major Shareholders and Related Party Transactions

     86   
    A.  

Major Shareholders

     86   
    B.  

Related Party Transactions

     88   
    C.  

Interests of Experts and Counsel

     89   
 

Item 8.

   

Financial Information

     89   
    A.  

Consolidated Statements and Other Financial Information

     89   
    B.  

Significant Changes

     90   
 

Item 9.

   

The Offer and Listing

     90   
    A.  

Offer and Listing Details

     90   
    B.  

Plan of Distribution

     90   
    C.  

Markets

     91   
    D.  

Selling Shareholders

     93   
    E.  

Dilution

     93   
    F.  

Expenses of the Issue

     93   
 

Item 10.

   

Additional Information

     93   
    A.  

Share Capital

     93   
    B.  

Memorandum and Articles of Association

     94   
    C.  

Material Contracts

     101   
    D.  

Exchange Controls

     101   
    E.  

Taxation

     104   
    F.  

Dividends and Paying Agents

     108   
    G.  

Statement by Experts

     108   
    H.  

Documents on Display

     108   
    I.  

Subsidiary Information

     108   
 

Item 11.

   

Quantitative and Qualitative Disclosures about Market Risk

     108   
 

Item 12.

   

Description of Securities Other than Equity Securities

     108   

 

iii


Table of Contents

Part II

        
 

Item 13.

   

Defaults, Dividend Arrearages and Delinquencies

     109   
 

Item 14.

   

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

     109   
 

Item 15.

   

Controls and Procedures

     109   
 

Item 16A.

   

Audit Committee Financial Expert

     110   
 

Item 16B.

   

Code of Ethics

     110   
 

Item 16C.

   

Principal Accountant Fees and Services

     111   
 

Item 16D.

   

Exemptions from the Listing Standards for Audit Committees

     111   
 

Item 16E.

   

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

     111   
 

Item 16F.

   

Change in Registrant’s Certifying Accountant

     111   
 

Item 16G.

   

Corporate Governance

     112   

Part III

        
 

Item 17.

   

Financial Statements

     112   
 

Item 18.

   

Financial Statements

     112   
 

Item 19.

   

Exhibits

     113   

 

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, 2014, 2013, 2012, 2011 and 2010 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, 2014 and 2013 and for each of the Fiscal years ended March 31, 2014, 2013 and 2012 are derived from our audited IFRS consolidated financial statements included in this annual report on Form 20-F. The selected IFRS consolidated financial data as of March 31, 2012, 2011 and 2010 and for each of the Fiscal years ended March 31, 2011 and 2010 are derived from our audited IFRS consolidated financial statements not included in this annual report on Form 20-F. Tata Motors adopted several new and amended standards issued by the IASB with effect from April 1, 2013. As described in Note 2(v) of our audited consolidated financial statements included elsewhere in this annual report on Form 20-F, the earliest period presented in the consolidated financial statement has been retrospectively adjusted in accordance with the transitional provisions of the standards. Accordingly, selected financial data as of and for the years ended March 31, 2013, 2012, 2011 and 2010 have been retrospectively adjusted. These retrospective adjustments resulted in decreases in net income by Rs.26.5 million, Rs.1,623.4 million, Rs.2,818.7 million for the year ended March 31, 2013, 2012 and 2011, respectively and an increase in net income by Rs.1,560.7 million in 2010. The decrease / increase in net income resulted in corresponding increase / decrease in other comprehensive income.

Consolidated financial data as of March 31, 2013, 2012, 2011 and 2010 for each of the Fiscal years ended March 31, 2013, 2012, 2011 and 2010 may differ from the data originally presented in those audited IFRS consolidated financial statements included in prior annual reports.

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  
     2014     2014     2013     2012     2011     2010  
    

(In US$ millions,

except share

and per share
amounts)

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

Revenues

     38,586.1        2,311,884.6        1,862,896.7        1,637,173.5        1,203,479.7        901,055.4   

Finance revenues

     498.6        29,875.9        30,013.3        24,340.4        22,231.5        21,796.9   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     39,084.7        2,341,760.5        1,892,910.0        1,661,513.9        1,225,711.2        922,852.3   

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

     (472.6     (28,317.3     (30,086.8     (25,861.4     (18,624.1     (9,365.5

Purchase of products for sale

     1,830.8        109,691.6        92,889.5        90,204.2        78,183.9        58,739.3   

Raw materials and consumables

     22,758.4        1,363,572.1        1,138,214.3        1,025,448.0        723,726.4        561,612.3   

Employee cost

     3,570.1        213,903.0        167,169.5        125,204.9        95,938.2        87,085.3   

Depreciation and amortization

     1,843.7        110,462.6        75,767.9        56,424.0        45,314.3        38,342.3   

Other expenses

     8,324.8        498,777.7        384,423.3        312,456.1        235,583.7        183,651.7   

Expenditure capitalized

     (2,257.3     (135,246.8     (101,934.5     (82,659.8     (57,462.3     (46,048.1

Gain on sale of controlling equity interest in subsidiary

     —         —         —         —         —         (27,565.5

Other (income) / loss (net)

     (129.0     (7,732.6     (12,099.1     (10,039.4     8,067.0        319.6   

Foreign exchange (gain)/loss (net)

     (318.9     (19,104.2     15,774.9        11,511.7        (3,012.1     (17,230.1

Interest income

     (111.1     (6,656.7     (6,298.0     (4,953.4     (3,471.8     (2,298.0

Interest expense (net)

     886.1        53,094.7        40,792.0        38,957.7        37,728.8        41,386.7   

Impairment in an equity accounted investee

     134.1        8,033.7        —         4,981.0        —         —    

Share of (profit)/loss of equity accounted investees

     31.3        1,877.6        131.5        586.8        (260.4     30.7   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income /(loss) before tax

     2,994.3        179,405.1        128,795.5        119,253.5        83,999.6        54,191.6   

Income tax expense

     (804.9     (48,226.5     (39,238.8     (4,436. 5     (13,069.6     (15,049.8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income /(loss) after tax

     2,189.4        131,178.6        89,556.7        114,817.0        70,930.0        39,141.8   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

1


Table of Contents
     For each of the years ended March 31,  
     2014      2014      2013      2012      2011      2010  
    

(In US$ millions,

except share

and per share
amounts)

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

Net income/(loss) attributable to equity holders

     2,181.7         130,717.1         88,670.5         114,035.7         70,583.1         39,589.4   

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

     7.7         461.5         886.2         781.3         346.9         (447.6

Dividends per share

   US$ —          Rs. 2.0         Rs. 4.0         Rs. 20.0         Rs. 15.0         Rs. 6.0   

Dividends per share ‘A’ Ordinary Shares

   US$ —          Rs. 2.1         Rs. 4.1         Rs. 20.5         Rs. 15.5         Rs. 6.5   

Weighted average equity shares outstanding:

                 

Basic

     2,732,346,381         2,732,346,381         2,706,014,707         2,691,542,867         2,588,800,690         2,318,682,314   

Diluted

     2,732,835,642         2,732,835,642         2,706,507,429         2,797,890,724         2,590,872,227         2,319,432,171   

Weighted average ‘A’ equity shares outstanding:

                 

Basic

     481,962,228         481,962,228         481,958,717         481,900,898         396,669,199         320,880,139   

Diluted

     482,206,515         482,206,515         482,206,515         482,206,416         397,166,848         321,380,820   

Earnings per share:

                 

Basic

   US$ 0.7         Rs. 40.7         Rs. 27.8         Rs. 35.9         Rs. 23.6         Rs. 15.0   

Diluted

   US$ 0.7         Rs. 40.6         Rs. 27.8         Rs. 35.5         Rs. 23.6         Rs. 14.7   

Earnings per share of ‘A’ Ordinary Shares:

                 

Basic

   US$ 0.7         Rs. 40.8         Rs. 27.9         Rs. 36.0         Rs. 23.7         Rs. 15.1   

Diluted

   US$ 0.7         Rs. 40.7         Rs. 27.9         Rs. 35.6         Rs. 23.7         Rs. 14.8   

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 in Fiscal 2012, 2011 and 2010 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,  
     2014      2014      2013      2012      2011      2010  
     (in US$ millions,
except number of
shares)
                                    
        (in Rs. millions, except number of shares)  

Balance Sheet Data

                 

Total Assets

     36,464.6         2,184,775.9         1,687,166.5         1,455,830.2         1,055,411.3         932,770.1   

Long term debt, net of current portion

     7,579.7         454,138.6         330,718.1         294,497.6         211,475.2         208,025.3   

Total shareholders’ equity

     10,543.2         631,696.3         373,905.7         331,343.6         211,259.3         102,222.8   

Number of Equity shares outstanding

                 

-Ordinary Shares

     2,736,713,122         2,736,713,122         2,708,156,151         2,691,613,455         538,272,284         506,381,170   

-‘A’ Ordinary Shares

     481,966,945         481,966,945         481,959,620         481,933,115         96,341,706         64,176,374   

During Fiscal 2012, Ordinary Shares and ‘A’ Ordinary Shares were each 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 and 2010 are not comparable to the number of shares as at March 31, 2014, 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.59.9150 = 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 28, 2014. 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.

 

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The following table sets forth, for the Fiscal years ended March 31, 2014, 2013, 2012, 2011 and 2010 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  

2014

     59.89         60.47         68.83         53.81   

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   

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 2014

     62.66         62.12         63.10         61.52   

February 2014

     61.76         62.21         62.58         61.76   

March 2014

     59.89         61.02         62.04         59.89   

April 2014

     60.34         60.36         61.09         59.90   

May 2014

     59.10         59.32         60.23         58.46   

June 2014

     50.19         59.76         60.40         59.16   

Source: Bloomberg L.P.

As of July 30, 2014, the value of the Indian rupee against the US dollar was Rs.60.06 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, financial condition and results of operations. 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, financial condition, results of operations, liquidity, capital resources and prospects.

Risk associated with Our Business and the Automotive Industry.

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

The automotive industry, and the demand for automobiles, are influenced by general economic conditions, including among other things, rates of economic growth, availability of credit, disposable income of consumers, interest rates, environmental and tax policies, safety regulations, freight rates and fuel and commodity prices. Negative trends in any of these factors impacting the regions where we operate could materially and adversely affect our business, results of operations and financial condition.

The Indian automotive industry is affected materially by the general economic conditions in India and around the world. Muted industrial growth in India during Fiscal 2014 along with continuing higher inflation and interest rates continue to pose risks to overall growth in this market. The automotive industry in general is cyclical and economic slowdowns in the recent past have affected the manufacturing sector, including the automotive and related industries in India. A continuation of negative economic trends or further 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 could materially and adversely affect our automotive sales in India and results of operations.

 

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Our Jaguar Land Rover business has significant operations 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. During Fiscal 2014, the automotive market in the United Kingdom and Europe continued to experience challenges. Confidence in financial markets and general consumer confidence have been further eroded by recent political tensions in North Africa, the Middle East and Ukraine, and concerns of an economic slowdown in China. Our strategy with respect to our Jaguar Land Rover operations, which includes new product launches and expansion in growing markets such as China, India, 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. If industry demand softens because of 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 materially and adversely impact our financial condition, results of operations and prospects.

Some of our financing agreements and debt arrangements set limits on and/or require us to obtain lender consent 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 consent for such activities. However, there can be no assurance that we will be able to obtain such consents in the future. If our liquidity needs or growth plans require such consents and such consents are not obtained, we may be forced to forego or alter our plans, which could materially and adversely affect our results of operations and financial condition.

In the event 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 net worth and the other relating to our debt service coverage ratio in bank guarantees relating to our 2009 non-convertible Indian rupee debentures, which could potentially result in increased costs under these guarantees. We have requested and obtained waivers of our obligations to pay additional costs as a consequence of such breaches. In Fiscal 2014, we are in breach of one financial covenant relating to our ratio of total outstanding liability to tangible net worth, which has also been waived by the lenders and has not resulted in any default or penalties. As per the terms of the bank guarantee agreement, a breach of one covenant is not an event of default and also does not require us to pay increased costs for these guarantees. 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.”

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

Our operations are subject to risks arising from fluctuations in exchange rates with reference to countries in which we operate. We import capital equipment, raw materials and components from, manufacture vehicles in, and sell vehicles into, various countries, and therefore our revenues and costs have significant exposure to the relative movements of the GBP, the US dollar, the Euro, the Chinese Renminbi, the Japanese Yen and the Indian rupee. In particular, the Indian rupee declined significantly relative to the US dollar during Fiscal 2014. As of August 28, 2013, the value of the Indian rupee against the US dollar was Rs. 68.80 = US$1.00, following a depreciation of approximately 28.2%, as compared to Rs.53.65 = US $1.00 on May 1, 2013, based on the exchange rate for Indian rupees in the City of New York for cable transfers payable in foreign currencies as certified by the Federal Reserve Bank of New York for customs purposes. The noon buying rate for the Indian rupee from the Federal Reserve Bank of New York, expressed in rupees per US$1.00, was Rs. 59.89 on March 28, 2014.

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.

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

 

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Although we engage in managing our interest and foreign exchange exposure through use of financial hedging instruments such as forward contracts, swap agreements and option contracts, higher interest rates and a weakening of the Indian rupee against major foreign currencies significantly increase our cost of borrowing, which could have a material adverse effect on our financial condition, results of operations and liquidity.

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 a material 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 expanding in emerging markets, such as China, India, Russia, Brazil and parts of Asia. The factors affecting competition include product quality and features, innovation and time to introduce new products, 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 have attracted 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 and quality.

Our competitors may 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 materially and adversely impact our financial condition and results of operations.

Customer preferences especially in many of the developed markets seem to be moving in favor of more fuel efficient and environmentally friendly vehicles. Furthermore, 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 regulations, rising fuel prices and customers’ environmental considerations. Our operations may be significantly impacted if we experience delays in developing fuel efficient products that reflect changing customer preferences, especially in the premium automotive category. In addition, a deterioration in the quality of our vehicles could force us to incur substantial costs and damage our reputation. There can be no assurance that the market acceptance of our future products will meet our sales expectations, in which case we may be unable to realize the intended economic benefits of our investments and our financial condition and results of operations may be materially and adversely affected.

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

We are subject to risks and costs associated with product liability, warranties and recalls, should we supply defective products, parts, or related after-sales services, including by generating negative publicity, which may have a material adverse effect on our business, results of operations and financial condition. Such events could also require us to expend considerable resources in correcting these problems and could significantly reduce 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.

 

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

In India, we are subject to risks associated with our automobile financing business. In Fiscal 2014, the market share of our automobile financing business, which supports sales of our vehicles, declined to 30.0% from 33.1% in Fiscal 2013. Any default by our customers or inability to repay installments as due, could materially and adversely affect our business, financial condition, 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 severely disrupt our ability to support the sale of our vehicles.

The sale of our commercial and passenger vehicles is heavily dependent on fund availability for our customers. Rising delinquencies and early defaults has contributed to a reduction in automobile financing, which has had an adverse effect on fund availability for potential customers. This reduction in available financing may continue in the future and have a material adverse effect on our business, financial conditions and results of operations.

Jaguar Land Rover has consumer finance arrangements in place with local providers in a number of key markets. Any reduction in the supply of available consumer financing for purchase of new vehicles could create additional pressures to increase marketing incentives in order to maintain demand for our vehicles, which could materially and adversely affect our sales and net income. Furthermore, Jaguar Land Rover also offers residual value guarantees on the leases of certain vehicles in some markets. Any significant declines in used car valuations could materially and adversely affect our sales and results of operations.

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 materially and 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 severely disrupt our business and materially reduce our sales and net income.

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 severely disrupt our supply chains and may further materially reduce our sales and net income.

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 business, financial condition and results of operations.

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

In Fiscal 2014 and Fiscal 2013, the consumption of raw materials, components and aggregates and purchase of products for sale constituted approximately 61.7% and 63.4% respectively, of our 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.

 

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Deterioration in the performance of any of our subsidiaries, joint ventures and affiliates may adversely affect our results of operations.

We have made and may continue to make capital commitments to our subsidiaries, joint ventures and affiliates, and if the business or operations of any of these subsidiaries, joint ventures and affiliates deteriorates, the value of our investments may decline substantially.

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

Jaguar Land Rover, which contributes a large portion of our revenues, generates a significant portion of its sales in the United Kingdom, North American and continental European markets where the automotive industry was severely impacted during the global economic downturn in Fiscal 2009. Even though sales of passenger cars in certain of these markets 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 condition and results of operations. In addition, our strategy, which includes new product launches and further 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 material 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 business, financial condition and results of operations could be materially and 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. The automotive industry has been cyclical in the past and we expect this cyclicality to continue.

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.

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. Other markets such as the United States are influenced by introduction of new model year products which typically occurs in the autumn of each year. The automotive market in China tends to reflect higher demand for vehicles around the Chinese New Year. Demand in the western European automotive markets tends to be reduced during the summer and winter holidays. Furthermore, our cash flows are impacted by temporary shutdowns of three of our manufacturing plants in the United Kingdom during the summer and winter holiday seasons. The resulting sales and cash flow profile is reflected in our results of operations on a quarterly basis.

 

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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.

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

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 business, financial condition and results of operations. 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 materially and adversely affected.

Our business and prospects could suffer if we lose one or more key personnel or if we are unable to attract and retain our employees.

Our business and future growth depend largely on the skills of our workforce, including executives and officers, and automotive designers and engineers. The loss of the services of one or more of our personnel could impair our ability to implement our business strategy. In view of intense competition, any inability to continue to attract, retain and motivate our workforce could materially and adversely affect our business, financial condition, results of operations and prospects.

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, including defined benefit plans. Our pension liabilities are generally funded. However, lower returns on pension fund assets, changes in market conditions, interest rates or inflation rates, and adverse changes in other critical actuarial assumptions, may impact our pension liabilities or assets and consequently increase funding requirements, which could materially decrease our net income and cash flows.

Any inability to manage our growing international business may materially and adversely affect our financial condition and results of operations.

Our growth strategy relies on the expansion of our operations by introducing certain automotive products in markets outside India, 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, rules 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 materially and adversely affected.

 

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We have a limited number of manufacturing, design, engineering and other facilities and any disruption in the operations of those facilities could materially and adversely affect our business, financial condition and results of operations.

We have manufacturing facilities and design and engineering centers located in India, the United Kingdom, China, South Korea, Spain, Thailand and South Africa, and have established a presence in Indonesia. We could experience disruptions to our manufacturing, design and engineering capabilities for a variety of reasons, including, among others, extreme weather, fire, theft, system failures, natural catastrophes, mechanical or equipment failures and similar events. Any such disruptions could affect our ability to design, manufacture and sell our products and, if any of these events were to occur, there can be no assurance that we would be able to shift our design, engineering or manufacturing operations to alternate sites in a timely manner or at all. Any such disruption could materially and adversely affect our business, financial condition and results of operations.

We are exposed to operational risks, including risks in connection with our use of information technology.

Operational risk is the risk of loss resulting from inadequate or failed internal systems and processes, whether resulting from internal or external events. Such risks could stem from inadequacy or failures of controls within internal procedures, violations of internal policies by employees, disruptions or malfunctioning of information technology systems such as computer networks and telecommunication systems, other mechanical or equipment failures, human error, natural disasters or malicious acts by third parties. Any unauthorized access to or misuse of data on our information technology systems, human errors or technological or process failures of any kind could severely disrupt our operations, including our manufacturing, design and engineering processes, and could have a material adverse effect on our financial condition and results of operations.

Any failures or weaknesses in our internal controls could materially and adversely affect our financial condition and results of operations.

As discussed in Item 15, “Controls and Procedures,” upon an evaluation of the effectiveness of the design and operation of our internal controls. We concluded that there was a material weakness such that our internal controls over financial reporting were not effective as at March 31, 2014. The existence of this material weakness, if not adequately remediated, could materially and adversely affect our ability to report accurately our financial condition and results of operations in a reliable manner. Although we have instituted remedial measures to address the material weakness identified and continually review and evaluate our internal control systems to allow management to report on the sufficiency of our internal controls, we cannot assure you that we will not discover additional weaknesses in our internal controls over financial reporting. Any such additional weaknesses or failure to adequately remediate any existing weakness could materially and adversely affect our financial condition or 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, financial condition and results of operations.

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 our insurance coverage will be sufficient, that any claim under our insurance policies will be honored fully or timely, or that our insurance premiums will not increase substantially. Accordingly, to the extent that we suffer loss or damage that is not covered by insurance or which exceeds our insurance coverage, or are required to pay higher insurance premiums, our business, financial condition and results of operations may be materially and adversely affected.

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 materially and adversely affect our sales and results of operations.

Compliance with new and current laws, regulations and government policies regarding increased fuel economy, reduced greenhouse gas and other emissions, vehicle safety and taxes may significantly increase our costs and materially decrease our net income.

As an automobile company, we are subject to extensive governmental regulations regarding vehicle emission levels, noise and safety, and the 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. In addition, a number of further legislative and regulatory measures to address greenhouse emissions, including national laws and the Kyoto Protocol, are in various phases of discussions and implementation.

                In order to comply with current and future safety and environmental norms, we may have to incur additional costs to: (i) operate and maintain our production facilities; (ii) install new emissions controls or reduction technologies; (iii) purchase or otherwise obtain allowances to emit greenhouse gases; (iv) administer and manage our greenhouse gas emissions program, and (v) invest in research and development to upgrade products and manufacturing facilities. These costs may be difficult to pass through to consumers. If we are unable to develop commercially viable technologies or otherwise unable to attain compliance within the time frames set by the new standards, we could face significant civil penalties or be forced to restrict product offerings drastically. Moreover, safety and environmental standards may at times impose conflicting imperatives, which pose engineering challenges and would, among other things, increase our costs. While we are pursuing the development and implementation of 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 could be significant to our operations and may materially and adversely impact our business, financial condition and results of operations.

 

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Imposition of any additional taxes and levies designed to limit the use of automobiles could significantly reduce the demand for our products as well as our sales and net income. Changes in corporate and other taxation policies as well as changes in export and other incentives given by the various governments could also materially and adversely affect our financial condition and 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 Proposed Direct Tax Code, or DTC, aims 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 are subject to review by the new government 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 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 further expand our international operations 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. In addition, conducting business internationally, especially in emerging markets, exposes us to additional risks, including adverse changes in economic and government policies, unpredictable shifts in regulation, inconsistent application of existing laws and regulations, unclear regulatory and taxation systems and divergent commercial and employment practices and procedures. Any significant or prolonged disruption or delay in our operations related to these risks could materially and adversely impact our business, financial condition and 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, rules, 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.

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, including under the recently enacted provisions of the Indian Companies Act, 2013. 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. If we fail to comply with new or changed laws, rules, regulations or differing standards, our business and reputation may be harmed.

 

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Compliance with the SEC’s new rule for disclosures on “conflict minerals” may be time consuming and costly and could adversely affect our reputation.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the SEC has adopted a new rule that applies to companies that use certain minerals and metals, known as conflict minerals, in their products, including certain products manufactured for them by third parties. The new rule requires companies that use conflict minerals in the production of their products to conduct due diligence as to whether or not such minerals originate from the Democratic Republic of Congo and adjoining countries and requires companies to file certain information with the SEC about the use of these minerals. The deadline for the first conflict minerals report was June 2, 2014, and we filed our first conflict minerals report on May 30, 2014. We expect to incur additional costs to comply with the new due diligence and disclosure requirements. In addition, depending on our findings or our inability to make reliable findings about the source of any possible conflict minerals that may be used in any products manufactured for us by third parties, our reputation could be harmed.

If an initial decision rendered by the Administrative Law Judge, or the ALJ, in administrative proceedings brought by the SEC against the PRC-based network firms of the Big Four accounting firms, including the independent registered public accounting firm of Chery Jaguar Landrover Automotive Co., Limited, becomes final, we could become unable to timely file future financial statements in compliance with the requirements of the U.S. Securities Exchange Act of 1934, as amended.

In December 2012, the SEC instituted administrative proceedings against the PRC-based network firms of the Big Four accounting firms, including the independent registered public accounting firm of Chery Jaguar Land Rover Automotive Co., Limited, our joint venture with Chery Automobile Co., Ltd. to manufacture cars in China, alleging that these firms had violated U.S. securities laws and the SEC’s rules and regulations thereunder by failing to provide to the SEC the audit work papers of these firms with respect to certain PRC-based companies that are publicly traded in the United States. On January 22, 2014, the ALJ presiding over the matter rendered an initial decision that each of the firms had violated the SEC’s rules of practice by failing to produce audit workpapers to the SEC. The initial decision censured each of the firms and barred them from practicing before the SEC for a period of six months. The ALJ’s initial decision has been appealed by these firms. The ALJ’s decision does not take effect unless and until it is endorsed by the SEC. Any SEC endorsement or other determination could be appealed by the accounting firms through the U.S. federal courts. While we cannot predict the outcome of the SEC’s review or that of any subsequent appeal process, if the accounting firms are ultimately temporarily denied the ability to practice before the SEC, our ability to file our financial statements in compliance with SEC requirements could be impacted. A determination that we have not timely filed financial statements in compliance with SEC requirements could ultimately lead to the delisting of our ADSs from the New York Stock Exchange or the termination of the registration of our ADSs under the Securities Exchange Act of 1934, as amended, or both, which would substantially reduce or effectively terminate the trading of our ADSs in the United States.

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 such policies, 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 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, and could have a material adverse effect on our financial condition and results of operations.

 

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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.

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.

 

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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 may materially fluctuate in the future. As of August 28, 2013, the value of the Indian rupee against the US dollar was Rs. 68.80 = US$1.00, following a depreciation of approximately 28.2%, as compared to Rs.53.65 = US $1.00 on May 1, 2013, based on the exchange rate for Indian rupees in the City of New York for cable transfers payable in foreign currencies as certified by the Federal Reserve Bank of New York for customs purposes. The noon buying rate for the Indian rupee from the Federal Reserve Bank of New York, expressed in rupees per US$1.00, was Rs. 59.89 on March 28, 2014.

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

Although holders of ADSs have a right to receive any dividends declared in respect of Shares underlying the ADSs, they cannot exercise voting or other direct rights as a shareholder with respect to the Shares underlying the ADSs evidenced by ADRs. Citibank, N.A. as depositary is the registered shareholder of the deposited Shares underlying our ADSs, and therefore only Citibank, N.A. can exercise the rights of shareholders in connection with the deposited Shares. Only if requested by us, will the depositary notify holders of ADSs of upcoming votes and arrange to deliver our voting materials to holders of ADSs. The depositary will try, in so far as practicable, subject to Indian laws and the provisions of our Articles of Association, to vote or have its agents vote the deposited securities as instructed by the holders of ADSs. If the depositary receives voting instructions in time from a holder of ADSs which fail to specify the manner in which the depositary is to vote the Shares underlying such holder’s ADSs, such holder will be deemed to have instructed the depositary to vote in favor of the items set forth in such voting instructions. If the depositary has not received timely instructions from a holder of ADSs, the holder shall be deemed to have instructed the depositary to give a discretionary proxy to a person designated by us, subject to the conditions set forth in the 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. In addition, 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.

Moreover, 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.

 

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Indian Government regulation of foreign ownership could materially reduce the price of the ADSs.

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 that 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. Tata Motors Limited is incorporated and domiciled in India. 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 rank as the eighth largest truck manufacturer globally in the 6 ton plus category according to Automotive World, as measured by volume of vehicles produced in 2013. The fall in the ranking from fifth to eighth with respect to size of truck manufacturing is attributable to, among other factors, slowdown in the Indian economy and the consequent reduction in sales of the M&HCV vehicles.

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 2014. We estimate that over 8 million vehicles produced by us are being operated in India as of the date hereof.

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 and have two advanced design and engineering facilities located at Whitley and Gaydon.

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. However, despite investments by Tata Motors since 2005, the impact of the 2008 global economic recession and the resultant shrinkage in demand in the segment in which Tata Hispano operates resulted in accumulated losses of over Euro 60 million in the past five years. Due to the reduction in the size of the market year after year the industry was left with idle capacities making it very difficult to operate. Considering the untenable nature of the business and no or low visibility of a turnaround in the market, as well as the absence of any potential acquirers of the business, we decided to wind down operations in place of investing more over the next five years.

 

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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 2008.

 

   

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, 2014, we own 94.36% of the joint venture, while Thonburi Group owns the remaining 5.64%. 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 the ASEAN region.

 

   

We are also expanding our export operations for certain products. 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 sedans and sports cars and Land Rover premium all-terrain vehicles as well as related parts, accessories and merchandise. 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. Trilix continues to implement a strategic growth policy and in March 2013 moved to a new facility as part of its ongoing implementation of this growth policy.

 

   

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. In February 2013, PT Tata Motors Distribusi Indonesia was established as subsidiary of PT Tata Motors Indonesia, with the objective and purpose of conducting business activities of import and wholesale distribution of vehicles in Indonesia.

 

   

Jaguar Land Rover has committed to a joint venture with Chery Automobile Co. Ltd to build a factory in Changshu, China to supply the local market beginning in Fiscal 2015. The joint venture is expected to invest a total of RMB 10.9 billion into the manufacturing plant, R&D center and engine production facility. JLR is committed to invest RMB 3.5 billion of equity capital in the joint venture company, representing a 50% of the share capital and voting rights of the joint venture company.

 

   

In December 2013, Jaguar Land Rover signed an agreement to invest GBP 240 million into a production facility in Rio de Janeiro in Brazil. We expect the construction of the vehicle manufacturing facility will commence in 2014 and the first vehicles are expected to come off the assembly line in 2016. We expect the new plant will have a capacity to build 24,000 vehicles annually for Brazil.

 

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We produce a wide range of automotive products, including:

 

   

Passenger Cars. Our range of Tata branded passenger cars include the Nano (Micro segment), the Indica (Compact segment), the Vista (Compact segment) the Indigo eCS (mid-sized segment) and the Manza (mid-sized) in the sedan category. We have expanded our car lines with several variants and fuel options to suit various customer preferences. In June 2013, we announced the Horizonext, a customer-focused strategy for our passenger vehicles business, and unveiled eight newly upgraded and enhanced products across the five brands. In Fiscal 2014, we introduced new products including the E-max range of CNG vehicles (for Tata Indica, Tata Indigo eCS and Tata Nano) and the Nano Twist with electric power steering. During the Delhi Auto Expo 2014, Tata Motors showcased two new products, the Bolt hatchback and the Zest sedan, which are anticipated to be launched later this year.

Jaguar has an established presence in the premium car segment. Jaguar currently produces four car lines, including the Jaguar XK sports car (coupe and convertible), the Jaguar F-TYPE (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. 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 architecture 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 convertible was made available to retail customers from April 2013 in select markets and the coupe went on sale from April 2014 onwards. The C-X17 concept car was created as a design study to introduce Jaguar’s all-new advanced aluminium architecture. We believe that this modular, scalable architecture will allow Jaguar to grow its product portfolio and target high-growth areas of the premium market, beginning with a new mid-sized sedan in 2015. We believe that the C-X17 concept car is one example of the diverse range of vehicles that could be produced using the new architecture.

 

   

Utility Vehicles. We manufacture a range of Tata branded utility vehicles, including the Sumo and the Safari, (SUVs), the Xenon XT (the lifestyle pickup), the Tata Aria (a crossover vehicle), and the Venture (a multipurpose utility vehicle, or MPV). Under the Safari brand, we offer two variants, the Dicor which is equipped with a 2.2L VTT DICOR engine, and the Safari Storme is powered by 2.2L VariCOR engine. Under the Sumo brand we offer the Sumo Gold, which features a BS4 3.0L diesel CR4 engine. The new Tata Aria launched in April 2014 has the 2.2L VARICOR engine which delivers an ultra-smooth ride. 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 introduced 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% CO2 reduction and 24% improved fuel economy. The new Range Rover Sport is the fastest, most agile and most responsive Land Rover produced to date. The new Range Rover Sport was awarded “SUV of the Year” by Top Gear magazine in the United Kingdom in 2013, the Middle East Edition of EVO in 2013 and Car and Driver in China in 2014. The all new Range Rover was launched in the third quarter of Fiscal 2013 on the same lightweight aluminum architecture. A diesel hybrid Range Rover is currently being developed for introduction later in 2014.

 

   

Light Commercial Vehicles. We manufacture a variety of Light Commercial Vehicles (LCVs), including pickup trucks, and small commercial vehicles (SCVs) 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, the Super Ace with a 1-ton payload, the 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. At the Delhi Auto Expo 2014, we unveiled the Ultra Narrow Cab and the Iris Electric. In Fiscal 2014 we marked our entry into two major markets – Australia and Indonesia with the Xenon and the SCV range of vehicles respectively. In Fiscal 2014 our new launches included the Ace and Magic Facelift, the Ace DICOR with common rail engine, and a new Ace Zip to tap the vast small three wheeler market. Additionally, the Company’s pickup truck, the Tata Xenon received an award for LCV Cargo vehicle of the year 2013. In Fiscal 2014, the Company launched new features and designs across the SFC (semi-forward control) range, and also introduced mechanical suspended seats in the HEx2 (high power and extra features) range of ICV trucks. Besides this, the Company has introduced the new-generation Ultra LCV / ICV range of trucks which commenced sales in July 2013.

 

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Our Commercial Vehicles business, in year 2011, initiated ‘Project Neev’ – a growth program for rural India designed to promote self-employment. Through a rigorous skill building exercise, local, unemployed rural youth have been enrolled and trained to work from homes as promoters of our commercial vehicles. Project Neev is currently operational in nine states of India and has engagement in 307 districts, 2,437 sub-districts, covering more than 350,000 villages. The rural penetration drive initiated through Project Neev has additionally deployed an approximately 5,000 strong dedicated rural team and 604 dedicated rural outlets in towns and villages with populations of less than 50,000. More than 50,000 small commercial vehicles have been sold since the commencement of this program, which we attribute to a 19% increase in volumes. Project Neev currently completed its third wave of expansion, and we anticipate that it will operate in all major states across the country within the next couple of years. This programme has been appreciated and recognized in various forums such as Rural Marketing Association of India Flame Awards for excellence in the field of rural marketing.

Another initiative pioneered by our Commercial Vehicles business is ‘TATA-OK’. TATA-OK seeks to promote our commercial vehicles through capturing new customer segments, for example economical and used vehicle buyers, promoting the sale of new vehicles through the exchange of used commercial vehicles at our dealerships, increasing the resale value of our commercial vehicles products, and developing deeper customer engagement and thereby promoting brand loyalty. TATA-OK has completed three years of operation, including a pilot year, with more than 15,000 transactions across all customer segments through 150 affiliated retailers across all regions.

 

   

Medium and Heavy Commercial Vehicles We manufacture a variety of Medium and Heavy Commercial Vehicles (M&HCVs), which includes 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 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 South Asian Association for Regional Cooperation (SAARC) countries, the Middle East and various countries in Africa. We showcased at the 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 six new heavy trucks and a telematics and fleet management service, Tata FleetMan. Targeted at commercial vehicle fleet owners and large consigners of goods, the service offers advanced telematics solutions, which provides our customers with tools for improving productivity and profitability. The ‘Tata Prima’ line 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 LX range was further expanded with the launch of 8 more products in Fiscal 2014 – Prima 2523T LX, Prima 3123T LX, Prima 4028.S LX (Single reduction and Hub reduction), Prima 4928.S LX (Single reduction and Hub reduction), Prima 4923.S LX, and Prima LX series of Tippers were launched – 2523K, 3123K, 2528K & 3128K. Our Construck range has been further supplemented with the launch of the Tata LPK 3118 tipper.

On March 23, 2014, the Company organized the T1 Prima Truck Racing Championship at the BIC Greater Noida – Buddh International F1 Circuit.

The championship featured 12 purpose-built Tata 4038.S Prima trucks The 12 trucks were divided among six teams, with participation from experienced international drivers. The Prima Truck Racing Championship was organized by the Federation of Motor Sports Clubs of India (FMSCI) and was conducted according to British Truck Racing Association (BTRA) guidelines. The event showcased the performance of our trucks as well as highlighted the contributions that truck drivers make to their communities.

In Fiscal 2014, we expanded the ‘Tata Alert’ service across all national highways. ‘Tata Alert’ provides breakdown assistance across all national highways in India by promising to respond to the breakdown site within 4 hours of notification and to return the vehicle to the road within 48 hours. This was coupled with the introduction of new services such as the ‘Tata On-site’ service and parts support through the use of “Container Workshops”. These workshops are an onsite service support system where a container is deployed onsite and houses the repair equipment while the repairs are done in the open. In addition, we introduced the ‘on-demand AMC (Annual maintenance contracts)’ service, which provides customized AMC support for significant customers such as large fleet owners. ‘Triple Benefit Insurance’ products were also introduced for both the cargo and Construck ranges (providing coverage for zero depreciation, loss of revenue, and replacement for total loss in case of accident). In January 2013, to further strengthen the core proposition of lowest total cost of ownership we introduced warranty of 4 years/4 lakh (400,000) kms on drivelines for our entire range of heavy trucks with 25 tons and higher GVW and extended the same to our 16T GVW truck range effective from March 2014 onwards.

 

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For M&HCV buses, several marketing and brand building initiatives have been undertaken. In order to cultivate safe practices in school bus riders, promote the brand image and build connections with school bus riders and stakeholders such as children, parents and school authorities, the ‘Dream it to Win it’ school bus campaign was organized across 2,070 schools in 11 cities across India, in Fiscal 2013. Owing to positive responses received for the campaign, in Fiscal 2014 this campaign was further extended to 1,967 schools across 22 Indian cities. Through this event, students from different regions were educated on safety while travelling in school buses. Another major initiative undertaken was the ‘Good Citizen Program.’ This is an interactive training session which has been designed, with the objective of promoting education and awareness of safety in school bus travel to school bus staff and. Since its inception the program has aimed at creating a sense of involvement among participants, increasing awareness about their duties and responsibilities, for example maintaining personal hygiene, general etiquette and behavior and taking necessary measures in case of accidents.

In February 2013, in the SIAM International Bus & Utility Vehicles Show, at Greater Noida, we showcased two new applications from our line-up of buses for the MCV market for intercity transportation and staff transportation: a 45-seater front-engine luxury air-conditioned intercity coach and a luxury non-air-conditioned 41-seater staff bus. Other new vehicles on display included the 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 world-class body has been built to meet international standards by Tata Motors Marcopolo Limited, on the Tata LPO 1618 and LPO 1512 chassis.

At the Delhi Auto Expo 2014, we unveiled Starbus Urban Parallel Hybrid Bus and the Starbus Urban Articulated Bus. The Starbus Urban Parallel Hybrid bus is intended for urban transportation and offers improved mileage with lower emissions relative to the conventional Starbus buses. The Starbus Urban Articulated Bus is targeted at bus rapid transit systems. With its two sections, it offers a carrying capacity of up to 70 passengers alongside the maneuverability needed for city transportation.

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.

Please see Item 4.B “— Business Overview — Our Strategy — Capital and Product Development Expenditures” and Item 5.B “Operating and Financial Review and Prospect — Liquidity and Capital Resources — Capital Expenditures” for details on the Company’s principal capital expenditures.

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 17 subsidiary companies and one joint venture as at March 31, 2014.

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 (TMIBASL) is a licensed Direct General Insurance Broker for the Indian market with plans to branch out globally to avail better opportunities. It commenced business in Fiscal 2008 and provides end-to-end insurance solutions in retail segment with special focus on the automobile sector. TMIBASL offers services to various original equipment manufacturers (OEMs) in the passenger vehicle, commercial and construction equipment segments, including Tata Motors.

 

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As of March 31, 2014, our operations included 70 consolidated subsidiaries, 2 joint operations, 3 joint ventures and 18 equity method affiliates, in respect of which we exercise significant influence.

As of March 31, 2014, we had approximately 68,889 permanent employees, including approximately 39,323 permanent employees at our consolidated subsidiaries and joint operations.

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.

 

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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:

Continued focus on new product development: In Fiscal 2014, we launched 89 new products or variants of our existing vehicle lines. 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 supported by our strong brand recognition in India, our understanding of local consumer preferences, in-house engineering capabilities and extensive distribution network. With growing competition, changing technologies and evolving customer expectations, we understand the importance of bringing new platforms to address market gaps and further enhance our existing range of vehicles to ensure customer satisfaction. Our capital expenditures totaled Rs.272,832 million, Rs.212,078 million and Rs.148,255 million during Fiscal 2014, 2013 and 2012, respectively and we currently plan to invest approximately Rs.380 billion in Fiscal 2015 in new products & technologies.

Jaguar Land Rover has aimed to enhance its technological strengths through in-house R&D activities, including the development of two new engineering and design centres which centralize Jaguar Land Rover’s capabilities in product design and engineering. Furthermore, Jaguar Land Rover participates in advanced research consortia that bring together leading manufacturers, suppliers or academic specialists in the United Kingdom and are supported by funding from the UK Government’s Technology Strategy Board. Examples of such efforts are the Evoque_e program, which aims to design and develop hybrid and electric vehicle powertrain systems, and the VARCITY project, which aims to develop the supply chains for vehicle body architectures using carbon fiber technology, among other goals.

Leveraging our capabilities: We believe that our in-house research and development capabilities, including those of our subsidiaries Jaguar Land Rover and TDCV 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 will enable us to expand our product range and extend our geographical reach. We continually strive to achieve synergy wherever possible with our subsidiaries and joint ventures.

In Fiscal 2012, we showcased at the 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 product portfolio of Tata brand vehicles which includes the Nano, Indica, Indica Vista, Indigo, Indigo Manza, Sumo, Sumo Grande, Safari, Safari Storme, Aria and Venture, enables us to compete in various passenger vehicle market segments. We also offer alternative fuel vehicles under the Nano and Indigo brands.

We have continued modernizing our facilities to meet 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.

Jaguar Land Rover aims to invest substantially to develop new products in new and existing segments by introducing new powertrains and technologies that satisfy both customer preferences and regulatory requirements. Complementing this, Jaguar Land Rover invests in manufacturing capacity in the United Kingdom and internationally to meet customer demand. In line with other premium automotive manufacturers Jaguar Land Rover aims to maintain an allocation of 10 to 12% of revenue on capital expenditure. However, in Fiscal 2015 and 2016, we anticipate that Jaguar Land Rover will make higher capital spending in order to take advantage of the growth opportunities. For Fiscal 2015, capital expenditure at our Jaguar Land Rover business are expected to be approximately GBP 3.5 billion to GBP 3.7 billion (allocated approximately 40% for R&D and 60% for expenditure on tangible fixed assets such as facilities, tools and equipment as well as investment in our China joint venture).

 

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In Fiscal 2015, Jaguar Land Rover will also start full production at its Engine Manufacturing Centre at Wolverhampton, UK. Our aim is that the plant will manufacture a family of premium, technologically advanced engines, “Ingenium”. These will be entirely designed and built in-house for exclusive use. We expect that the Jaguar XE, debuting in 2015, will be the first vehicle equipped with these four-cylinder engines. Jaguar Land Rover’s state-of-the-art Engine Manufacturing Centre is the first new facility that it has built from the ground up. Situated at Wolverhampton in the heart of the UK, we believe that it is ideally located between the Jaguar Land Rover’s three other manufacturing sites at Halewood, Castle Bromwich and Solihull. We expect that the plant will employ almost 1,400 people by the time it reaches full capacity and the first phase of recruitment commenced in January 2014. Representing an investment of more than GBP 500 million, we believe that the plant will manufacture Jaguar Land Rover’s most advanced engines ever.

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 799 in 2013 from 796 in 2012. We maintained the 6th ranking in the 2013 J.D. Power India Customer Service Index survey. 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 encouraging focused initiatives at both sales and service touch points to enhance customer experience and strive to be best in class.

Jaguar and Land Rover collectively received over 195 awards from leading international motoring writers, magazines and commentators in 2013, 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. The Jaguar F-TYPE has been voted the winner of a prestigious Golden Steering Wheel award by readers of the respected German newspapers Bild am Sonntag and Auto Bild. The F-TYPE competed in the “coupé and cabriolet” category, finishing ahead of the Porsche Cayman and BMW 4 Series Coupé. Range Rover achieved the Highest Automotive Performance, Execution and Layout (APEAL) score of any model in the J.D. Power 2013 APEAL survey – the first time a model outside of the large premium car segment has ranked highest among all models in the industry. The New Range Rover Sport was awarded “SUV of the Year” by Top Gear magazine in the United Kingdom in 2013, the Middle East Edition of EVO in 2013 and Car and Driver in China in 2014.

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. We are the largest investor in automotive research and development in the United Kingdom as measured by GBP. We also 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.

We have developed diesel hybrid versions of the Range Rover and Range Rover Sport, without compromising the vehicles’ off road ability or load space. We are currently conducting trials of an electric Defender, as part of our research into the electrification of premium sedan and all terrain vehicles.

We believe that we are a global leader in the use of aluminum and other lightweight materials to reduce vehicle weight and improve fuel and CO2 efficiency, and we believe we are ahead of many of our competitors in the implementation of aluminum construction. We offer five aluminum monocoque vehicles: the Jaguar F TYPE, the Range Rover, the Range Rover Sport, the Jaguar XJ and Jaguar XK. We plan to deploy our core competency in aluminum construction across more models in our range.

 

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We are also developing more efficient powertrains and other technologies. This includes smaller and more efficient diesel and gasoline engines, stop start and hybrid engines, starting with a diesel hybrid engine available in the Range Rover and Range Rover Sport this year and the introduction of our own four cylinder engines from beginning in 2015.

Our current product line up is the most efficient it has ever been, in terms of fuel efficient and CO2 emissions. The most efficient version of the Range Rover Evoque emits less than 130 g/km. The all aluminum Jaguar XJ 3.0 V6 twin turbo diesel has CO2 emissions of 159 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 (now 196 g/km). The new “downsized” 2.0 liter turbocharged gasoline engine options in the Range Rover Evoque, the 2013 Model Year Freelander, and the Jaguar XF and XJ will 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 XF 2.2 liter diesel, already the most fuel efficient Jaguar to date was further improved for 2014 Model Year with CO2 emissions cut to 129 g/km. In 2014 we will intend to launch our first hybrid electric vehicles in the Range Rover and Range Rover Sport 3.0L TDV6 Hybrid with emissions of 169 g/km.

We are also taking measures to reduce emissions, waste and the use of natural resources from all of our operations. We recognize the need to use resources responsibly, produce less waste and reduce our carbon footprint. We have reduced our energy use per vehicle by 23% from 2007 levels. We have implemented life cycle techniques so that we can evaluate and reduce our environmental footprint throughout the value chain. We have been certified to the international environmental management standard, ISO 14001, since 1998. As part of our integrated CO2 management strategy, we have one of the largest voluntary CO2 offset programs. Through CO2 offset schemes, we offset all our own manufacturing CO2 emissions and have provided customer programs to enable our 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.

Expanding our international business: Our international expansion strategy involves entering new markets where we have an opportunity to grow and introducing new products to existing markets in order to grow our presence in such markets. Our international business strategy has already resulted in the growth of our international operations in select markets and chosen segments over the last five years. In recent years, we have grown our market share across various African markets such as Kenya, Nigeria, Tanzania, Congo and Senegal, and have also introduced certain products in Australia.

We have also expaned our range through acquisitions and joint ventures. Our acquisition of Jaguar Land Rover has expanded our geographical presence significantly. Through Jaguar Land Rover we now offer products in the premium 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 and any other product lines that would be suitable for the market, going forward. 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. Currently, Tata Motors (SA) Proprietary Limited, caters to the domestic South African market and up to March 2014, it had produced and sold over 2,000 chassis.

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.

 

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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 management 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.

Expanding customer financing activities: 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 2014 and 2013 was Rs.371,432 million and Rs. 225,549 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, we believe 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.

 

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Automotive Operations

We sold 1,020,546, 1,192,742, and 1,270,211 vehicles in Fiscal 2014, 2013 and 2012 respectively, consisting of 588,657 units of Tata and other brand vehicles and 431,889 units of Jaguar Land Rover vehicles in Fiscal 2014. In terms of units sold our largest market is India where we sold 527,378 and 756,444 units during Fiscal 2014 and 2013, (constituting 51.7% and 63.4% of total sales in Fiscal 2014 and Fiscal 2013, respectively) followed by China where we sold 103,910 units and 79,458 units in Fiscal 2014 and Fiscal 2013 respectively (constituting 10.2% and 6.7% of total sales). A geographical breakdown of our revenues is set forth in Item 5.A “— Operating Results — Geographical breakdown”.

Our total sales (including international business sales and Jaguar Land Rover sales) in Fiscal 2014, 2013 and 2012 are set forth in the table below:

 

Category

   Fiscal 2014     Fiscal 2013     Fiscal 2012  
     Units      %     Units      %     Units      %  

Passenger Cars

     204,075         20.0     237,023         19.9     353,709         27.9

Utility Vehicles

     383,871         37.6     361,822         30.3     316,589         24.9

Light Commercial Vehicles

     296,873         29.1     428,708         35.9     365,677         28.8

Medium and Heavy Commercial Vehicles

     135,727         13.3     165,189         13.9     234,236         18.4

Total

     1,020,546         100.0     1,192,742         100.0     1,270,211         100.0

Revenues from our automotive operations were Rs.2,329,582 million, Rs.1,881,621 million and Rs.1,651,564 million in Fiscal 2014, 2013 and 2012, respectively. Tata and other brand vehicles (including spares and financing thereof) constituted 18.7% of our total automotive revenues before inter-segment elimination in Fiscal 2014, while Jaguar Land Rover constituted 81.3%.

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

We sold 588,657, 820,686, and 955,961 units of Tata and other brand vehicles in Fiscal 2014, 2013 and 2012, respectively. Of the 588,657 units sold in Fiscal 2014, 527,378 units were sold in India while 61,279 units were sold outside of India, compared to 756,444 units and 64,242 units respectively, in Fiscal 2013. Our share of the Indian four-wheeler automotive vehicle market (i.e. automobile vehicles other than two and three wheeler categories) decreased from 22.1% in Fiscal 2013 to 16.6% in Fiscal 2014. We maintained our leadership position in the commercial vehicle segment in the industry, which was characterized by increased competition during the year. The passenger vehicle market also continued to be subject to intense competition. A principal reason for the decline in volume of sales of Tata and other brand vehicles is the lack of fund availability for potential customers. High default rates in loans alongside early delinquencies has led financiers to tighten lending norms, such as lowering the loan-to-value ratio on new financings while focusing on collection of existing loans.

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

 

Category

   Fiscal 2014     Fiscal 2013     Fiscal 2012  
     Units      %     Units      %     Units      %  

Passenger Cars

     123,431         21.0     179,257         21.9     299,719         31.4

Utility Vehicles

     32,626         5.5     47,532         5.8     56,329         5.9

Light Commercial Vehicles

     296,873         50.4     428,708         52.2     365,677         38.2

Medium and Heavy Commercial Vehicles

     135,727         23.1     165,189         20.1     234,236         24.5

Total

     588,657         100.0     820,686         100.0     955,961         100.0

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

 

Category

   Fiscal 2014     Fiscal 2013     Fiscal 2012  

Passenger Cars*

     6.1     9.6     13.6

Utility Vehicles**

     5.0     7.1     10.9

Light Commercial Vehicles***

     53.7     62.2     60.2

Medium and Heavy Commercial Vehicles

     54.9     53.3     59.3

Total Four-Wheel Vehicles

     16.6     22.1     25.1

 

* Passenger cars market shares include sales of Fiat vehicles distributed by us and Jaguar Land Rover vehicles sold in India.
** UV market share includes the market share for Vans V1 segment (i.e. Tata Venture) and excludes Vans V2 segment (i.e. Tata Ace Magic),
*** 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.

 

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

India’s GDP growth continues to remain weak, at 4.9% in Fiscal 2014 according to advance estimates after growing at 4.5% in Fiscal 2013. Industrial activity continues to remain weak. The Index of Industrial production (IIP) declined by 0.1% during Fiscal 2014. The stagnation in the industrial activity was broad-based. While mining output declined by 1.1%, manufacturing output declined by 0.7% during the same period. Fiscal 2014 witnessed a decline in investments in new projects in line with a slowdown in overall growth. On the back of tight monetary policy, limited fiscal spending, rising inflation and slowing investments, over the previous year, Fiscal 2014 saw many of the same challenges continuing into the year. Fiscal 2014 was marked by efforts of the Government of India to contain the fiscal deficit, and expenditure on infrastructure and other key sectors suffered. With the continued high interest rates and inflation, households were forced to spend more on essentials and reduce discretionary spending, leading to deferral of purchasing decisions. The consistent stagnation of the industrial growth mainly in the areas of mining and quarrying, manufacturing and infrastructure adversely impacted the domestic auto industry.

Passenger cars: The passenger vehicle industry recorded a negative growth of 4.7% for the first time in the last five years in Fiscal 2014. The last such instance was during the economic slowdown of Fiscal 2009, when it remained close to flat at a negative growth of 0.5%. The decline in sales volumes is seen across segments, with the sedan segment witnessing the largest decline. The Hatchbacks and UV segments are historically the volume drivers. The high growth in UV segment last year, with the onset of Softroaders, did not witness similar growth in Fiscal 2014. Further, tightening of credit norms, higher interest rate, and a rise in fuel prices have contributed to low consumer confidence and has resulted in deferral of purchasing decision.

The Government of India has deregulated gasoline prices in the recent past and continued to subsidize diesel prices. This has resulted in preference of diesel vehicles. During the year, the Government of India started correcting the diesel prices in measured manner with a view to minimize government subsidy. This has resulted to lowering of gap between diesel prices and gasoline prices to some extent. Hence share of gasoline vehicles in overall industry has gone up, especially in hatchbacks and sedans. The hatchback segment, which is the largest volume segment in the industry declined in Fiscal 2014. Hyundai launched the Grand i-10 in the hatchback segment this year, which received an overwhelming response in the market. Maruti Suzuki launched its new hatchback Celerio with an automated manual transmission at the Delhi Auto Expo 2014. Nissan launched its budget brand Datsun in India. The first vehicle launched under the Datsun brand is the ‘Datsun Go’ hatchback.

The sedan segment (or the A3 segment according to SIAM) has grown by around 7% in Fiscal 2014 as compared to Fiscal 2013 due to new launches such as Honda Amaze, New Honda City, Hyundai Xcent, New Elantra, and New Skoda Octavia. The sub 4-m compact sedans continue to remain in demand.

Increase in marketing initiatives and network actions continued in the face of weak industry trends. Our performance within the industry was also impacted unfavorably. During Fiscal 2014, we recorded sales of 117,767 vehicles in the domestic market; a decline of 32.2% over last year. The overall market share of passenger cars was lower at 6.1% as compared to 9.6% during the last fiscal year. The negative growth of industry, competition from new models and declining preference for diesel vehicles, severely affected our market share.

We continued our focus on branding Nano as a smart city car. In Fiscal 2014, we sold 23,400 Nano cars, compared with 48,122 in Fiscal 2013. The Nano Awesome Campaign was launched during Fiscal 2014 along the same lines. The Nano Twist with electric power steering was launched in January 2014 and is aimed at appealing to younger customers.

Consequent to the signing of the Restructuring Framework Agreement, as agreed therein, the distribution agreement between TML, FIAL and FGA for the distribution of the Fiat vehicles in India was terminated with effect from April 1, 2013 and the distribution of the Fiat vehicles was taken over by Fiat Group Automobiles India Private Limited (FGAIPL), a wholly-owned subsidiary of FGA, Italy.

Since the commencement of distribution of Jaguar and Land Rover vehicles through our exclusive dealerships in India in June 2009, the brands have witnessed an impressive growth in the Indian market. The sales volumes in Fiscal 2014 have grown approximately 12.5% to 2,805 vehicles compared to Fiscal 2013 despite the adverse impact of more than 17% depreciation in the value of rupee versus GBP. Aided by start of local manufacturing in India, the sales of Jaguar XF grew by 119% in Fiscal 2014. We expect that continued efforts towards dealership network expansion and local manufacturing of Jaguar Land Rover products will enable us to further penetrate the premium/luxury automotive passenger car market in India.

 

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Utility Vehicles:

The utility vehicle segment, which had grown more than 50% last year has declined this year. The soft roader segment continued to grow with new launches by competition like Ecosport, Terrano and Enjoy. The offroader segment has declined, mainly after an increase in the excise duty on SUVs in February 2013. Our share in the overall UV segment has declined mainly due to lack of presence in the growing compact SUV and softroader segment. The subsequent reduction in the excise duty has not resulted in a substantial improvement in the UV segment.

Commercial Vehicles:

The commercial vehicles market in India in Fiscal 2014 recorded a decline of 22.4%. Limited government spending on developmental activity, weak industrial activity, low freight/cargo availability, rising diesel prices and weak consumer demand, have contributed to this decline. We registered a decrease in sales in Fiscal 2014, by 29.5% to 378,028 units.

Light Commercial Vehicles (including pickups):

Our range of LCVs includes SCVs, 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 declined by 21.2% in Fiscal 2014 to 498,483 units from 632,450 units in Fiscal 2013. The decline in LCV market segment is particularly significant when compared to its growth rate of 17.9% in Fiscal 2013. Our sales in the LCV segment declined by 31.9% to 268,041 units from 393,726 units in Fiscal 2014.

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 109,987 units during Fiscal 2014, resulting in a market share of 54.9%.

M&HCV truck sales have been declining for most of Fiscal 2013 and Fiscal 2014, due to a weak economic environment in India, bans on mining, fleet underutilization (estimated at above 40%), rising diesel prices, unchanged freight rates and sharp fall in resale prices. But a partial lifting of the mining bans, the excise duty cut, the increase in the freight rates in January and February have revived sales in the last few months of Fiscal 2014. A complete ban on iron ore mining in the states of Karnataka in Fiscal 2011 and Goa in Fiscal 2012 had been put in place by the Supreme Court of India to suppress illegal mining where the licenses of many mines were cancelled. A small percentage of mines in these areas have resumed mining in the recent past upon receiving clearances from the authorities.

Tata and other brand vehicles — Sales and Distribution:

Our sales and distribution network in India as of March 2014 comprises approximately 2,420 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 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 of 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.87,676 million and Rs.111,800 million during Fiscal 2014 and 2013, respectively. During Fiscal 2014 and 2013, approximately 32% and 33%, 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, 2014 and 2013 amounted to Rs.185,275 million and Rs.198,219 million respectively.

We market our commercial and passenger vehicles in several countries in Africa, Middle East, South East Asia, South Asia, Australia and Russia/ Commonwealth of Independent States (CIS) countries. We have a network of distributors in all such chosen countries where we export our vehicles. Such distributors have created a network of dealers and branch offices and facilities for sales and after-sales servicing of our products in their respective markets. We have also stationed overseas resident sales and service representatives in various countries to oversee our operations in the 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.

 

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In Fiscal 2013, we introduced Tata FleetMan. Targeted at commercial vehicle fleet owners and large consigners of goods, the service offers advanced telematics solutions, which we anticipate will help in increasing productivity and profitability. The Tata FleetMan has been designed to address what we understand to be pressing concerns of 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 and have recently commenced exports of certain products to Australia. Our exports of vehicles manufactured in India decreased by 2.5% in Fiscal 2014 to 46,983 units from 48,196 units in Fiscal 2013 impacted by external environment influences in Europe, the Middle East and South Asia.

In Fiscal 2014, our top five export destinations from India accounted for approximately 73% and 88% 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 5.1% increase in its overall vehicle sales to 10,594 units in Fiscal 2014 from 10,080 units in Fiscal 2013. In the South Korean market, TDCV’s unit sales in the M&HCV category in Fiscal 2014 increased by 21.9% to 6,584 units as compared to 5,400 units in Fiscal 2013, mainly due to strong performance of the Company as well as the gradual recovery in the economy. However, TDCV’s export performance in Fiscal 2014 decreased by 14.3% to 4,010 units compared to 4,680 units in Fiscal 2013, due to adverse economic conditions in its major export markets.

Jaguar Land Rover

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 in Fiscal 2014, 2013 and 2012 are set forth in the table below:

 

     Fiscal 2014     Fiscal 2013     Fiscal 2012  
     Units      %     Units      %     Units      %  

Jaguar

     80,644         18.7     57,766         15.5     53,990         17.2

Land Rover

     351,245         81.3     314,290         84.5     260,260         82.8

Total

     431,889         100.0     372,056         100.0     314,250         100.0

 

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Jaguar:

Jaguar designs, develops and manufactures a range of premium cars and sports cars recognized for their design, performance and quality. Jaguar’s range of products comprises the XF and XJ sedans, the F-TYPE two seater sports car and the XK coupe and convertible.

 

   

The XF, launched in 2008, is a premium executive car that merges sports car styling with the sophistication of a luxury sedan. The 2013 model year XF range also included for the first time an all-wheel drive version of the new V6 gasoline engine for the US and European markets and a 2.0 liter gasoline version for the US and Chinese markets which helped to grow the volume of sales for Jaguar in FY 2014.

 

   

The XJ is Jaguar’s largest luxury sedan vehicle, powered by a range of supercharged and naturally aspirated 5.0-liter V8 gasoline engine and a 3.0-liter diesel engine. Using Jaguar’s aerospace inspired aluminum body architecture, the new XJ’s lightweight aluminum body provides improved agility, and fuel and CO2 efficiency. The 2013 Model Year also included an all-wheel drive version and a 3.0 liter V6 gasoline version for the US and European markets excluding the United Kingdom and a 2.0 liter gasoline version for the Chinese market.

 

   

The F-TYPE, a two seat sports car, inspired by the 2011 C-X16 concept cars, with an all-aluminum structure and enhanced technology with the power of Jaguar’s latest 3.0 liter V6 and 5.0 liter V8 engines, was available for retail customers from April 2013 onwards and since then, has received numerous awards and appreciation by the auto media. In November 2013, Jaguar unveiled the F-TYPE coupe which went on sale in April 2014.

 

   

In March 2013, Jaguar unveiled two new additions to its R performance range, the XJR sedan and the XKR-S GT. The 550PS XJR - Jaguar’s new flagship sports sedan - combines a supercar performance and assertive looks with the luxury features already associated with the XJ range. The XKR-S GT is the road-going but track-ready version of the XK coupe.

 

   

At the Frankfurt Motor Show in September 2013, Jaguar revealed its first ever crossover concept vehicle, the Jaguar C X17, based on a new modular and scalable aluminum architecture, which is adaptable to different vehicle designs and may be used in different models. JLR has also announced the new Jaguar XE, a mid-sized sedan which will be built on this new modular architecture. We anticipate that this will allow Jaguar to grow its product portfolio and target high growth areas of the premium market.

Land Rover:

Land Rover designs, develops and manufactures premium all-terrain vehicles that aim to differentiate themselves from the competition by their capability, design, durability, versatility and refinement. Land Rover’s range of products comprises the Defender, Discovery, Freelander 2, Range Rover (including the new Range Rover), Range Rover Evoque and Range Rover Sport (including the new Range Rover Sport).

 

   

The Defender is one of Land Rover’s most capable SUVs, and targets extreme all-terrain capabilities and payload / towing capability.

 

   

The Freelander 2 is a vehicle intended for active lifestyles, matching style with technological features and off-road capability. The Freelander 2 offering was enhanced for the 2013 model year with the introduction of a turbocharged 2.0-liter gasoline engine, giving superior performance as compared to the 3.2-liter engine it replaces, while also reducing CO2 emissions.

 

   

The Land Rover Discovery Sport replaces the Freelander 2 in the Land Rover product range and is expected to be available for retail sales in 2015.

 

   

The Range Rover is the flagship product under the Land Rover brand. The new all-aluminum version was launched in the third quarter of Fiscal 2013. The new Range Rover won Top Gear magazine’s “Luxury Car of the Year” in 2012 and was awarded the maximum 5-star safety rating by Euro NCAP in 2012. The new “Discovery Vision” Concept car was unveiled at New York International Auto Show in April 2014 to an enthusiastic response amongst auto media and journalists.

 

   

The Range Rover Evoque is the smallest, lightest and most fuel-efficient Range Rover to date, available in 5-door and coupe body styles and in both front-wheel drive and all-wheel drive derivatives. Since its launch in September 2011, consumer demand has been consistent across the globe and the car has been a major success for JLR. The volumes have grown to 120,911 units in Fiscal 2014 as compared to 116,291 units in Fiscal 2013.

 

   

The Range Rover Sport aims to combine the performance of a sports tourer with the versatility of a Land Rover. At the 2013 New York International Auto Show, Land Rover debuted the 2014 model year Range Rover Sport built on a weight saving aluminum architecture that is capable of reducing the weight of the All New Range Rover Sport by up to 420 kg. 2014 model year Range Rover Sport is the fastest, most agile and most responsive Land Rover ever.

 

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

United States

In Fiscal 2014, industrial activity in the United States increased and the unemployment rate fell. Consumer spending recovered with rising asset prices and consumer confidence. However, consumer spending patterns were disrupted by weather patterns between December and March as well as the shutdown of the U.S. Federal Government.

In Fiscal 2014, total passenger car sales expanded by 6.2%. Alongside a strong expansion of business in Canada, total Jaguar Land Rover sales in North America grew 20.2%. United States retail volumes in Fiscal 2014 for the combined brands totaled 75,671 units. Jaguar retail volumes in Fiscal 2014 grew by 49% compared to Fiscal 2013, leading to an increase in market share. Land Rover retail volumes in Fiscal 2014 increased by 13% compared to Fiscal 2013.

United Kingdom

In Fiscal 2014 labor market conditions in the United Kingdom improved as the employment rate increased. Rising consumer and business confidence helped to underpin stronger retail sales and investment spending, while the recovery in house prices helped to improve household wealth. UK vehicle sales increased 12.5% compared to the previous year.

UK retail volumes in Fiscal 2014 for the combined brands totaled 76,721 units. Jaguar retail volumes in Fiscal 2014 increased by 10% compared to Fiscal 2013, broadly maintaining market share. Land Rover retail volumes in Fiscal 2014 increased by 5% compared to Fiscal 2013, 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 continues to create uncertainty around Eurozone stability, the Euro and borrowing costs. Credit continues to be difficult to obtain for customers and the outlook remains volatile.

European retail volumes in Fiscal 2014 for the combined Jaguar Land Rover brands totaled 82,854 units, representing a 2.3% increase compared to Fiscal 2013. Jaguar retail volume in Fiscal 2014 grew by 5%, and Land Rover retail volume in Fiscal 2014 increased by 1.8% compared to Fiscal 2013.

China

The Chinese economy continued to grow in Fiscal 2014, however GDP growth is likely to slow in the future.

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 intend to 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.

Chinese retail volumes in Fiscal 2014 reached 103,077 for the combined brands units up from 77,075 units in Fiscal 2013. Jaguar volumes more than doubled to 19,891, while Land Rover sales reached 83,186.

Asia Pacific (excluding China)

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 2014, partly due to increased trade with China and other growth economies.

The Asia Pacific retail volumes in Fiscal 2014 for the combined brands totaled 22,795 units. Jaguar retail volume in Fiscal 2014 increased by 30% compared to Fiscal 2013. Land Rover retail volume in Fiscal 2014 increased by 27% compared to Fiscal 2013.

 

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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 2008 global 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 in Fiscal 2014 for the combined Jaguar and Land Rover brands totaled 73,193 units, reflecting an increase of 15% from Fiscal 2013. Jaguar retail volumes in Fiscal 2014 increased 27% from 6,402 units in Fiscal 2013 to 8,135 in Fiscal 2014, while Land Rover retail volume increased 14% from 57,087 units in Fiscal 2013 to 65,058 in Fiscal 2014.

Jaguar Land Rover — Sales & Distribution:

We market Jaguar Land Rover products in 170 markets, through a global network of 18 national sales companies, or NSCs, 84 importers, 53 export partners and 2,518 franchise sales dealers, of which 784 are joint Jaguar and Land Rover dealers.

Jaguar Land Rover has established robust business processes and systems to ensure that its production plans meet anticipated retail sales demand and to enable the active management of its inventory of finished vehicles and dealer inventory throughout its network. Jaguar Land Rover has robust arrangements in place with: Black Horse (part of the Lloyds Bank Group) in the UK, FGA Capital (a joint venture between Fiat Auto and Credit Agricole) in Europe and Chase Auto Finance in the USA for the provision of dealer and consumer financial services products. Jaguar Land Rover has similar arrangements with local automobile financial services providers in other key markets. Jaguar Land Rover’s financing partners offer its customers a range of consumer financing options.

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.

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:

Jaguar Land Rover operates 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, Italy and the United Kingdom. In addition to this, we leverage key competencies through various engineering service suppliers and design teams of our suppliers.

 

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We have a crash test facility for passive safety development towards meeting regulatory and consumer group test requirements and evaluating occupant safety, which includes a full vehicle crash test facility, a sled test facility for simulating the crash environment on subsystems, a pedestrian safety testing facility, a high strain rate machine and a pendulum impact test facility for goods carrier vehicles. This facility is also supported by computer-aided engineering infrastructure to simulate tests in a digital environment. Our safety development facilities also incorporate other equipment that we believe will help improve the safety and design of our vehicles as well as assist in the compliance with regulatory requirements, including transient dynamometer test beds, a mileage accumulation chassis dynamometer and emission labs engine development, a hemi-anechoic chamber testing facility for developing vehicles with lower noise and vibration levels, an engine emission and performance development facility, an eight poster test facility that helps to assess structural durability of M&HCVs, and a new passenger car infotainment system and dedicated labcar testing facility. In addition, we are installing a new engine noise test facility and transmission control unit which we expect will aid in powertrain development. Other key facilities include an environmental testing facility, heavy duty dynamometers and aggregate endurance test rigs.

Our product design and development centers are equipped with hardware, software and other information technology infrastructure, which we believe is conducive to creating a digital product development and virtual testing and validation environment, which we expect to reduce product development cycle-time and to increase ability to create multiple design options. These centers are growing with increased vehicle development programs targeted at improving the breadth and depth of technology. Our product development infrastructure also include prototype development systems, testing cycle simulators and styling studios. We have made investments in our product development infrastructure which we expect to enhance our product development capabilities especially with respect to computer-aided design, computer-aided manufacturing, computer-aided engineering, knowledge-based engineering, product life cycle management, manufacturing planning and specific engineering review processes, such as production of digital mockups. Our product lifecycle management system provides vital processes, including manufacturing feasibility studies, for product development. In order to track and fix various issues arising in vehicle design and development processes, we have institutionalized ‘issue tracking’ systems at various points in the product development cycle which we believe will manage issues that arise in the product development cycle 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.

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 were deployed in our range of vehicles. Technologies such as electronic stability programs, automated and automatic transmission systems, telematics for communication and tracking, anti-lock braking systems intelligent transportation systems are in the process of various phases of deployment 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 – Tata FleetMan, 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 five years. Over recent years, we believe that Jaguar Land Rover has made significant progress in reducing its development cycle times. The ERC in India and Jaguar Land Rover engineering and development operations in the United Kingdom, have identified areas to leverage their facilities and resources to enhance the product development process and achieve economies of scale.

 

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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 has 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. In Fiscal 2014, we launched the Vista Tech, Nano CNG emax, Nano Twist and updated the current range of products like Indica, Indigo, Sumo, Aria, and Nano in the passenger cars segment and launched the Ultra Truck 912 and 812 with different wheel base, Prima 4928 6x4 and 4028 4x2, 3138 for domestic and 3338 for SA etc. 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.

As part of the acquisition of our 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. The Tata Group had previously applied to the RBI for a banking license on July 1, 2013. On November 26, 2013, Tata Group withdrew its application upon concluding that the current financial services operating model best supports the current needs of the Tata Group’s domestic and overseas strategy.

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 cams for our vehicles, which are manufactured in-house or by our subsidiaries, affiliates, joint ventures / operations 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.

We have reorganized the sourcing department in India under four divisions, namely, Purchasing, Supplier Quality, Supply Chain and Production and Planning Management or PPM. The reorganization was done with a view to establish and define responsibility and accountability in the sourcing department. Purchasing oversees the commercial aspects of product sourcing; Supplier Quality is primarily responsible for maintaining the quality of supplies that we purchase; Supply Chain oversees the logistics of the supply and delivery of parts for our vendors while PPM oversees execution of new projects.

 

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As part of our strategy to become a low-cost vehicle manufacturer, we have undertaken various initiatives to reduce our fixed and variable costs. In India we started an e-sourcing initiative in 2002, pursuant to which we procure some supplies through reverse auctions. We 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 sixteen step process in order to ensure quality of outsourced components. We formalized the component development process using AIAG guidelines. We also have a program for assisting vendors from whom we purchase raw materials or components to maintain quality. 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.

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 in sheet (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 highly functional components such as axles, engines and gear boxes for our vehicles, which are mainly manufactured by strategic suppliers. We have long term purchase agreements with our key suppliers. The components and raw materials in our cars include steel, aluminum, copper, platinum and other commodities. We have established contracts with certain commodity suppliers to cover our own and our suppliers’ requirements to mitigate the effect of such high 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 our 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 our quality standards. Such programs include site engineers who regularly interface with suppliers and carry out visits to supplier sites and ensure that the relevant quality standards are being met. 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 located at our Jaguar Land Rover plants, who provide the link between the site engineers and the Jaguar Land Rover plants. We have in the past worked, and expect to continue to work, with our suppliers to optimize our procurements, including by sourcing certain raw materials and component requirements from low cost countries.

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.

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, Johnson Controls Limited for seats, 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. In addition, the co-development of various components, such as engines, axles and transmissions 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.

 

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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, long term agreements were 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 in duration from 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.272,832 million, Rs.212,078 million and Rs.148,255 million during Fiscal 2014, 2013 and 2012, respectively. Our capital expenditure during the past three 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.

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.24,989 million, Rs.22,179 million and Rs.18,905 million in Fiscal 2014, 2013 and 2012, respectively, representing nearly 1.1%, 1.2% and 1.1% of our total revenues before inter-segment elimination in the corresponding Fiscal periods.

Information Technology Services:

As of March 31, 2014, we owned a 72.32% equity interest in our subsidiary, TTL. TTL, founded in 1994 and a part of Tata Motors 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. TTL’s services include product design, analysis and production engineering, knowledge-based engineering, PLM, ERM and CRM systems. TTL 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). In Fiscal 2014, TTL acquired Cambric Corporation, a premier engineering services organization, to achieve greater domain expertise and presence in the industrial equipment sector. TTL has a combined global workforce of around 7,020 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 six offshore development centers in India, Thailand and Romania. TTL had 17 functional subsidiary companies and one joint venture as of March 31, 2014.

 

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The consolidated revenues of TTL in Fiscal 2014 were Rs.23,724 million (including sales to Tata Motors Group) reflecting a growth of 16.7% against Rs.20,324 million in the previous year with traction in the automotive and aerospace markets. TTL recorded profit after tax of Rs.2,642 million in Fiscal 2014, reflecting a decrease of 12.2% over Rs.3,008 million in Fiscal 2013.

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.

Emission Norms 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. 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. As required by the draft Notification on the Gazetted Statutory Rule numbered G.S.R 278 E, Bharat Stage IV norms will be extended in 20 additional cities. The next change in emission regulations remains to be discussed by the Government of India.

Auto Fuel Vision & Policy 2025

The Ministry of Petroleum and Natural Gas constituted an expert committee under the Chairmanship of Shri Saumitra Chaudhuri, Member Planning Commission on December 19, 2012. Its objective was to recommend auto fuel quality applicable through model year 2025. The committee in its draft report has recommended Bharat Stage IV compliant fuel across the country by 2017. Bharat Stage V compliant fuel with 10ppm sulphur will be made available from 2020 onwards. The draft report proposes nationwide Bharat Stage V emission norms for new 4 wheelers from model year 2020 and for all 4 wheelers from model year 2021. It also recommends Bharat Stage VI emissions norms from 2024 onwards. In April 2014, the expert committee submitted its recommendations to the Ministry of Petroleum and Natural Gas.

 

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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.

In addition, pursuant to the CMV rules, every manufacturer must submit the prototype of every vehicle to be manufactured by it for testing by the Vehicle Research and Development Establishment of the Ministry of Defense 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.

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 Government of India 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 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.

 

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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.

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 cost, insurance and freight value of more than US$40,000 or with engine capacities more than 3000 cc for diesel variants and 2500 cc for gasoline variants, may be imported at an 100% basic customs duty. Commercial vehicles may be imported at a 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%

February 2014 (valid until June 30, 2014)

     8   20% or
24%*
     8   10%      8   9%    24%

 

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* Small cars - cars with length not exceeding 4,000mm and an engine capacity not exceeding 1,500 cc for cars with diesel engines and not exceeding 1,200 cc for cars with gasoline engines. The higher rate is applicable if engine capacity exceeds 1,500 cc.
** 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.

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 passenger vehicles are also subject to National Calamity Contingent Duty, or NCCD, assessed at 1%.

Value 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 our business. Prior to the implementation of VAT, a major portion of sales tax paid on purchases formed part of our total cost of materials. 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 in Fiscal 2014.

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.

Proposed Direct Tax Code:

The Proposed Direct Tax Code, or DTC, aims 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 are subject to review by the new government 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.

 

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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.

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. The Government of India has made changes in Excise duty in February 2014 which will be in effect until December 31, 2014 as follows: The Cenvat on small cars, trucks and buses reduced to 8% in February, 2014 whereas Cenvat on cars other than small cars has been reduced to 20% or 24% from 24% or 27%. The Cenvat on UVs have been reduced from 27% or 30% to 24%. The Cenvat for chassis which was increased from 12% to 14% in the budget for the Indian fiscal year 2012-2013, has since been revised to 13% in the budget for the Indian fiscal year 2013-2014 and further reduced to 9% in February 2014.

In the United Kingdom, the Bank of England base (interest) rate has been maintained at an historic low of 0.5% in order to provide monetary/economic stimulus to the UK economy. However a recent improvement in UK GDP growth, improving labour market conditions and a return to inflation levels close to the long term target (2%) is placing pressure on the Bank of England to begin raising interest rates towards the end of the year, although rate rises are likely to be small and gradual.

The European Central Bank has progressively reduced its interest rates since July 2011 prompted by the developing sovereign debt crisis of peripheral Eurozone economies and more recently, in May 2014, the main refinancing rate was cut to a historical low of 0.15% to address persistent low growth across the European Union.

The US Federal Reserve began tapering off its quantitative easing programme in December 2013, signifying a return to growth for the United States economy. However since then the expected reduction in unemployment and strong economic growth has failed to materialise as anticipated. Base interest rates in the United States have been maintained at historically low levels of 0.25% and they are likely to remain low whilst employment and GDP remain lower than anticipated.

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.

Furthermore, the Ministry of Road Transport & Highways and the Bureau of Energy Efficiency in India finalized labeling regulations for the M1 category of vehicles, which includes all passenger vehicles i.e cars, UVs, SUVs, Vans etc, upto less than or equal to 10 seats.

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).

 

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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 and issued regulations in 2012 for tightened fuel economy and emissions standards for model years 2017-2025. In addition, many other markets either have or will shortly define similar greenhouse gas emissions standards such as Canada, Mexico, China, Japan, South Korea, Switzerland, Brazil, Saudi Arabia, Turkey, Taiwan and Australia. In Europe, implementation of LCV CO2 standards would impact the Defender and a small number of commercial 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.

In Europe, monetary fines are imposed as penalties for non-compliance with emissions standards. In the United States, non-compliance with the fuel economy standards require by the National Highway Traffic Safety Administration CAFE standards may result in monetary fines. Failure to comply with the Environmental Protection Agency standards on greenhouse gas emissions may result in market exclusion.

California has developed a zero emissions vehicle regulation mandating increased penetration of electric and plug in hybrid electric vehicles beginning with model year 2012 and the Advanced Clean Car package of regulations which tightened previous standards on emissions and evaporative emissions beginning with model year 2017, 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 the majority of our vehicles, and nine speed transmissions available in the Land Rover Evoque . We also plan to expand the introduction of smaller vehicles, which commenced 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 and plug-in hybrid electric vehicles initially in Europe and the United States, both of 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 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; and (iii) to require tire pressure monitoring systems starting in 2012. 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.

 

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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 ensure 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 NHTSA.

These standards add to the cost and complexity of designing and producing vehicles and equipment. In recent years 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;

 

   

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

 

   

enhanced requirements for vehicle roof strength and rollover safety requirements.

Furthermore, the Cameron Gulbransen Kids Transportation Safety Act of 2007, or Kids and Cars Safety Act, passed into law in 2008, and requires NHTSA to enact regulations related to rearward visibility which were implemented in 2014 and begin to take effect starting in model year 2016. The act also requires manufacturers to install brake-to-shift interlocks in vehicles with automatic transmissions. NHTSA has proposed regulations requiring brake – throttle override systems, for the installation of event data recorders in vehicles and for approaching vehicle audible systems. The costs to meet these regulatory requirements may be significant.

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 95 licenses which require us to export our products of a value of approximately Rs.74.47 billion between the years 2002 to 2020, 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, 2014 we have remaining obligations to export products of a value of approximately Rs.5.98 billion by March 2020. 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.

 

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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 34 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 (referred to as the “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 Calcutta High Court (referred to as the “High Court”), ruled against the validity of the legislation and restored our rights under the land lease agreement. The State Government has 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 5, 2014. We expect that the 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, up to the period of lawsuit. We have recorded a provision of KRW 43.6 billion (Rs.2,124 million) (through March 31, 2013) in Fiscal 2013 in respect of this lawsuit. TDCV has filed an appeal against the order which is still pending. In December 2013, in a case involving an unaffiliated company the Supreme Court of South Korea laid down guidelines and principles of determining the elements which could be considered as part of ordinary wage and the principles to be considered for determining the applicability of such claims on a retrospective basis. The Labor Union has formally withdrawn its claim in respect of five elements out of total 12 elements which were part of the original claim. Accordingly, TDCV reversed provision of KRW 13.4 billion (Rs.748 million) in Fiscal 2014 for such five items and recorded a provision of KRW 45.8 billion (Rs.2,565 million) up to March 31, 2014 in respect of this lawsuit. On April 18, 2014, the High Court ordered mediation, to which the Union did not concur. At present this matter is pending before the High Court.

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 promoted companies engaged in a wide range of businesses. The various companies promoted by Tata Sons, including our company, are based substantially in India and had combined revenues of approximately US$103 billion in Fiscal 2014. The businesses of Tata Sons promoted entities can be categorized under seven business sectors, namely, engineering, materials, energy, chemicals, consumer products, services, communications and information systems.

Tata Sons promoted entities have their origins in the trading business founded by the founder Mr. Jamsetji Tata in 1868, which 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 established for philanthropic and charitable purposes and together own a significant percentage of the share capital of Tata Sons Limited.

Over the years, 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 the seventh largest manufacturer of buses and the eight largest manufacturer of trucks 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 Tea Limited (1962), which is the second largest branded tea company in the world, along with its UK-based subsidiary Tetley.

 

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Tata Consultancy Services Limited, or TCS, a subsidiary of Tata Sons which started its operations in the 1960s as a division of Tata Sons and later converted to a listed public company, is leading software service provider and exporter and the first Indian software firm to exceed sales of US$4 billion. TCS has delivery centers around the globe including in the United States, the United Kingdom, Hungary, Brazil, Uruguay and China, as well as India.

Tata Sons promoted entities 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. In 1999, entities promoted by Tata Sons also invested in several telephone and telecommunication ventures, including acquiring a significant portion of the Government of India’s equity stake in the then state owned Videsh Sanchar Nigam Limited (VSNL), which was subsequently renamed, Tata Communications Limited and is one of the world’s largest wholesale voice carriers. Tata Sons promoted companies are building multinational businesses that aspire to 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 and common brand equity as well as helped to grow and sustain its brand equity. Tata Sons instituted a corporate identity program to re-position the brand to compete in a global environment. A substantial ongoing investment and recurring expenditure is undertaken by Tata Sons planned to develop and promote a strong, well-recognized and common brand equity, which is intended to represent for the consumer a high level of quality, service and reliability associated with products and services offered by the Tata Sons promoted entities.

Each of the Tata Sons promoted entities which have subscribed to the Tata Brand Equity & Business Promotion Scheme pays a subscription fee to use the “Tata” business name and trademarks and participate in and gain from the Tata brand equity as well as avail themselves of various services including legal, human resources, economics and statistics, corporate communications, public affairs services. We believe that our company benefits from the use of and association with the “Tata” brand identity and accordingly, Tata Motors Limited and certain of our subsidiaries have subscribed to the Tata Brand Equity & Business Promotion Agreement and agreed to pay an annual subscription fee to Tata Sons which is in the range of 0.15%-0.25% of the 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 some of the past years, Tata Sons has lowered the absolute amount of subscription fee, considering its outlay for activities related to brand promotion and protection in those years. In Fiscal 2012, 2013 and 2014 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 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.

The Tata Sons promoted entities have sought to continue to follow the ideals, values and principles of ethics, integrity and fair business practices espoused 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 Tata promoted entities. The Tata Trust 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 for the Performing Arts and more recently the Tata Medical Center at Kolkata for cancer patients set up by the Tata Trusts and supported by Tata Sons and promoted companies. The Tata Trust is one among the largest charitable foundations in India.

Some of the Tata Sons promoted entities hold shares in other companies promoted by Tata Sons. Similarly, some of our directors hold directorships on the boards of Tata Sons and/or other 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 binding us 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 on our Board, Tata Sons or its subsidiaries do not have any special contractual or other power to appoint our directors or management. They have only the voting power of their shareholdings in our Company. 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 Tata Sons promoted entities are generally insignificant as a percentage of their respective outstanding shares or in terms of the amount of our investment or the market value of our shares of those companies.

 

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II Tata Motors Group:

Subsidiaries and Affiliates

The subsidiaries, joint operation and equity method affiliates and joint ventures of Tata Motors Limited that together with Tata Motors Limited form the Tata Motors Group under Indian Law as of March 31, 2014 are set forth in the chart below:

 

LOGO

Note: 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 Company of Jaguar Land Rover Automotive Plc, Tata Daewoo Commercial Vehicle Co. Limited with effect from December 23, 2013, Tata Motors (Thailand) Limited with effect from January 30, 2014 and Tata Motors (SA) (Proprietary) Limited with effect from March 27, 2014.
(2) These subsidiaries are based in many countries outside India.
(3) Shareholding increased from 90.82% to 94.36% with effect from December 11, 2013.
(4) Holding in its subsidiary, Tata Daewoo Commercial Vehicle Sales and Distribution Co. Ltd. is 100%.
(5) The holdings in these 17 subsidiaries range between 72.32% and 72.52%.
(6) Winding down of operations with effect from September 20, 2013.
(7) Holding in Tata Hispano Motors Carrocerries Maghreb SA, subsidiary based in Morocco is 100%.
(8) Holding in PT Tata Motors Distribusi Indonesia subsidiary is 99.99%
(9) Is an affiliate of Tata Technologies Limited.
(10) With 2 subsidiaries in Spain and 1 affiliate in China with holding of 22.48%.
(11) Out of the 8 subsidiaries 1 is presently under the process of liquidation and 3 affiliates with holding of 13% in each.

 

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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 LCVs 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 arrangement 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.

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 expect to increase investment in the facility to in excess of GBP 500 million from GBP 355 million. This is anticipated to 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 is intended to include an engine testing center alongside the manufacturing and assembly halls. 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.

 

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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 Bharat Stage III and Bharat Stage 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 endeavored to incorporate 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 in place and have achieved ISO-14001 certification. We have been implementing various Environment Management Programs 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.

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.

 

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

We have a good health and safety record. We maintain our 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, 2014 and production levels by plant and product type in Fiscal 2014 and 2013:

 

    Fiscal Year ended March 31,  
    Production
Capacity
    Production (Units)  
      2014     2013  

Tata Motors Plants in India*

     

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

    1,625,000        513,442        773,238   

Jaguar Land Rover**

     

Utility Vehicles, Passenger Cars

    514,000        439,120        385,787   

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

     

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

    58,750        22,162        28,272   

Joint operations**** (Passenger Cars)

    100,000        30,702        23,968   

 

* 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, Morocco, South Africa and Thailand. Production capacity of plants at Morocco are on single shift basis
**** Excludes Production of Engines / Powertrains

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.

 

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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, 2014. The remaining facilities are on leased premises.

 

Location

  

Facility or Subsidiary / Joint operations 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
Satara    Tata Cummins Ltd    Automotive Engines
Pune (Ranjangaon)    Fial India Automobiles Ltd.    Automotive vehicles & components
In the State of Jharkhand      
Jamshedpur    Tata Motors Ltd.    Automotive vehicles, components & R&D
Jamshedpur    TML Drivelines Ltd.    Axles and transmissions for M&HCVs
Jamshedpur    Tata Cummins Ltd    Automotive Engines
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

 

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Location

  

Facility or Subsidiary / Joint operations Name

  

Principal Products or Functions

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 & Cambric UK 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 service
Morocco    Tata Hispano Motors Carrocerries Maghreb.    Bus Body Manufacturing and service
South Africa    Tata Motors (SA) (Proprietary)    Manufacture and assembly operations of vehicles
Indonesia    PT Tata Motors Indonesia    Distribution of vehicles
Rest of the world    Tata Technologies Group of Companies    Software consultancy and services
   Jaguar Land Rover    National sales companies
      Regional sales offices

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, 2014 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. In June 2011, the newly elected State Government of West Bengal enacted legislation to cancel the land lease agreement.

 

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The Company challenged the legal validity of the legislation. In June 2012, the Calcutta 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. Based on the management’s assessment, no adjustments to the carrying amount of buildings is considered necessary. 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 2014, our total revenue (net of excise duties) including finance revenues increased by 23.7% to Rs.2,341,761 million from Rs.1,892,910 million in Fiscal 2013. We recorded a net income (attributable to shareholders of the Company) of Rs.130,717 million in Fiscal 2014, representing an increase of 47.4% or Rs.42,046 million over net income in Fiscal 2013 of Rs.88,671 million.

Automotive operations

Automotive operations are our most significant segment, accounting for 99.5%, 99.4% and 99.4% of our total revenues in Fiscal 2014, 2013, and 2012, respectively. In Fiscal 2014, revenue from automotive operations before inter-segment eliminations was Rs.2,329,582 million as compared to Rs.1,881,621 million in Fiscal 2013 and Rs.1,651,564 million in Fiscal 2012.

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 financing thereof and the Jaguar Land Rover. In Fiscal 2014, Jaguar Land Rover contributed 81.3% (72.5% in Fiscal 2013) of our total automotive revenue (before intra segment elimination) and the remaining 18.7% (27.5% or Fiscal 2013) 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 financing thereof). During Fiscal 2014, there was continued deterioration in the macroeconomic factors leading to volume contraction and competitive pressures across all major products.

 

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During Fiscal 2014, the Indian economy recorded a GDP growth of 4.7%, compared to 4.5% in Fiscal 2013 (based on data from the Ministry of Statistics and Programme Implementation). The Index of Industrial production (IIP) declined by 0.1% during Fiscal 2014. The stagnation in the industrial activity was broad-based. While mining output registered a decline of 1.1%, manufacturing output declined by 0.7% during the same period. Fiscal 2014 witnessed a decline in investments in new projects in line with slowdown in overall growth. The stagnation of industrial growth particularly in mining and quarrying, manufacturing and infrastructure, adversely impacted the domestic auto industry. Fiscal 2014 was also marked by efforts by the Government of India to contain the fiscal deficit. As a result, the domestic auto industry witnessed decline as expenditure on infrastructure and other key sectors suffered. With the continued high interest rates and inflation, households were forced to spend more on essentials and reduced discretionary spending, leading to deferrals of purchase decisions.

The demand in certain product category was also affected due to the lack of financing for potential customers in Fiscal 2014. Further, high default rates in loans alongside early delinquencies has led financiers to tighten lending norms, such as lowering the loan-to-value ratio on new financings while focusing on collection of existing loans.

Consequently, sales in the Indian automobile industry posted a decline of 9.3% in Fiscal 2014, as compared to 1.1% growth in Fiscal 2013. Sales of commercial vehicles declined by 22.4% (last year growth of 1.7%) and passenger vehicles declined by 4.7%, compared to an increase Fiscal 2013 of 0.9%. The sales in the M&HCV category fell by 25.2% in Fiscal 2014 continuing a 23.3% decline in Fiscal 2013, due to ban on mining, significant deacceleration in investment in infrastructure and slowing economy growth. Further, the contraction of the LCV segment by 21.2% to 498,483 units from 632,450 units in Fiscal 2013 has significantly impacted the volume which had been a growth driver in the past, growing by 17.9% in Fiscal 2013. The fall in the LCV segment has been led by a decline of sales in the SCV segment. Sales of our commercial vehicles in India decreased by 29.5% to 378,028 units in Fiscal 2014 from 536,491 units in Fiscal 2013. However, over the last few months, there have been some signs of revival and sales volumes have stabilized which was facilitated by steps taken by the Government of India to revive the economy, such as 4% reduction in excise duty for a limited period upto December 31, 2014 and a partial lifting of mining bans. There has been slight increase in freight rates, indicating that the economy may be nearing the end of the down-cycle.

The passenger vehicle industry in India recorded a negative growth of 4.7% for the first time in the last five years in Fiscal 2014. The decline in sales volumes was seen across segments, with the sedan segment witnessing the largest decline. The Hatchbacks and UV segment are historically the volume drivers. The high growth in UV segment last year, with the onset of soft roaders did not witness similar growth in Fiscal 2014. Our passenger vehicle (including UV) sales in India decreased to 149,350 units in Fiscal 2014 from 219,953 units in Fiscal 2013 (32.1%). We sold 23,400 Nano cars in Fiscal 2014, a decrease of 51.4% over 48,122 units in Fiscal 2013. In the UV category, we sold 31,583 units in Fiscal 2014, representing a decrease of 31.9% from 46,366 units in Fiscal 2013. The premium and luxury vehicles segment however has seen a growth in an otherwise declining year. We sold 2,805 units of Jaguar and Land Rover in Fiscal 2014 as compared to 2,494 units in Fiscal 2013 in India.

Our overall sales in international markets decreased by 4.6% to 61,279 units in Fiscal 2014, as compared to 64,242 units in Fiscal 2013. Our exports of vehicles manufactured in India decreased marginally by 2.5% in Fiscal 2014 to 46,983 units from 48,196 units in Fiscal 2013. For Tata Motors, traditionally strong markets in South Asia, such as Bangladesh, also were affected by internal conflict and unrest.

TDCV, our subsidiary company engaged in design, development and manufacturing of M&HCVs, recorded a 5.1% increase in its overall vehicle sales to 10,594 units in Fiscal 2014, from 10,080 units in Fiscal 2013. TDCV exported 4,010 units in Fiscal 2014, compared to 4,680 units in Fiscal 2013, a fall of 14.3%. However, in the South Korean market, TDCV’s sales have increased by 22% from 5,400 units in Fiscal 2013 to 6,584 units in Fiscal 2014, primarily attributable to growth in the South Korean economy and improved market share of TDCV in local market.

Our overall vehicle sales decreased by 28.3% to 588,657 units in Fiscal 2014 from 820,686 units in Fiscal 2013, resulting in a revenue (before inter-segment elimination) decrease of 15.8% to Rs.435,012 million in Fiscal 2014, compared to Rs.516,867 million in Fiscal 2013.

Revenue from our vehicle financing operations decreased marginally by 0.5% to Rs.29,876 million in Fiscal 2014 as compared to Rs.30,013 million in Fiscal 2013.

There was a decrease in spares and after sales activity by 9.6% to Rs.40,798 million in Fiscal 2014, compared to Rs.45,119 million in Fiscal 2013. In terms of earnings before other income, interest and tax before inter-segment eliminations from Tata and other brand vehicles and financing thereof, there was a loss of Rs.20,630 million in Fiscal 2014 as compared to a profit of Rs.13,554 million in Fiscal 2013. The losses were mainly attributable to a significant reduction in volumes and competitive pressure on pricing. Also as a result of increase delinquency rate on vehicle financing, we provided Rs.24,139 million in Fiscal 2014 as compared to Rs.9,428 million in Fiscal 2013. 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. While we have stepped up the cost reduction programs, in the short term, the level of fixed costs continued to have negative impact on earnings.

 

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Jaguar Land Rover

Jaguar Land Rover had another successful year of continued growth in all markets, particularly 33.7% 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 the all-new Range Rover and the launch of new Range Rover Sport and Jaguar F-TYPE. More established models have also been performing well, including in particular derivatives such as the XF Sportbrake and all-wheel drive and smaller engine options.

Retail volumes in Fiscal 2014 were 434,311 units, an increase of 15.9% compared to the prior year. Retail volumes were 80,522 units for Jaguar and 353,789 units for Land Rover, growth of 37.3% and 11.9%, respectively. Retail volumes have grown across all markets, led by China up 34% from last year, to record retail sales of 103,077. North America and Asia Pacific regions also performed strongly, up 20.2% and 27.7% to 75,671 and 22,795 respectively while UK and Europe were up 6.2% and 2.3% to 76,721 and 82,854 units respectively.

Wholesale volumes in Fiscal 2014 were 431,889 units, an increase of 16.1% over Fiscal 2013. Wholesale volumes for Jaguar in Fiscal 2014 were 80,644 units, representing an increase of 37.3% as compared to 57,766 units sold in Fiscal 2013. Wholesale volumes for Land Rover in Fiscal 2014 were 351,245 units, representing an increase of 11.8% over sales of 314,290 units in Fiscal 2013.

Revenues (before inter-segment eliminations) for Jaguar Land Rover were Rs.1,894,590 million in Fiscal 2014, compared to Rs.1,365,620 million in Fiscal 2013, representing a 38.7% increase over Fiscal 2013. The increase was primarily driven by demand for both brands as well as a strong product and market mix, supported by favorable exchange rates. The revenues were also positively impacted by translation gain, of approximately Rs.218,417 million.

In Fiscal 2014, the Jaguar Land Rover business reported earnings before other income, interest and tax before inter-segment eliminations of Rs.228,027 million, as compared to Rs.150,653 million in Fiscal 2013, representing an increase of 51.3% over Fiscal 2013. The improvement in profitability was mainly attributable to increases in volumes across all markets, introduction of the Jaguar F-TYPE and smaller powertrain derivative of XF and XJ and XF Sportbrake, the New Range Rover, the New Range Rover Sport and Range Rover Evoque. 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 of GBP to rupees of Rs.27,064 million.

Other Operations

Our other operations business segment mainly includes information technology services, machine tools and factory automation solutions. Our revenue from other operations before inter-segment eliminations was Rs.24,989 million in Fiscal 2014, an increase of 12.7% from Rs.22,179 million in Fiscal 2013. Revenues from other operations represented 1.1%, 1.2% and 1.1% of our total revenues, before inter-segment eliminations, in Fiscal 2014, 2013 and 2012, respectively. Earnings before other income, interest and tax before inter-segment eliminations, were Rs.2,634 million in Fiscal 2014 and Rs.3,294 million and Rs.2,443 million in Fiscal 2013 and 2012, 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 2014, 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 in terms of volumes, after India. The performance of our subsidiary in South Korea, TDCV, and TTL contributed to our revenue from international markets. TDCV’s major export markets are Algeria, Russia, Vietnam, South Africa and countries in the Middle East. The proportion of our net sales earned from markets outside of India has increased significantly to 84.4% and 76.1% in Fiscal 2014 and Fiscal 2013, respectively. The increase was also a consequence of reduction in domestic sales in India.

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

 

     Fiscal 2014     Fiscal 2013     Fiscal 2012  

Revenue

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

India

     364,591         15.6     453,276         23.9     549,174         33.1

China

     656,138         28.0     446,508         23.6     296,923         17.9

United Kingdom

     290,162         12.4     224,604         11.9     179,866         10.8

United States of America

     266,436         11.4     189,007         10.0     157,855         9.5

Rest of Europe

     292,378         12.4     221,035         11.7     190,056         11.4

Rest of the World

     472,056         20.2     358,480         18.9     287,640         17.3
  

 

 

      

 

 

      

 

 

    

Total

     2,341,761           1,892,910           1,661,514      
  

 

 

      

 

 

      

 

 

    

 

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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”.

 

   

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. Jaguar Land Rover constitute a major portion of consolidated financial position, the figures of which are translated into Indian rupees. However, the translation effect is a reporting consideration and does not impact our underlying results of operations.

 

   

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

 

   

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

 

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Results of operations

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

 

     Percentage of Total Revenue     Percentage Change  
     Fiscal 2014     Fiscal 2013     Fiscal 2012     2013 to 2014      2012 to 2013  

Total revenues

     100     100     100     23.7         13.9   

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

     61.7        63.5        65.6        20.3         10.2   

Employee cost

     9.1        8.8        7.5        28.0         33.5   

Other expenses

     21.3        20.3        18.8        29.7         23.0   

Depreciation and amortization

     4.7        4.0        3.4        45.8         34.3   

Expenditure capitalized

     -5.8        -5.4        -5.0        32.7         23.3   

Other (income)/ loss (net)

     -0.3        -0.6        -0.6        -36.1         20.5   

Interest income

     -0.3        -0.4        -0.3        -3.9         39.9   

Interest expense (net)

     2.3        2.2        2.3        30.2         4.7   

Foreign exchange (gain) / loss (net)

     -0.8        0.8        0.7        -221.2         37.0   

Impairment of an equity accounted investee

     0.3        —         0.3        100.0         -100.0   

Share of (profit) / loss of equity accounted investees

     0.1        —       0.1        1,327.8         -77.6   

Net income before tax

     7.7        6.8        7.2        39.3         8.0   

Income tax expense

     -2.1        -2.1        -0.3        22.9         784.5   

Net income

     5.6        4.7        6.9        46.5         -22.0   

Net income attributable to shareholders of Tata Motors Limited

     5.6        4.7        6.9        47.4         -22.2   

Net income attributable to non-controlling interests

     —       —       —       -47.9         13.4   

 

* Less than 0.1

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

 

                      Percentage Change  
    Fiscal 2014     Fiscal 2013     Fiscal 2012     2012 to 2013     2012 to 2013  

Total Revenues (Rs. million)

    2,329,582        1,881,621        1,651,564        23.8        13.9   

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

    207,396        164,207        158,986        26.3        3.3   

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

    8.9     8.7     9.6    

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 2014     Fiscal 2013     Fiscal 2012     2013 to 2014      2012 to 2013  

Total revenues (Rs. million)

     24,989        22,179        18,905        12.7         17.3   

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

     2,634        3,294        2,443        -20.0         34.8   

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

     10.5     14.9     12.9     

Fiscal 2014 Compared to Fiscal 2013

Revenues

Our total consolidated revenues (net of excise duty, where applicable) including finance revenues were Rs.2,341,761 million in Fiscal 2014, an increase of Rs.448,851 million or 23.7%, from Rs.1,892,910 million in Fiscal 2013.

The increase in revenues was primarily driven by our Jaguar Land Rover business, where revenues increased by 38.7%, from Rs.1,365,620 million in Fiscal 2013 to Rs.1,894,590 million in Fiscal 2014, due to volume increases across products and markets. The revenues also reflect an increase on account of currency translation from GBP to Rupees of Rs.218,417 million pertaining to Jaguar Land Rover. The increase in revenues of Rs.310,553 million (excluding translation impact relating to Jaguar Land Rover) was mainly attributable to increase in sales of the Range Rover and Evoque from 146,425 units in Fiscal 2013 to 166,697 units in Fiscal 2014 and Jaguar vehicles from 57,766 units in Fiscal 2013 to 80,644 units in Fiscal 2014. The increase in Fiscal 2014, was also attributable to an indirect tax incentive by Jaguar Land Rover of Rs.8,463 million.

 

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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 15.8% from Rs.516,867 million in Fiscal 2013, to Rs.435,012 million in Fiscal 2014. Our revenues (gross of excise duty) from vehicle sales in India decreased from Rs.438,106 million in Fiscal 2013 to Rs.325,192 million in Fiscal 2014. The main affected product segments were the M&HCV segment and the LCV segment which decreased by 23.1% to Rs.129,350 million and by 32.5% to Rs.74,900 million, respectively in Fiscal 2014. Similarly, revenue from passenger cars and UV decreased by 38.6% to Rs.30,370 million and by 30.0% to Rs.13,810 million, respectively in Fiscal 2014. Furthermore, there was a decrease in spares sales activity by 9.6% in Fiscal 2014. These decreases in revenues were offset by an increase in vehicle sales of TDCV by 21.5% from Rs.36,992 million in Fiscal 2013 to Rs.44,955 million in Fiscal 2014.

Revenues (net of excise duty, where applicable) before inter-segment eliminations, from other operations were Rs.24,989 million in Fiscal 2014, an increase of 12.7% from Rs.22,179 million in Fiscal 2013, which represent 1.1% and 1.2% of our total revenues, before inter-segment eliminations, in Fiscal 2014 and 2013, respectively. The increase in revenues net of inter-segment elimination was Rs.889 million, which was mainly attributable to the acquisition of Cambric by TTL.

Cost and Expenses

Raw Materials, Components and Purchase of Products for Sale (including change in stock) (Material costs): Material costs in Fiscal 2014 were Rs.1,444,946 million compared to Rs.1,201,017 million in Fiscal 2013, reflecting an increase of 20.3%, or Rs.243,929 million. The increase in absolute terms in material costs was mainly attributable to increased volumes at our Jaguar Land Rover business as further discussed below and includes the foreign currency translation from GBP to rupees for Jaguar Land Rover operations which resulted in an increase of Rs.133,237 million. Due to the downturn in our India operations, material costs for Tata and other brand vehicles has decreased by Rs.61,062 million. Material costs as a percentage of revenues (excluding finance revenues) decreased to 62.5% in Fiscal 2014 as compared to 64.5% in Fiscal 2013. The reduction in material costs as a percentage to revenue was partly on account of change in composition of revenue, in terms of higher Jaguar Land Rover revenue as compared to India operations in Fiscal 2014.

At our Jaguar Land Rover operations, material costs in Fiscal 2014 were Rs.1,154,510 million compared to Rs.850,372 million, in Fiscal 2013, reflecting an increase of Rs.304,138 million, or 35.8% from Fiscal 2013. The material costs as a percentage to revenue was 61.4% in Fiscal 2014 (62.8% in Fiscal 2013) for Jaguar Land Rover (in GBP terms). The material cost increased by GBP 1,107 million (Rs.106,416 million) due to increase in volume and increase in duties by GBP 163 million (Rs.15,676 million) mainly due to increase in sales to China. However, as a percentage to revenue duties decreased from 11.7% in Fiscal 2013 to 10.4% in Fiscal 2014, due to an increase in sales in China of our 2.0 litre engines which attracts a lower duty (prior years when we were selling vehicles engines, which attracted a higher duty rate). Further, 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 209 million (Rs.20,100 million). However, such decrease was partially offset by negative movement of foreign currency rates applicable for sourcing countries of GBP 154 million (Rs.14,811 million).

At our India operations, material costs in Fiscal 2014 were Rs.259,163 million compared to Rs.329,621 million in Fiscal 2013, reflecting a decrease of Rs.70,458 million caused by the reduction in sales volume across all vehicle categories. The material costs as a percentage to revenue is 72.5% in Fiscal 2014, as compared to 73.5% in Fiscal 2013. The reduction is mainly attributable to the composition of revenue mainly of spares and M&HCV, where the % material cost is lower. Further in UV and LCV category, the average price realization improved over material cost. However, the decreases were offset by reduction in unit realization for cars, due to competitive environment.

Employee Cost: Our employee cost was Rs.213,903 million in Fiscal 2014, as compared to Rs.167,170 million in Fiscal 2013 and has gone up by 28.0% or Rs.46,733 million, including the currency translation impact discussed below. Our permanent headcount increased by 6.2% as of March 31, 2014 to 68,889 employees, as compared to 64,821 employees as of March 31, 2013.

The employee cost at Jaguar Land Rover was Rs.160,147 million in Fiscal 2014, as compared to Rs.114,591 million in Fiscal 2013, reflecting an increase of 35.0% or Rs.45,556 million. This includes currency translation from GBP to rupees of Rs.17,987 million. In GBP terms the employee cost was GBP 1,654 million in Fiscal 2014 as compared to GBP 1,334 million in Fiscal 2013. The employee cost at Jaguar Land Rover as a percentage to revenue was 8.5% in Fiscal 2014 and 8.4% in Fiscal 2013. In view of consistent volume increases and to support new launches and product development projects, Jaguar Land Rover increased permanent head count by 29.6% as of March 31, 2014 to 23,111 employees, as compared to 17,832 employees as of March 31, 2013. Consequently, the average temporary headcount decreased by 2,239 employees or 31.6% in Fiscal 2014 to 4,842 employees, as compared to 7,081 employees in Fiscal 2013. The increase in cost was also due to higher pension charge by GBP 71 million (Rs.6,838 million), on account of change in actuarial assumptions, such as discount rate and inflation and a 7.5% increase in employee salary (4.5% last year).

 

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The employee cost at TDCV was Rs.5,771 million in Fiscal 2014, as compared to Rs.6,916 million in Fiscal 2013. In Fiscal 2013, TDCV recorded a provision of Rs.2,124 million, stemming from the lawsuit filed by the union employees demanding inclusion of some elements of non-ordinary salary and bonus as part of ordinary wages, which has been decided by the District Court against TDCV. TDCV has filed an appeal against the order which is still pending. On a comparable basis, the increase of Rs.979 million in Fiscal 2014 represents normal annual increments and currency translation of Rs.709 million.

For our India operations (Tata brand vehicles) the employee cost was Rs.33,672 million in Fiscal 2014, reflecting an increase of 2.5% or Rs.792 million. The permanent headcount decreased marginally by 0.5% as at March 31, 2014 to 38,434 employees, as compared to 38,627 employees as at March 31, 2013. To address the challenges posed by the business downturn, the Company has introduced an organization wide cost optimization program, and incurred Rs.535 million towards employee early separation scheme. Remaining increase mainly represented normal annual increments.

During Fiscal 2014, we have closed the manufacturing operations at Tata Hispano Motors Carrocera S.A. and accordingly paid EURO 12.4 million (Rs.1,006 million) as employee separation cost. The closure has been trigerred by continuous under performance mainly attributable to challenging market conditions in which Hispano operates.

Other Expenses: Other expenses increased by 29.7% to Rs.498,778 million in Fiscal 2014 from Rs.384,423 million in Fiscal 2013. This increase mainly reflects an effect of volumes at Jaguar Land Rover and currency translation of GBP to rupees of Rs.43,558 million pertaining to Jaguar Land Rover. As a percentage of total revenues, these expenses represented 21.3% in Fiscal 2014, as compared to 20.3% in Fiscal 2013. The major components of expenses are as follows:

 

     Year ended March 31,      Increase/
(Decrease)
 
     2014      2013     
     (Rs. in millions)  

Freight and transportation expenses

     75,439         55,930         19,509   

Works operation and other Expenses

     186,067         143,924         42,143   

Publicity

     81,425         66,556         14,869   

Allowance for trade and other receivables, and finance receivables

     26,830         10,570         16,260   

Warranty and product liability expenses

     57,957         42,029         15,928   

 

i) The increase in freight and transportation expenses corresponds to an increase in volumes at our Jaguar Land Rover operations, predominantly on account of increased China sales.

 

ii) Our works operation and other expenses represented 7.9% and 7.6% of total revenue in Fiscal 2014 and 2013, respectively. These mainly relate to volume related expenses at Jaguar Land Rover.

 

iii) Publicity expenses were 3.5% of our revenues in Fiscal 2014 (same as Fiscal 2013). In addition to routine product and brand campaigns, we incurred expenses relating to new product introduction campaigns, namely new Range Rover, new Range Rover Sport, Range Rover Evoque, Jaguar F-TYPE and smaller powertrain derivative XF and XJ and XF Sportbrake and the Prima LX series of trucks, Vista tech and Sumo Gold in India.

 

iv) The allowances for trade and other receivables, and finance receivables mainly relates to India operations. The increase mainly relates to provision for impairment of vehicle loans. Consistent deterioration in the economic environment in India severely affected fleet owners and transporters. Due to overcapacity and slowing industrial activity, freight rates stagnated. As a result, the increased diesel prices and other cost could not be fully recovered by the transporters. Both large and small fleet operators suffered due to lack of cargos, reduced trips and waiting periods. The situation was further accentuated on account of delays in payments by customers, which affected the cash flow and economics of small fleet operators who generally avail financing. Consequently, the rate of defaults increased during the year. The number of vehicles repossessed have also increased leading to pressure on downward realization of resale of these vehicles. As per the policy followed by us of recognizing allowances for finance receivables upon event of default, we have made provision of Rs.24,139 million in Fiscal 2014.

Further, based on our assessment of non-recoverability of overdues in trade and other receivables, we have recorded a provision of Rs.2,691 million in Fiscal 2014, an increase of Rs.1,549 million.

 

v) Warranty and product liability expenses represented 2.5% and 2.2% of our revenues in Fiscal 2014 and Fiscal 2013, respectively. The warranty expenses at Jaguar Land Rover represented 2.84% of the revenue as compared to 2.80% last year, whereas for Tata Motors Indian operations these represent 0.99% of revenue as compared to 0.78% last year. The increase cost for Tata Motors Indian operations represented increase in warranty period from two years to four years for certain M&HCV models, resulting in an increase in warranty accrual from Rs.116 million in Fiscal 2013 to Rs.438 million in Fiscal 2014. Please refer to Item 5.A “Critical Accounting Policies” of this annual report for further details.

 

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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, Jaguar F-Type future LCVs, World Truck and passenger car models. The expenditure capitalized in Fiscal 2014 was Rs.135,247 million as compared to Rs.101,935 million in Fiscal 2013. The increase inclues currency translation impact from GBP to rupees of Rs.13,374 million pertaining to Jaguar Land Rover.

Depreciation and Amortization: Our depreciation and amortization expenses increased by Rs.34,695 million or 45.8%, the breakdown of which is as follows:

 

     Fiscal 2014      Fiscal 2013  

Depreciation

     52,426         39,651   

Amortization

     58,037         36,117   

Total

     110,463         75,768   

The increase on account of currency translation from GBP to rupees is Rs.9,864 million pertaining to Jaguar Land Rover. The increase in depreciation expenses was on account of asset addition in Fiscal 2014 and plant and equipment and toolings (mainly towards capacity and new products) and the full effect of asset additions in the previous year. The amortization expense mainly relate to product development cost capitalized and new products introduced during Fiscal 2013 and Fiscal 2014, primarily, the new Range Rover, the new Range Rover Sport, Evoque and Jaguar F-TYPE and represented 2.5% and 1.9% of revenue for the Fiscal 2014 and Fiscal 2013, respectively.

Other income (net): There was a net gain of Rs.7,733 million in Fiscal 2014, as compared to Rs.12,099 million in Fiscal 2013, representing a decrease of 36.1% or Rs.4,366 million.

 

  i. In Fiscal 2013, we recorded a gain of Rs.3,933 million on account of the fair value of prepayment option to the holders of Senior Notes. During the Fiscal 2014, the Company refunded these notes before maturity and consequently recognized a loss of Rs.4,792 million towards reversal of previously recognized gain.

 

  ii. As compared to gain of Rs.802 million in Fiscal 2013, there was a loss on fair value of conversion option relating to convertible foreign currency notes of Rs.838 million in Fiscal 2014. The notes have been fully converted in Fiscal 2014.

 

  iii. In Fiscal 2014, there was a gain on a sale of available for sale investments of Rs.1,102 million as compared to loss of Rs.275 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 30.2% to Rs.53,095 million in Fiscal 2014, compared to Rs.40,792 million in Fiscal 2013. As a percentage of total revenues, interest expense represented 2.3% in Fiscal 2014 compared to 2.2% in Fiscal 2013. The interest expense (net) for Jaguar Land Rover was GBP 138 million (Rs. 13,272 million) in Fiscal 2014 as compared to GBP 65 million (Rs.5,608 million) in Fiscal 2013. The increase of Rs.12,303 million was due to prepayment of Senior Notes of GBP 53 million (Rs.5,097 million). This also includes a currency translation of Rs.2,317 million from GBP to rupees.

Foreign exchange (gain)/loss (net): We was a net foreign exchange gain of Rs.19,104 million in Fiscal 2014, compared to loss of Rs.15,775 million in Fiscal 2013. This was primarily attributable to Jaguar Land Rover

 

  i. Jaguar Land Rover recorded an exchange gain of Rs.25,244 million in Fiscal 2014 as compared to loss of Rs.12,680 million in Fiscal 2013. There was a gain of Rs.10,771 million on cash flow hedges in Fiscal 2014 as compared to a loss of Rs.5,047 million in Fiscal 2013. We incurred a net exchange gain on Senior Notes of Rs.8,367 million in Fiscal 2014, as compared to Rs.3,405 million in Fiscal 2013. The gain was mainly due to depreciation of USD as compared to GBP.

 

  ii. For India operations, due to depreciation of the Indian rupee against all major currencies, we incurred exchange losses. There was a net exchange loss of Rs.4,841 million in Fiscal 2014 as compared to Rs.5,467 million in Fiscal 2013, attributable to foreign currency denominated borrowings.

Impairment in respect of equity accounted investees: In Fiscal 2014, we recognized an impairment loss of Rs.8,034 million in respect of its investment in an associate. The associate is engaged in the business of manufacture and sale of construction equipment. The operation has been severely affected due to the current economic slowdown and increased competition from new entrants. The recoverable amount is determined based on value in use.

 

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Income Taxes: Our income tax expense was Rs.48,227 million in Fiscal 2014 as compared to Rs.39,239 million in Fiscal 2013, representing 26.9% as compared to 30.5% of net income before tax, respectively. The reasons for major reconciliation items are given below:

 

  i. Considering the statutory tax rates applicable for each company in the group, the effective tax rate has decreased from 23.7% in Fiscal 2013 to 19.9% in Fiscal 2014. The net increase in tax expense by Rs.5,280 million is represented by a gross increase in tax expense of Rs.11,970 million due to increase in income offset by decrease in statutory tax rate of Rs.6,690 million.

 

  ii. We recognized net credit of Rs.5,300 million representing reduction in statutory tax rates applicable to a subsidiary in the UK. We had recognized a net debit of Rs.1,548 million during Fiscal 2013 due to changes in tax rates in our Indian operations.

 

  iii. We recognized net credit of Rs.3,257 million in respect of utilization /credit of unrecognized tax losses, unabsorbed depreciation and other tax benefits as compared to Rs.518 million in Fiscal 2013.

 

  iv.