Tata Motors Limited. (TATAMOTORS) Q4 FY21 Earnings Call Transcript

Tata Motors Limited. (NSE:TATAMOTORS) Q4 FY21 earnings call dated May. 18, 2021.

Corporate Participants:

Prakash Pandey — General Manager Treasury and Investor Relations

P B Balaji — Group Chief Financial Officer

Adrian Mardell — Chief Financial Officer of Jaguar Land Rover

Girish Wagh — President- Commercial Vehicles Business Unit

Shailesh Chandra — President – Passenger Vehicles Business Unit

Thierry Bollore — Chief Executive Officer of Jaguar Land Rover

Guenter Butschek — Chief Executive Officer and Managing Director

Bennett Birgbauer — Treasurer of Jaguar Land Rover

Operator

Ladies and gentlemen, good day and welcome to the Tata Motors’ Q4 Earnings Conference Call. [Operator Instructions] I now hand the conference over to Mr. Prakash Pandey from Tata Motors. Thank you, and over to you, sir.

Prakash Pandey — General Manager Treasury and Investor Relations

Yeah. Thank you. Good evening everyone. Hope all of you and your family members are healthy and safe during these uncertain and unprecedented times. On behalf of Tata Motors, I warmly welcome you all for our Q4 FY21 Results Conference Call. Today, we have with us Mr. Guenter Butschek, MD and CEO, Tata Motors; Mr. Thierry Bollore, CEO, Jaguar Land Rover; Mr. Mr. P B Balaji, Group CFO, Tata Motors; Mr. Adrian Mardell, CFO, Jaguar Land Rover; Mr. Girish Wagh, President, Commercial Vehicles business; Mr. Shailesh Chandra, President, Passenger Vehicle and Electric Vehicle business; and my other colleagues from the Investor Relation teams. Like always, we will start the session with big overview of the financial and business performance from the management and then, followed by Q&A.

Over to you, Balaji.

P B Balaji — Group Chief Financial Officer

Thank you. Thanks, Prakash. Firstly, a warm welcome to all of you. Thanks for taking the time. As Prakash said earlier, I hope all of you are safe and sound. I intend to — the presentation has already been uploaded into the Investor portal and therefore, I’m presuming all of you had a chance to take a look at it and also have it in front of you. We will refer to the page numbers and move forward with these.

Can we have the next slide, please? This is the Safe Harbor statement. Moving to the next one. Yeah, an intense period of product actions as well as company actions that you saw in Jaguar Land Rover. Defender of course, we’re going to talk a lot about Defender today, winning the World Car Design of the Year and now almost 12 out of 13 are placed on electrified and you were there when the Reimagine strategy and the Refocus transformation was announced, and we’ll talk about that later as well. We will be concluding Charge in this quarter. We generated GBP6 billion of lifetime savings, one of the most successful projects in locomotive world. I’m very happy with that.

Next slide please. In Tata Motors, of course, we did see significant product interventions, post BS-VI, and at this point in time, what is really happening is customers aren’t experiencing the product and really giving us excellent feedback, which is now reflected in our market shares, particularly in M&HCV and ILCV. Tata Safari was — The Legend was Reborn. Of course, its strong response in the market. And PV has been a standout performer, which Shailesh is going to talk about even more.

And the cost saving target we had indicated, INR6000 crores for the year, we ended up at INR9,300 crores, a strong performance there as well. And the promoters have completed their funding, the warrants — the remaining outstanding warrants have been exercised.

Next Slide. From a performance perspective for the quarter, a strong all-round performance despite the pandemic, if you look at the full year. Full-year EBITDA of almost INR30,000 crores, but if I look at closer home into Q4, the EBIT numbers that you see of 7.3% is the highest rate we’d have seen in a lot many quarters. We ended the year with a strong cash flow for the quarter, as well as for the year, being a positive free cash flow. And overall EBITDA margins have picked up. And if you look at the full-year number, EBITDA has improved despite a decline in revenue or volume increase which tells you that the business is getting intrinsically more stronger and the implication of a strong business what does it do when revenues come through is seen in Q4. That’s how we’d like to see the business today.

Go forward. From a — the numbers are there to see, but call out the net automotive debt, we have called out the deleverage plan when we announced it in the AGM. Happy to report that for the current year, we are lower than what we were closing that of last year, and every quarter, we have been reducing our net debt level, and that is something which we are quite happy about.

Next slide. What are the three things that actually — which are a bit different to the rest of the floor, which is a traditional P&L analysis. First is JLR where we called out the Reimagine-led changes that we are doing to our strategy resulting in an one-time non-cash write-down of GBP0.95 billion and a restructuring cost of about GBP0.6 billion. And this will impact us in FY22, but even then we will deliver a breakeven cash flow, but this is an important pivot that we have done to the business and therefore, these write-downs that we have taken will actually help us from a strategy perspective to go fully into the electrification mode, and Thierry and Adrian are going to talk more about it. This will also give us a credit going forward in terms of lower D&A charge of GBP150 million per annum and also the headcount savings — we are looking at about 2,000-odd headcount, that will result in savings of close to about GBP100 million per annum, sorry. Despite these write-downs, the network continues to be strong at GBP5.3 billion, so that is the first one of the exceptional items.

In the case of TML PV, there is a sweet news where the strong performance of the business, it’s a significant improvement even well ahead of our own internal expectations and outlook remaining strong, thanks to the pandemic and our performance, both together. We have reversed the impairment that we have taken in the same period last year of INR1,200 crores. We also had a Onerous contract provision for volume from one of our vendors, that is also being reversed and therefore, this business is now well and truly performing to the extent that we want and of course, more to be achieved as well.

PV subsidization, we had the shareholders’ meeting as well as secured creditors’ meeting and got approval for that. We are awaiting the final NCLT approval, which is now scheduled on June 14, and we are hoping to get their approval from there, and promoters have already talked about it.

With this, let me hand it over to Adrian to quickly run us through the key highlights of JLR performance. Adrian, over to you.

Adrian Mardell — Chief Financial Officer of Jaguar Land Rover

Many thanks, Balaji. Good afternoon, evening to you all on the call. As the same format for us, exactly as Balaji said, first half was the weak half and we had a second half performance, particularly in Q4. Can everybody hear me? Particularly in Q4.

Thank you, the 7.5% you see there, EBIT in Q4 was mostly and overwhelmingly underlying performance, so really pleased with that. You see the PBT, GBP500 million and the big free cash flow as well, GBP729 million. Full-year results on the right, but you can see dramatic improvement to the previous year even though FY20 was impacted partially in quarter four, if you recall.

Next slide please. Okay. So these are the headlines below that. We will dwell into revenue details later in the presentation. Balaji has talked about the exceptional item, and we will go through the walks on cash flow as we normally do.

Next slide please. Many points I want to make on exceptional because I don’t want to repeat what Balaji said was look, our assessment at the end of the year was very close to the preliminary assessment we made on February 26, GBP1.5 billion and just to remind you, those products MLA made did not fit into the Reimagine strategy and they would not leapfrog competition, and we’re all about being the best of the best, not just competing. So that’s why we took the really difficult and emotional decision to cancel those programs. We are still working through the restructuring costs beyond to the headcount, 2,000 people and that’s mostly about getting the right positions and the right people into the organization with the right skill sets. That’s management grades, now more people with specialist skills, which is fundamental to success in this environment.

Next slide please. Okay. A busy one, but we wanted to show you several flavors of the retail data quarter four at the top, full year below. Look, you can see the highlights and study in your own time, but a dramatic quarter-over-quarter improvement on China, in part because Q4 FY20 of course, COVID in China first and therefore was impacted negatively, but nice year-over-year performance in North America as well, particularly in Q4. And the other regions are starting to build back. There were limited impact of course last year. They are starting now to build back with a huge order demand we have at this point in time, almost 100,000 customers waiting to drive our vehicles. So very, very healthy order bank going into quarter one.

Next slide please. And this is it by family. Don’t forget we talk a lot about health of sale, quality of sale, and we play in this backed by sales family. Range Rovers versus last year were a little bit higher. Obviously, China is a good piece of that. Take a look at the Defender data. Balaji said we would talk Defender a little bit, 17,000 units in Q4, our highest quarter so far. We’ve talked to you several times about 5,000 units a month. We have surpassed that already. Other datasets you to focus on this page, 62% of our vehicles were electrified in one form or the other, pure BEV to MHEV, so the pure ICE vehicle content is reducing quarter-by-quarter and that trend will continue, particularly now we brought out 21 model PHEV vehicles, that will continue going forward. More of our vehicles will be electrified going forward.

Next slide please. Okay. Defender, look, this is really dramatic. I talked about 100,000 orders overall for our families of cars, more than 22,000 orders now for the Defender family. You see the uptick here towards the right-hand side as our Defender 90 came on stream at the end of last year. And the solid line there, that is the retail data, 7,000 cars in March. So we talked about 5,000 a month. We have now started talking about 6,000 to 7,000 units a month as that supply comes on. World Car Design of the Year, you would have seen that. Last one we got announced was Women’s World Car of the Year. So this is definitely a vehicle that actually gets appeal across all the spectrums and all the genders and it’s a brilliant indication of what this organization can and does do. This is the best of the best and that’s what we aspire for.

Next slide please. Okay. So you talked to us a lot about share. So we’ve added this page this point. Few things to draw out, as shares growing quarter-over-quarter, but particularly growing stronger in those families, which we are focusing most on Range Rover and Defender, that’s health of sale, quality of sale we’re not competing on total units. We’re competing on overall profitability and this is shown I think perfectly by this page. Overall though, you can see in total, last year has grown from 4.4% at the start of the fiscal year to 6% at the end of the fiscal year, and again that’s mostly around that Defender family and the growth you there see in the Range Rover.

Next slide please. So our traditional walks on profitability. I’m just going to draw a few things here. This one is quarter four. Last year, of course, we recorded a big loss. Some of that was as a result of those COVID provisions, variable marketing provisions we put in place as the second-hand vehicle market collapsed at the end of that year and this year, the GBP534 million. Things to draw out, we talk about health of sale, quality of sale, you can see a huge increase in mix actually there within the volume and mix, almost GBP200 million within the quarter and dramatic data on variable marketing.

The other thing about health of sale is of course, you cannot oversupply to the marketplace. We haven’t been oversupplied and our available market has substantially improved because of that. Almost half of that last year number was as a result of the reserves we put in place, but I told you several times about VME, less than 7%. Our underlying number dropped to 4.9% in Q4 with the headline number at 4.4%, eliminating reserve adjustments. The other one I wanted to talk about and call out is warranty. Again, we’ve talked to you about this almost every quarter. We’ve been very transparent and very clear about what our intention is and what’s likely happened. You are seeing the data here right. 20 model year vehicles are substantially better than previous model years. We said that mature at the end of Q3 and into Q4, and we said our warranty as a proportion of gross vehicle revenue dropped below 4% towards 3.5%, slightly under that 3.4%. And then, I won’t repeat all the other pieces, but there was a big favorable year-on-year on exchange. Sterling depreciated last year, which meant our euro-denominated liabilities. Net dollar and euro-denominated debt was more expensive in sterling. That gave us bad news last year. The other way, sterling depreciated post-Brexit, again as we said, it would and that’s given us that optical improvement on revaluation, but great work by the Treasury team in terms of the hedging levels we’ve had both on commodities and on currencies, which of course helped as well.

Next slide please. Full-year performance, I’d write different things on this one. Volume significantly low year-over-year, 120,000 units, then GBP1.2 billion [Phonetic] of course, that mix improvement has partially offset that. You can see the full-year numbers for VME and for warranty. Wanted to draw at the engineering DNA here as we talk about this one a lot as well, and we did say to you the capitalized engineer would start to fall. As that programs mature and you can see here really for the first time, the amount of capitalization is lower than our amount of amortization. That means we do supplement in the balance sheet on these programs and you will see in the back of data substantially less capitalization, particularly over these last few quarters versus previous years and that trend will continue we believe and then the full-year exchange, which is the full-year evaluation of the items I mentioned early on revaluation on hedges and on commodities.

Next slide please. Okay. Cash, look at the middle box. Again, I’ve been asking you to look at the middle box for the last several quarters and see how dramatic our underlying cash position is, almost GBP1 billion generated. Investment now within that GBP2.5 billion range, more than GBP400 million in the quarter. And we did reverse that working capital losses of quarter three — quarter one, as we went through the year. So that was behind the GBP700 million cash flow in the quarter.

Next slide please. Investment, GBP2.5 billion was the guidance. Now, we said GBP600 million a quarter broadly. We came in a bit lower than that. Our guidance for next year is GBP2.5 billion. Also, I think it’s reasonable for you to assume with plus or minus GBP100 million over the next year depending on where those investments finally get deployed and crystallized, but we were lower than the target for this year, GBP2.5 billion stays in place going forward.

Next slide. Charge. Balaji said, we’ve now finished the program. We did exactly again what we committed to do, right. So this is becoming a theme from us. We make commitments and we deliver on those commitments. We said in April we would generate GBP2.5 billion this year and that would take the program up to GBP6 billion; we did, and it has in summary for the program over 2.5 years. We took GBP1 billion out of inventory. We took almost GBP3 billion out of investment, laterally measured on a year-over-year basis, not the notional star point, which we started off with and we took GBP2.1 billion out of several areas of cost — strategic cost, the staff hire program, all the things we’ve told you about previously. So again, we did what we said we were going to do. The program has closed, but the power of the program lives on through refocused, which has substantially expanded the scope of the program as well, more in later slides.

Next slide please. Okay. So I introduced this slide you at the Investor Day. I won’t repeat it all, like I did then, but this is quite dramatic what the program has done. We’ve effectively reset the investment on the structural cost base, eight years now. Go to your first column, breakeven volume is 425,000 units in FY14 with wholesale of 471,000 [Phonetic], significantly cash generative, but we invested and we brought more structure and more people in right through to the start of the Charge program in FY19. Breakeven cash position was 600,000 units at that point and even though in that year, we had wholesale number of the highest in our history, we lost substantial cash.

Charge started to bring that down pre-COVID at 500,000, obviously had a dramatic year and the year of COVID as you would expect artificially low, including some furlough money there, but the big point here is we now know we’ve restructured and we’ve rebalanced 400,000 units. So we’ve reset this organization eight years and that’s before the power of the Reimagine and the Refocus programs kick in fully.

Next slide. Okay. Say it in a different way. First three quarters before the program, GBP2.7 billion cash loss. Last three quarters of the program, GBP1.7 billion cash gain. Since Charge started, net cash gain is almost GBP8 billion. So that’s quite a dramatic turnaround as Balaji has mentioned.

Next slide. Okay. So those are the core finance slides. I’d quickly go on to the business update slides. This is the same as last time. Our electrified portfolio is now in the marketplace. Next slide. Okay. Reimagine strategy. Look, we took you through almost two hours’ worth of detail on February 26 on Reimagine. So I’m literally going to just take a few highlights. Reimagine is there fundamentally to fix the problems we’ve designed within this organization.

So the first thing clearly that comes out from Reimagine is we need to make Jaguar great again. The power of that brand deserves to be great and that is our intention to actually do that, will be a copy or nothing, upgrade into modern luxury, so an intent repositioning of this brand, with luxury materials as well as obviously, a luxury external design, all of that is in process. We made a lot of progress over the last few months. We will bring those details to you going forward. All BEV Jaguar will be from 2025, let me remind you. And Land Rover will have its full — first full all BEV from 2024 onwards. Our estimation is about 20% of our sales will be all BEV by 2026 with a commitment for tail-pipe zero by 2036. That’s the intention and the commitments we made on February 26. They will not change going forward.

Next slide please. So how we’re going to do it? Obviously, the first thing we’re going to do is consolidate our architecture, six architectures down Q3 and most importantly, two on Land Rover, one Jaguar. That will enable us to design those brand personalities, specific to those two brands. No compromise here. No compromise. So the freedom of the design and the engineering authority discreetly within those brands, that’s something that other organizations and other OEMs don’t do as well as we can do. This is a competitive advantage for us, and we are not going to give up that competitive advantage.

Increased collaboration, particularly with our group with charter announcements will be made on that forthcoming, not today but forthcoming. Very excited about the speed of consolidation and synergy within the broader empire and also working with external people collaborating to get the best. We want to be the best of the best, Therefore, we have to work with the best to enable and to actually do that, and please don’t underestimate many of those companies want to work with us.

We are a brilliant profile company for them to wish to work for as well. So we’re very excited about the collaborations we will be able to make in the foreseeable future. And again, when we’re ready to announce those, you will hear about it at that point in time, but we will also take on the other challenges we’ve created for ourselves, excess capacity. This is our production facilities. Obviously, we announced on February 26 our intention to consolidate our nameplates within facilities and also to repurpose the Castle Bromwich side after we finish building the current range of Jaguar vehicles there. So that’s what we intend to do, build under that modern luxury by design banner, that’s what you should judge us by.

Next slide please. Okay. Mechanism. How are we going to do it? That’s the Refocus program. Exactly as we told you before, six pillars, three enablers across all of those pillars. Next slide. Let me draw out some of it because obviously each time we told you, we need to build on it a little bit. I’m going to talk about one of the pillars that wasn’t a focus of Charge. This is pillar two. This is program delivery and this is where we really tie in the pillars — the item seven enabler, agile working. We’ve introduced some agile specialists. We’re bringing on agile people to add to our workforce. We’re rolling this out, particularly within the engineering fraternity. We’ve already started with hundreds of teams, and we will have thousands of people working in those scrums, Those bring empowered to fix the problems that we have over the course of the next six months to nine months.

What do we expect? We expect to significantly speed up our time to market. You can see there what we are actually committing to a 40% improvement, and we also expect to improve customer satisfaction, why? Because the input into the engineers and designers are coming from several different sources and to the individual groups and obviously, the engagement of those workforce and the speeding up will actually improve the quality of the engineered solution. And as a result of which, we will spend less. Less time means less; less rework means less; less iteration means less spend. So we expect a 30% reduction in spend, which of course will also help deliver those investment targets.

The center one, customer market performance. We talk to you in some detail about this two years ago, particularly to the US market, but we’ve significantly scaled this now under that in digital side of refocus where we brought our analytics team and our robotics teams together with data solutions the problems we have in the marketplace. We’ve also scaled our intention here. So two years ago, I talked about national sales company work. This is working directly with the dealers and you can see there, again the commitments that we’re making through that analytic solutions and making sure we’re providing the right task to the right market at the right time with the right specifications. They sell quicker with less marketing support around that we’ve already proven this out. This is scaling of those ideas, very excited about pillar five and everything that is an embedded elsewhere from charge goes into pillar nine. So the 2,000 people coming out of the organization was the first decision we made, but we will continue our work obviously in terms of real estate consolidation post-COVID and a lot of the other side in digital, the robotics team are starting to help our teams become more efficient, taking administrative roles out replacing with robots.

So very, very excited about the scaling up of the program in terms of Refocus and a fast start here. We’ve got the momentum of all the whole Charge program into Refocus, which is why we are committing to GBP1 billion value in FY22 of this program.

Next slide. Still problems out there, of course. None of us will rest until the planet is vaccinated against COVID. We know that. The speed to electrification is enhancing. Therefore, we need to make sure that we speed up as well, pillar two, agile is part of that and of course, there are supply concerns, particularly as a result of the semiconductor post COVID and also the fire in Japan, which are the OEMs I have told you about. We know we’re not immune to them also. But I didn’t want to talk about the first half of FY22. We will cover that in terms of our Q&A. From a Q4 perspective, we manage these challenges quite excellently within our results, as you would have seen and our intention is to manage and make sure we go forward as well. Next slide.

Next slide please. Okay. Outlook, very similar to what we told you on February 26. Also revenue will be bigger this year than last year. So in FY22, we are already seeing that in the first quarter of course, despite the headwinds, the challenges, the supply constraints, we’re reconfirming 4% or better EBIT margin for this year. We are reconfirming investment GBP2.5 billion and we are also reconfirming cash positive or better than breakeven is just referenced here despite the monies will need to pay on restructuring the GBP500-and-some million, all of that will improve through FY24 because our underlying business is stronger than FY22. It’s those challenges, which will hold us back and the momentum of that transformation program will clearly build over the next several quarters.

And we’ve got some superb product offerings MLA high, Range Rover, Range Rover Sport, Defender 130 coming at us between those two periods as well. So we’re very, very confident to be and how to build not only our EBIT, but reduce and eliminate our debt. And I’ll remind you in FY26, our guidance, EBIT margin is 10% or better, not up to 10%, 10% or better and that’s what we intend to do.

I think I’m back to you, Balaji.

P B Balaji — Group Chief Financial Officer

Thanks, Adrian. Our next slide please. Talking about Tata Motors standalone numbers, you’ve already seen. Call out I would make here is the spread between EBITDA and EBIT starting to narrow, as the revenues start picking up, but on an overall year despite the pandemic grew 2% with revenues up 7% and EBITDA margin improving by almost 380 bps over last year. So that’s a good place to be. And the profit before tax before exceptional items that is of course we talked about the PV impairment reversal in the exceptional item, but the spread back this quarter was for breakeven PBT. Full year, of course, impacted by first quarter and the second quarter we saw. Free cash flow of course strong for the year, third quarter in a row and full year also ended on a positive basis as we had guided earlier.

Next slide please. Same highlights. Maybe, I’ll just pick up one or two items here. I think — the question on CV, if I look at the recovery starting to move from M&HCV and ILCV. So it’s not, those things are starting to fire well with higher demand from infra. We are also seeing percentage of M&HCV and our overall portfolio also starting to increase. PV, of course, this is the higher sales that we saw in the last 34 quarters, doing extremely well. EV growing at 215%, so it’s a whopping growth that we’re seeing on the EV side.

EBITDA is the highest in the last eight quarters and CV EBITDA within touching distance of the double-digit that we talked about in the guidance and CV EBITDA at 4.9%, well ahead of the breakeven that we indicated and absolute EBITDA highest in the last 10 years. So overall domestic business comes through well across all the lines.

Next slide please. To call out here, I think every line with volume mix realization starting to go well. The one that’s really applying the ointments here is variable cost coming from inflation on commodities that we are seeing and that is of course going to be an issue as we go into Q1 as well, and that coupled with lockdown, we will talk a little bit towards the end on that front. Our fixed cost control continues to be tight, and that’s the reason we see a benefit coming as volumes picking up. And overall PBT margin at 3% for the quarter is something that we are quite satisfied with given the conditions.

Next slide. Similar to JLRs, watch the central box where I think cash profit after-tax, well ahead of investments and even on a full-year basis, so the decision to actually cut back on investment proven right and at a same time, we are not being pedantic about it. We did dial up the investment, particularly in PV, as we started seeing growth comes through. As far as working capital changes are concerned, most of it from a base perspective. We are reducing our inventory days. We are reducing our better days, and we are reducing our critical days. So combination of that despite that we are starting to see working capital negative continue and the growth is coming through. You’re seeing this number really stew cash. And hygiene point here, as Q1 with the kind of lockdowns that we are seeing, this will unravel for a while until growth comes back again. So that is just the nature of the game that we are currently on to.

Next slide. Investments. We have already seen. We don’t want to spend more time on this other than to say that we are managing our investment quite prudently in current conditions focused on products and technologies.

Next one. This is the INR6,000 crore target that we had given ourselves to deliver and against that, we have delivered INR9,300 crores. You will notice on the investment line, we did not meet the target because we diverted that money for unlocking growth, which is what you’re seeing on the PV side and on the working capital side, of course, good number there. Overall market shares — fine, don’t change, go back.

Overall market shares have been sequentially improving as the year progressed, and we did end the quarter with almost 47% share, which on a YTD basis, lands at 42.4%. Draw your attention to the M&HCV market share improvement over the last four years, so we have been consistently increasing that share and almost 400 bps added over the last few years. ILCV also continued to increase its market share momentum as it built forward. Real call-out will be on small commercial vehicles, where I think they have a task on hand. We did end the quarter strong in terms of pickup in number. Sequentially, there has been improvement, but clearly, that is the number that is not acceptable to us and we need to ensure that we work on that and deliver against it. But since I wouldn’t speak too much about where the salience was completely required, so very little to talk about.

And this overall number actually got impacted by the small commercial vehicle salience disproportionately increasing the first half of the year and therefore, that is what you are seeing as numbers. No excuses. It is just the nature of the game and therefore, we need to do a better job of picking up the small commercial vehicle share, which we are committed to.

Next slide. Financials. Commercial vehicles, clearly the revenue number is going at 90% for the quarter, even on a sequential basis, the numbers starting to increase is a good news. EBITDA at 9.1%, we talked about and the gap between EBITDA and EBIT starting to narrow. Overall on a full-year basis, the EBIT was breakeven despite the mayhem that was there in the first half of the year as we’ve seen those numbers there.

Let me hand it over to Girish in terms of how we see the current quarter and what has happened in the last quarter. Girish over to you. Next slide please.

Girish Wagh — President- Commercial Vehicles Business Unit

Thanks, Balaji. So it is summarized the key points in last quarter. So I think most of the end-use sectors showed a strong recovery, of course prior to the onset of the second wave of COVID. I think our BS-VI product superiority and value-added services continue to be well received by the customers and as a result, not only did we see sequential market share growth, but also our net promoter score increased for third year consecutively and has now moved from almost 65 to 68. So at a high level and continues to grow.

We also did well in the non-vehicle business, so we were able to improve our spare parts penetration by almost 500 basis points during the year, which also therefore increased its contribution to the revenue. We also increased penetration of Fleet Edge, our connected truck platform and I think we have now a penetration of upwards of 90% in medium and heavy trucks. So those were the highlights and of course, we were able to reduce the EBIT breakeven by 25% during the year gone by. Coming to the current quarter, of course, I think we are now challenged with the second wave of COVID and there, we are focusing on ensuring the dealer health. So, we have provided support to the dealers through various initiatives, especially in the area of liquidity, so ensuring that the teams have settled.

We are also giving wherever required support on interest on the stock to provide a P&L support. We are supplying vehicles to those geographies and segments where the demand is not yet impacted much and continue to monitor our pipeline on a daily basis. In terms of customer connect, that continues to be on a digital basis, completely, so all virtual engagement with the customers across all the segments. We’ve also formulated new set of standard operating procedures and communicated those to all the channel partners

In terms of demand fulfillment, so we are aligning our production to retail, so whatever has been the retail and one has seen a drop in the retail and if you see some of the highlights, I think one has seen drop in diesel consumption, one has seen a drop in the fast tags, one has also seen drop in the Vahan registration of the vehicles. So overall I think the market has dipped, and we have immediately aligned our production to retail starting from the month of April, second fortnight and we are doing so even in this month. And even this month, I think the production is lower than that of April. So we are ensuring that we are able to break the chain effectively in all the plants by having sufficient shutdowns and even on the days we are working, we are having just 50% of the manpower.

We are, of course, looking at fulfilling the spare parts and international business orders, which continue to be good, but of course, in some of our international markets also, there have been COVID-driven lockdowns. We’ve started maintaining strategic inventory of critical parts, I mean especially electronic items, which have been in shortfall throughout the last year and before looking at those and we also have formed a task force, which is monitoring the vendors — vendor side, operation and health and also their operational requirements.

In terms of cost reduction and cash conservation, we carried forward the learnings from the business continuity plan that we had last year. Direct material cost reductions are being expedited and pulled towards Q1. We have deferred capex. As regards our earlier budget or plan, we deferred by almost 30%. All the fixed expense reduction that we had done during the previous year has been put into action again, so that we are able to sustain all the benefits. And the capex — capital allocation has been revised for products with a large part of it now going for BS-VI Phase 2 programs. I think that’s what we have done. And we align ourselves continuously with the changing market environment through the business agility plan.

Back to you, Balaji.

P B Balaji — Group Chief Financial Officer

Thanks a lot, Girish. Moving on to passenger vehicles. Next slide please. Two call-outs here. Draw your attention to the growth numbers. Industry declined 2%. We grew by 69% in Tata Motors PV and the EV business within that grew 218%. So significant shift in numbers there. Market share of 8.2% we talked about. Also draw your attention to the penetration of EVs in our portfolio, which is 0.2%, is now up to 2% and likely to increase further as we go forward. So therefore, we do see significant change happening in the consumer segment, and we are very clear at Tata Motors we will lead the PV disruption as far as India is concerned.

Next slide please. Financials. Delighted to see the EBITDA numbers consistently improving in the PV business as volumes are starting to come through. Mix is improving, and EBIT margins starting to come down as operating leverage improve rather as operating leverage kicks in. We believe this trend is not fundamental coming from the fact that the consumer is clearly looking to break free, and this is a shift towards personal mobility that we’re seeing. And within that, our New Forever portfolio is really firing all cylinders. So the consistency in growth that you’re seeing is likely to continue. What is happening in Q1 this year is a different discussion, which we will come to in a short while. So I will ask Shailesh to talk about it.

Shailesh, over to you.

Shailesh Chandra — President – Passenger Vehicles Business Unit

Thank you, Balaji. So second wave of COVID has, of course, adversely impacted both demand and supply side, but the good thing for PV business is that we started the quarter with a very low inventory and a very strong booking pipeline for ourselves. And therefore, while quarter one looks a bit on the decline, we have therefore articulated and operationalized the business agility plan to navigate effectively in this uncertain period, and actions have been developed in three areas which is on-demand creation, fulfillment as well as profitability.

On demand creation, you’ve seen that because of progressive lockdown in the country since middle of April, it has really impacted demand side. While in April, the retail and bookings dropped in the range of maybe 40% to 45%, but in May, it is trending at a much steeper drop with only I would say, less than 20% of showrooms which are operational. And therefore, demand is expected to be significantly subdued in the quarter one.

As far as actions are concerned on the demand creation side, we are closely tracking the regional and segmental changes, if any on the demand side and keeping our off-taken production completely aligned to that. We are using digital given in the lockdown situation, this is what had helped us last year also, leveraging it through platforms like Click to Drive and hyper local marketing initiatives, ensure that even in the lockdown period, we are able to keep getting the flow of the bookings.

And since we have less than 10 days of inventory at the start of the quarter and this was due to demand being more than our supply rate and therefore, we are using this month to increase the stock in the channel and bring down the waiting period for our customers, which were pretty high and therefore, this is an opportunity for us.

Sorry, on the demand side. Sorry, on the demand fulfillment side, the supply side got impacted primarily due to the lockdown in all the major auto clusters, especially in Maharashtra I would say and latest one are Nashik and Kolhapur cluster, which has badly got impacted. And most of the suppliers are operating at 50% manpower or less and also semiconductor supply has further deteriorated, is what we have seen in this quarter. While it was a concern in Q4 also, but this quarter, it has further deteriorated and a matter of concern for the coming months. And therefore, we are trying to maximize production to fulfill the demand and build strategic inventory. So we are continuing with the production in all our three plants. And we had taken shutdown for the first four, five days mainly enhancing our capacity further for supporting the growth that we had planned for this year and also certain preventative maintenance actions.

On the profitability front, it’s going to be impacted by the lower operating leverage and commodity inflation that we assume and therefore, we have initiated tight controls on fixed cost and also accelerated the structural cost reduction effort, which is now pretty much institutionalized and on ongoing initiatives for us. And we have also taken price increase, which is in line with the industry, but we are the only players who have also given the price protection for our customers and that basically has helped us in avoiding any cancellations to the strong booking pipeline that we have.

So that’s from my side. Balaji, back to you.

P B Balaji — Group Chief Financial Officer

Thanks, Shailesh. Next slide please. Quick peek into Tata Motors Finance. They ended the year pretty strong. Market share, 33%; PBT of INR266 crores, significantly better than last year; and return on equity, which is the metric that they’re going after of 9.2%. GNPA is also below 5% and NNPA is below 4%. The key one is the cost/income ratio has been tightly controlled, at the same time focus on collections where it is at almost 105% in March, but that’s — I would — really would like to draw your attention to the last two lines out there where next few months we do expect to see a challenge. And this time, it is different because it’s not just about the transportation business that is getting affected. The collection infrastructure in terms of people who are going out there and getting collecting, we have almost 900 people who have been impacted by COVID who are people who have feet on street. And unfortunately, we’ve lost six of them in Tata Motors Finance and therefore, we are wanting to be very careful with respect to our people and that will definitely have impact on collection efficiencies.

We’re already seeing it come down quite significantly to almost 80% level last month, and therefore, it’s not an easy time out there in the field. And we are working closely with our teams, our customers, our people to ensure that we alleviate the stress. But it is fair to expect that Q1 is going to be a significant pain, and we are having — representing to all the powers that we do finds ways to alleviate the stress. So this is going to be a critical quarter for all of us from that perspective.

Last slide. Outlook, I think you can see it, but Q1 FY22 will be adversely impacted by lockdown. You heard Adrian talk, Girish, Shailesh, and myself talk, clearly impacted by lockdown, semiconductor shortage. We have a couple of those that’s quite full. So a strong end to the year is something that is we were very happy with, but then of course, Q1, we need to deal with the stress. But we will come through strong, because fundamentals of the business as you have seen are very strong. And therefore, this makes us even more resilient in terms of performance, and we will get there. And we are not changing any of our plans in JLR or in TML because what we need now is agility and therefore, that is what we are focused on.

So with this, let me stop here and hand it back to you guys for questions that you may have.

Questions and Answers:

Prakash Pandey — General Manager Treasury and Investor Relations

Thank you, Balaji. We will now start the Q&A session. We’ll wait for a minute.

P B Balaji — Group Chief Financial Officer

Would you want to quickly explain the Prakash process?

Prakash Pandey — General Manager Treasury and Investor Relations

Yeah, sure Balaji. [Operator Instructions] We will wait for a moment, while the queue assembles.

P B Balaji — Group Chief Financial Officer

Okay, let’s get started. Right. First question is from Ruchit Mehta, SBI Mutual Fund. Adrian, this for you. For JLR, the Q4 implied ASP seems to be lower by GBP5,000 quarter-on-quarter. Could you walk us through the cost for the same?

Adrian Mardell — Chief Financial Officer of Jaguar Land Rover

Yeah, okay. So let me go back to a couple of the points I’ve made in previous presentations. Different markets have different peak periods, different times of the year. Quarter three actually, that’s the peak selling period for China and therefore, there was a disproportionate value within our China business in Q3 and don’t forget that means SUV-4 an SUV-5 vehicles, so the highest transacting price vehicles that we sell.

Q4 is different. Q4 has a peak selling period in the UK and not such a peak selling period in China. And of course, UK is about SUV-2 and SUV-3 vehicles lower transacting prices, lower gross vehicle revenue, and lower margins as well. So you really need to start to look in plots where our peak sales periods are for our peak regions, which will give you a heads-up that our average selling price in Q3, unless there’s something extreme happening, will always be higher in Q4.

P B Balaji — Group Chief Financial Officer

Thank you. Thanks, Adrian. Second is from Prateek Poddar and I’ll take this question. Tata Motors has been very clear that the equity fund raise would be the last resort despite such a good performance on both JLR and TML standalone for the rationale or thinking for a fundraise.

Prateek, you’re absolutely right. It remains the last option. There is no change in that particular front and also just to add there, the Board has deferred the decision to a subsequent Board meeting. And the reason we had a medium coming up and from a flexibility perspective, we want to keep all the options open. And that is why we have not been clear in terms of what are instruments that we will raise and how much we will raise, and that was something that was part of the discussions and therefore, the Board has decided we will defer it to a later point in time given the performance that we have right here.

And at the same time, we shouldn’t forget that we are in the midst of COVID. There are a fair number of challenges that we have outlined and the reason we wanted to keep our options open was this, because it’s an AGM coming up and therefore, those enabling resolution, you can notice — if you read the notice carefully, you would specifically put it as enabling resolution and that then gives us a good one year of not having to go back to the shareholders, but that is of course not subsequently from the Board, we have decided to defer it. So therefore, that’s the background thinking to it.

Next question is from Yogesh Aggarwal, HSBC. JLR volume growth guidance of better than FY21 seems very conservative considering the base effect in FY21, can you please provide more flavor? Would it be a 20%-plus kind of a growth?

Adrian Mardell — Chief Financial Officer of Jaguar Land Rover

So you’re absolutely right. It is very conservative and the answer is yes. It will be better than 20% higher than last year.

P B Balaji — Group Chief Financial Officer

Okay. Kapil Singh, Nomura. On JLR guidance of FY22 forecast, the company has been reporting JLR EBIT margin of around 7% for the last two quarters, plus you will get the benefit of nearly 100 bps from some restructuring cost taken in FY21. So why is the guidance so low at 4% plus EBIT margin? What are the key factors that can take the margins down to 4%? Was there any reversal in residual values for JLR and maybe that’s a separate question, maybe we will answer this one first, Adrian and the next piece.

Adrian Mardell — Chief Financial Officer of Jaguar Land Rover

Yes, sure. Yeah. So let me take you back to half to FY21 to answer the piece. Let me remind you what we’ve told you so far. We told you Q4 underlying is about 7%. Q4 is always our best quarter. You know that our volumes were 123,000 units so it’s closer to an indicator of a normal quarter but Q4 is normally stronger. Q3, don’t forget well I told you we were 6.7% but we had a lot of reversals of residual values in VME in Q3 and the result of that underlying was a couple of points lower.

So I think, it’s reasonable for you to based of what we’ve already told you, but that our second half performance was close to about 6% so why 4% plus. While a number of factors coming — going forward we don’t yet know the level on the scale of impact from the semiconductor challenges that the whole industry faces other OEMs I have told you specific numbers.

We’re not going to do that and the reason why we’re not going to do that is because we haven’t given up on it. Right, we are working tirelessly to enhance our position every week, every day, every week and every month. So don’t actually know where we’ll end up from a volume perspective, in quarter one while I do know is we optimize everything we possibly can. Last year, in quarter one, we lost 13.5% EBIT margin.

It could be EBIT loss in this quarter as well, but be very, very small if we are, so it will impact the full year. Here is a key point here, right Q1 will impact the full year, however, depending on the speed and the balance of the industry response the semiconductor build I don’t know how much of that, we would then get back in Q2, Q3 and Q4.

Well I do know is if we can overcome those challenges, we will be stronger than the 4% that’s why we said higher. So it’s speed of recovery for those challenges and whether we can catch back units of the two unknowns to date and I really don’t want to mislead you. So given your baseline of 4% or better and depending on how the industry can respond to semiconductors the better will get bigger. That’s all Balaji.

P B Balaji — Group Chief Financial Officer

Thanks, Adrian. Second question for you, again was there any reversal in residual for JLR in USA in Q4, do you see more coming through in Q1?

Adrian Mardell — Chief Financial Officer of Jaguar Land Rover

So we did reverse some of the residual values in the US survey. We have now made all of those reversals actually within quarter four so no more to come; however, we did book some reserves in Germany. So the net reversal in Q4 was very low, about 0.2% that’s all so most of it is done and we think also with the changes we made in Germany we’ve contained in trap those losses as well.

So overwhelmingly we do not expect VME to be driven by residual value improvements reductions going forward while we do expect in this lean market of under-supply and significant demand is that underlying VME to be better than we’ve actually previously communicated that was 6% or lower so we do expect that to continue, particularly with supply shortages. It will be close to 5% of the first half is my estimate.

P B Balaji — Group Chief Financial Officer

Yes, thanks. Again question back to you. Again, this is from Satyam Thakur, Credit Suisse. Could you help understand the moving parts behind the gross margins of JLR sequentially quarter-on-quarter, fourth quarter versus the third quarter. How much was the impact of higher raw material costs and what all went into offsetting that, if you could quantify please?

Adrian Mardell — Chief Financial Officer of Jaguar Land Rover

Yeah. So I’d refer to the response to the first question actually overwhelming issue is the mix of the vehicles we sell, SUV 45 Q3, SUV 23 quarter four, so even though volume would have increased we would naturally expect gross margin Q4 — quarter four over quarter three for those reasons, mix of vehicles and regional strength, we know that commodity prices are increasing, as it not yet having a significant impact on our numbers on our margins, in fact Q4 from an overall material cost perspective was lower as a proportion of gross vehicle revenue than quarter three. So limited to date, we have a hedging strategy in place, it will increasingly hedge as we go forward and those hedges roll off over the course of the next six to 12 months if it becomes a particular impact on the data we’ll call out at that point in time not in the data today.

P B Balaji — Group Chief Financial Officer

Thank you. The next one is from Jinesh Gandhi, Motilal Oswal questions for India [Indecipherable], can you discuss your fundraising plan, of course, debt, was it including equity considering the sustained sharp improvement in both JLR in India, why do we need any fundraising, that’s the first question.

I think Jinesh I have answered that. It was an enabling provision that we took to be safe in this environment, COVID ways. So there is too many things coming at us, so we want to be sure that we have the options with us. It was an enabling provision and at this point, the Board has deferred it. Obviously, the strong performance that has helped there and we will revisit it if required, so that’s the way we’re looking at it. Of the INR9,300 crores cash saving, how much of the actual cost savings?

It’s we have referred to it in slide 37 Jinesh, cost and profits of INR2,200 crores all of that. How much of this is sustainable? We are seeing it sustainable because take Girish has mentioned on breakeven reduction, we were down by almost 25% for the commercial vehicles, passenger vehicles EBITDA improvement also includes savings that are coming through here, but do keep in mind, going forward, we need to take a look at this, vis-a-vis the commodity inflation that’s coming at us, these become the source of money to manage that inflation that is coming at us.

Can you through light on the product pipeline post Hornbill. What new models can we expect post Hornbill?

Clearly, that’s something that we wouldn’t want to discuss and the right forum for that will be the Auto Expo, once we have made up our mind as to what we are going to show out there. So we will definitely share it with you.

Next question is from Stephanie Vincent from JPMorgan. How much of the semiconductor and raw materials issues respectively hitting the FY22 guidance? Adrian would you want to pick that?

Adrian Mardell — Chief Financial Officer of Jaguar Land Rover

Yes, I think I have actually already Balaji within my 4% or better question which I covered semiconductors and within the margin question which I covered the raw material. So nothing to add to previous questions.

P B Balaji — Group Chief Financial Officer

Okay. Second is from, the next one is from Basudeb Banerjee, AMBIT Capital.

Why it is saying led by one-off restructuring cost of GBP500 million to GBP550 million JLR will be [Indecipherable] neutral, aren’t you confident of maintaining operating cash flows and capex of GBP2.5 billion at last couple of quarter levels. The next one is on India, so Adrian would you want to pick this one up?

Adrian Mardell — Chief Financial Officer of Jaguar Land Rover

Yes, I’ll take that one up. So we are actually confident but unless I say this and I have to give you a difference set of numbers right. So the bottom line is, our commitment is to reduce net debt and we won’t go backwards. We will have a challenging quarter one for the reasons already discussed, but we’ll get that back over the balance of the year and net debt was GBP1.9 billion at the end of March, but we expect at the end of March next year to be slightly lower, but for the moment our guidance with the uncertainties we’ve already mentioned is maintained as cash flow positive or better than breakeven despite the GBP500 some million restructuring costs, you take that away. It would have been GBP500 million plus cash flow.

P B Balaji — Group Chief Financial Officer

The question is for India. India capex outlook for FY22. It seems higher than 2018 as stated earlier. Plan for the year is more like INR3,000 crores to INR3,500 crores and INR1,800 crore for FY21 in the midst of a pandemic where we are fighting a business continuity plan. Haven’t seen three quarters of performance. We are very clearly seeing that once the pandemic is out, the lockdowns are out. There is definitely a demand, the resurgence that happens, and therefore at this time it’s not a business continuity plan. It is the business agility plan and therefore we want to be as flexible as we can. Obviously if situation dramatically alters then we will not hesitate to go back to the drawing board on this, but at this point in time, we see the current issues are temporary, and therefore we intend to generate positive cash flows, despite those capex investment there and they are going towards products and technologies which are going to aid growth.

So we will not be pedantic about putting a number out there. We are watching it and moving it dynamically in line with demand out there. That’s how we see it.

The next question is from Rakesh Kumar, BNP Paribas. Is profitability continues to improve JLR, is there a possibility that we could increase our capex plan to accelerate the reimagined strategy timelines and what share of sales comes from lease sales in US and Europe and what are the peak share of leases we have seen historically? Adrian?

Adrian Mardell — Chief Financial Officer of Jaguar Land Rover

Okay. So my answer the first one is unlikely. We’ve got a real clear plan, we’re setting out, right we’re making sure that every element of that plan is fundamental to the success of this organization. We don’t actually think we’ve missed anything. Throwing money at this doesn’t necessarily speed you up actually, so the agile approach the scrums, the sprints, the impairment, making sure people are responsible to fixing things first, that will speed us up and we’ve made a commitment to actually that overall in time, we will be 40% faster than we are today.

That’s a huge improvement, a huge commitment, and that’s what we maintain. At the point in time as we go forward, as we eliminate our debt, just as the Investor Day as we eliminate debt and then decide what we wish to do with the cash flow positions TML friends, at Tata Sons friends, and our Board will discuss what we wish to do but the current plan stands the investment guidance stands as well.

P B Balaji — Group Chief Financial Officer

Lease sales Adrian what share of lease sales come from lease sales in US and Europe and what are the picture?

Adrian Mardell — Chief Financial Officer of Jaguar Land Rover

Yes. Well, again we’re overwhelmingly consistent with the rest of the marketplace, so US is our highest lease market as you would know, followed by UK, and markets in Europe mostly Germany. I do have some data in front of me which suggest it’s about 80% in North America. Well, that’s consistent with the marketplace.

P B Balaji — Group Chief Financial Officer

Thanks next one is from Ronak Sarda from Systematix.

Let’s take the JLRs piece first and I’ll do the PVPs later. For JLRs the lower D&A and employee benefits start reflecting from Q1. We have in a way, gone back to the pre-Jag XE phase. Should we expect JLRs will focus mainly on profitable model. Second question. And the last one on JLR that is the easy one. I’ll pick it up. For JLR can we have an EBIT waterfall instead of a PBT. You already have that in the slides, the bottom line has that. So you can use that in case you need more clarification do reach out to us.

Back to you, Adrian for the first two pieces.

Adrian Mardell — Chief Financial Officer of Jaguar Land Rover

Yes. Okay. So let me take D&A first of all, okay. D&A over the next few quarters will be similar to the second half last year. Don’t forget the MLA mid vehicles were not available to be introduced in the first half of this year. At the point we would have introduced them 12 months to 18 months’ time that’s when the reduction in the D&A would have kicked in of course. D&A will next actually change when we introduced our new models, Range Rover, and Range Rover Sport in 12 months to 18 months’ time.

Employee benefits as we release those 2,000 people over the course of the next three months to six months. And yes, the cost of people will actually start to fall as well GBP100 million a year, we believe, but in a particular quarter that filters down to GBP20 million or GBP25 million. So I don’t anticipate that to dramatically impact the in-quarter data you will see.

P B Balaji — Group Chief Financial Officer

Then on, I think the profitable, lot of these spot agreement has been explicitly called out that we are looking at profitable growth here. And that’s how it will be done. So no change in strategy there.

Then on PV impairment. Yes, these are non-cash cost. The question is, are these non-cash cost versus non-cash. Absolutely, yes, they are.

Moving to the next slide — next topic Amyn Pirani CLSA. Given that the first Land Rover BEV will come in 2024. Do you think it may pose a risk in model such as Evoque and Discovery Sport.

Their competition is already in the process of launching BEV.

Adrian Mardell — Chief Financial Officer of Jaguar Land Rover

Look, we have great Evoque and a great Discovery sport under MLA platform shortly afterwards. So, if it were to the time to new vehicle delivery is quite short. So, that wouldn’t be a concern for us.

P B Balaji — Group Chief Financial Officer

Okay. Again on JLR’s this from Jinesh, once again Motilal. JLR realization declined sharply quarter-on-quarter by 9%. What are the key reason behind it. I think we have already explained it extensively in the previous question there maybe we will take it as given. Order book of 100k units for JLR. Can you give some flavor on which models region and make up of this order book. Is this due to supply side impact. Are we done with write-offs to streamline the new normal and the business. Finally, one effective tax rate question as well for FY22.

Adrian Mardell — Chief Financial Officer of Jaguar Land Rover

Okay. Let me, take them. As you’ve some of the order book 100,000 units of late has been growing about 2,000 units a month, the phenomenon in that business is that most of those ordering process happening in UK and Europe.

And that’s where 60% of the order book is less in China and less in North America, that’s just a buying phenomena and the logistics phenomena right. Vehicles have to be there in place because of the pipeline to get them there is so long.

So mostly UK and Europe, particular emphasis on PHEV vehicles, they have had a dramatic impact in the marketplace. Some of those vehicles in some markets in Europe of up to 12-month waiting list for, so clearly those customers are going to have to be super patient before us.

So ultimately, yes, the answer is a result of the supply side, and as we work through some of those supply issues, let me just referenced for the moments, semiconductors but there also PHEV issues, then we would expect those order books to actually start to normalize in six, nine or 12 months’ time.

We are dealing with write-offs to streamline the new norm of the business. We believe so. We don’t have anything left that we’re aware of, right. We really think we’ve had a strong six months review of what our strategy is, and we think we’ve communicated that to you and we think we’ve actually made the adjustments we need to make and as you would know, our external auditors have been working alongside us for three months and they agree with us. So, I don’t expect any additional tests for any of the elements that we’ve actually communicated as a part of Reimagine.

To-date, effective tax rate expected in FY22, obviously the tax rate has been pretty damn weird over the last 12 months or so, because the losses are non-allowance of deferred tax assets. As we become more profitable, obviously that deferred tax position will change and we’ll be left with a couple of phenomenon, we’ll be left with a phenomenon called overseas, we expect obviously, the tax rate will now become profitable overseas. So we will be paying tax as you would have seen this time around. And we would expect the deferred tax asset to start to normalize the effective tax rate also. I suspect that will happen later this year, as our profitability grows in H2.

P B Balaji — Group Chief Financial Officer

Got it. So next one from Aditya Makharia from HDFC Securities. Congrats on the market share gains at Land Rover. What is the impact that Tesla is having on the luxury market, as their volumes are now 500k. Can you give some color on the same?

Thierry Bollore — Chief Executive Officer of Jaguar Land Rover

Maybe I can take this one Balaji. It’s Thierry speaking. I think that, even if we don’t talk very often by competitors in this type of the session, the reality of — if you look at Tesla today, is that are not really in the luxury market and more and more, they are less to a certain extent. They started with the high-end premium and now if you look carefully to the rental cost and associated volumes, you will notice that it’s more and more again to the mid-premium, which is giving us a huge space.

P B Balaji — Group Chief Financial Officer

Okay. Thanks, Adrian. Question from [Indecipherable] again. Can you share an update on what’s happening with the BMW partnership on EDUs? Here he was quoted last week by Routers, saying that JLR is exploring with BMW on going further with the partnership. Can you share anything that is on these areas?

Thierry Bollore — Chief Executive Officer of Jaguar Land Rover

We continue to work with BMW and as such we are currently exploring new opportunities concerning, of course, renewable car version. I mean we use — it’s of course include. But it’s clear that we have stopped also our ex-J BEV, although we returned the IP on our joint partnership.

P B Balaji — Group Chief Financial Officer

Thank you. A question from Pramod Kumar, Goldman Sachs. Given the acceleration in pure EV demand led by competition launches and regulatory push, are you comfortable with your EV business? And is there a risk of JLR losing out on demand and customer mindshare on EVs?

Thierry Bollore — Chief Executive Officer of Jaguar Land Rover

Well, I think what is key and Adrian answered in that spirit as well for one of the previous questions, is to be on time against the real demand from our customers. And today, the real demand of our customers is very much on PLs as you understood. So we are glad about that. And at the same time, we are glad to see that the BEV starts really to take off worldwide, and that’s why we are fine with our timeline.

For sure, we are clearly — and we enjoyed the fact that with our Refocus plan we can see an acceleration of our processes in the company to seamlessly and excellently deliver what we promised, and we are going to make the best use of that.

P B Balaji — Group Chief Financial Officer

Thank you, Thierry. A question, maybe this is for Girish and Shailesh. In terms of — can you please guide for India’s CV and PV growth outlook? How do you see it given COVID second wave impact on semi urban and rural? Girish, you want to go first and then Shailesh you want to take it up next?

Girish Wagh — President- Commercial Vehicles Business Unit

Yes, Balaji. So, in the last analyst call, I think we had indicated the TIV of almost 750,000 to 800,000 for FY ’22 in which we had predicted Q1 being at around 170,000. And I think, at the end of March and more so in the month of April, we have come across this COVID second wave, which has indeed created a slowdown in the demand. And as we got into me, I think the slowdown has been even more as many states have gone into lockdown. And in April, we have seen that the total industry volume has been just 40,000.

So, I think to give a clear projection for the entire year, we need to see how the states unlock, which is something that we are monitoring on almost on a daily basis. So, as the states unlock and the freight starts moving in the country and get back to the pre-COVID levels, I think we should be in a position to indicate what’s likely to happen.

So, at this juncture, it is very difficult to provide a firm outlook, although there could be some scenarios as to when the economy gets back to the pre-COVID levels. But as we stand here now, appears difficult that we are able to — we’ll be able to get this 35%, 37% total industry volume growth that we had indicated. For the exact number maybe we’ll have to wait for the next analyst call. Balaji?

P B Balaji — Group Chief Financial Officer

Yes. Shailesh?

Shailesh Chandra — President – Passenger Vehicles Business Unit

Yes, I’ll just take this. Typically in PV business, the rural to urban ratio has been 40% rural and 60% urban. Last year, it was slightly tilted towards rural where it gained the share by 1% or 2%. So far in this year, we have seen that April is only month where we saw that rural was actually higher and that was primarily on account of the lockdown enforcement being a bit weaker in rural areas as compared to urban.

But the jury is out in terms of how this whole ratio is going to play out, as far as rural is concerned, but clearly, we would expect that rural would stabilize around 40% only this financial year also, as far as overall projection for PV industry is concerned, was supposed to be in the range of 3.2% to 3.4% as per the earlier estimate, before we were aware of the COVID second wave.

This might decrease by 250,000 to 300,000 as a one scenario that is being projected, but if the pent-up demand, which is getting built in these two three months, as well as one is seen that, the shift towards personal mobility might become even more stronger given that the customers are expecting multiple waves of COVID, and therefore, there is greater concern about the well-being and therefore, there might be bigger personal mobility shift phenomenon that one might see. And therefore, one can still imagine that this can be recovered whatever losses that we are going to see in Q1.

But as far as rural is concerned, we would still think that rural will remain around 40% of whatever demand we see in the PV industry. As far as Tata Motors is concerned, since last year, our mix is more favoring towards urban, given that the young and urban customers are getting more kind of excited with the expressive design and the safety aspect, this is being more appreciated in urban centers. So that has been as far as the Tata Motors PV business is concerned. Back to you Balaji.

P B Balaji — Group Chief Financial Officer

Excellent. And the final question is from Pramod is on any timeline you can share on your CV plan for the India car business? So far no decision has been taken on this Pramod, as and when something comes up, we’ll definitely share it with you.

A question, this is on chip shortage. Can you give some of color on the chip shortage? How long would this last? How do we plan to mitigate the same? And also does this affect our key rollout plans? And is it easy for our rollout plans in the future?

Thierry, do you want to pick this up?

Thierry Bollore — Chief Executive Officer of Jaguar Land Rover

Yes, I can take that one. Of course, I will not repeat the comment from Adrian, which were clear enough, I believe on the shortage in terms of impact. I think it’s important to say that, during the first part of this crisis, the team did an incredible job to mitigate that risk to the extent that the impact, I think, on the Q4 of last fiscal year was about 7,000 units, which was quite limited without big consequences on our strong figures as you could see.

But from a crisis, you’ll always learn, and you’ll find opportunities. And first, what I’m learning and with the team is about our Tier 2 and Tier 3, our microprocessors suppliers and the way they work, the way they operate. And at the end of the day, what’s happening is that we need a change in the way we are operating our supply chain with them. And it’s exactly what we are preparing at the moment to have a structural fix to this problem.

P B Balaji — Group Chief Financial Officer

Thank you. Guenter, would you want to just give us color on the implication of that?

Guenter Butschek — Chief Executive Officer and Managing Director

Balaji, my pleasure. As already mentioned earlier by Girish and Shailesh, in the first quarter because of the dedication and commitment of the teams in PV and CV, although we had certain shortages. We could actually prevent supply impacting our delivery position, in order to give us the chance to actually meet the strong demand as already highlighted.

As we expected that it couldn’t get worse and felt pretty comfortable having the situation to a certain extent under control. The situation has already as mentioned by Shailesh under one slide has worsened to the extent that we see across the board significant constraints, where we are now working with the team based on the database established in the fourth quarter, more or less on a daily way on the mitigation of the impact on production. What does it mean?

We have actually looked deep into the easy use, we’ll have to understand which kind of chips for which kind of supplier would actually use by our Tier 2 — second tier, first tier suppliers. And in order to see whenever there is a constraint which of these use and therefore which kind of components or modules could be impacted. We started to establish direct contact with the two suppliers, although we are not contractually linked with them.

But since we have established relationships from the past, it also helped to ensure that our demand got prioritized got met and parts were made available solely by the chip suppliers to our second and first tier suppliers, in order to have transparency in the first instance and to a large extent to the largest possible extent, also full control of the situation.

Nevertheless, as already indicated by Thierry, the situation of Tata Motors is no different to the one at JLR. It’s a daily struggle. And it requires lots of detailed review work effectively on a daily basis by the teams, in order to keep the supply chain going to limit the impact.

Nevertheless, we expect the situation as mentioned will get worse in the first quarter. We expect some kind of an improvement in the second quarter. But it’s also because of the fact that mentioned by Girish and Shailesh, that we have started to actually build some stock, because some of the shutdown days we have experienced in the last couple of days, because of the COVID situation in India.

So that we hope that we can actually get back to full production in the moment we get out of the lockdown. And we echo what is generally the expectation of the industry, that as of the second-half of the fiscal year, we are going to see a gradual improvement of the situation. To what extent? I think it would be too early and would be too much of a kind of crystal ball approach to say as of October, we are going to be safe. But we expect at least gradual relaxation of the situation on the way forward.

P B Balaji — Group Chief Financial Officer

Thank you. Thanks, Guenter. A question from Chirag Shah Edelweiss. JLR commodity costs, how does commodity contract work, annual semi-annual? Also how does the commodity hedging differ from revenue hedging? And if you break raw material costs into commodities and value add, how much will the commodities percentage will be of the total RMC? Adrian?

Bennett Birgbauer — Treasurer of Jaguar Land Rover

Balaji, it’s Ben Birgbauer, the Treasurer of Jaguar Land Rover. So I’ll pick that question up. So I think on the first piece of it, how does the commodity contract work? So I think it’s different across different commodities. And so it’s really difficult to answer that question in the context of this event.

I think, on the second question around, how is commodity hedging different? I think one thing I’d say is generally the horizon is shorter. So on FX, we go out four to five years, in practice with commodities, we really only going out about two years and in quite a bit reduced percentage in the second year.

I think the other thing that’s worth mentioning is the hedge accounting is different. So we have hedge accounting for the FX. So essentially, both the P&L impact of the hedge and the cash flow both occur when the hedge matures. In the case of commodities, actually, there’s not hedge accounting. So there’s an immediate mark to market which comes to our P&L. And that’s why you tend to see that number in our profit bridges. But then the cash only flows when the contract actually matures. So there is a difference between the timing of the cash flow and the profit.

And then, I think on the last one, just what is raw material costs as a percentage of RMC. I don’t have that number at the tips of my fingertips. But what I’d generally say is, it’s a second order kind of number. I think that the commodities is a total value of components that we buy is smaller than you would think. Just for an example, in Q4 year-over-year commodities was worth GBP19 million unfavorable, despite the significant move in commodities that you’ve seen.

P B Balaji — Group Chief Financial Officer

Thank you, Ben. And I think the second part of the question is can we assume from here on there won’t be any extraordinary charges? I think, Adrian has already answered.

Let me take a question from Pramod Amthe from InCred Capital. JLR VME is reduced by 250 bps year-on-year, can you sustain it, considering RR changeovers in the coming quarters? How demand will help you here? Second for Tata Motors I’ll pick it up. Adrian?

Adrian Mardell — Chief Financial Officer of Jaguar Land Rover

Yes, of course. So with the help of sale approach with our taking out deliberately reducing dealer stocks, I think we took you a lot through that detail through the previous two presentations. That continues to be our intent. We were surprised by the scale of the impact of the marketplace and the speed of that impact. And it’s certain that when we have more supply concerns and demand concerns today VMA over that period of time will be at levels lower than I previously indicated.

Hence, why I’ve said earlier, expect in the first-half a number close to 5% rather than the 6% on the line we were at previous to that. As we grow that demand, then we’ll see how the marketplace responds later in the year. But in the first-half of this year, it will be certainly lower than the 6% guidance I’ve previously given for sure.

P B Balaji — Group Chief Financial Officer

Thanks, Adrian. Second, I’ll take it. This is on collections and Tata Motors finance. There are two questions, the two people have asked the same question. How’s it performing post the COVID?

As we said — as I recall — as I said in the presentation, we ended the March quarter at 105% kind of collection efficiency. This has obviously come down to more like about 82%, 83% in the month of April and we’re expecting to this to go down even further. So it will be a painful quarter for Tata Motors Finance as they navigate this, because the issue is not about just cash flows, it’s also about feet on street and infrastructure. So we are working through this and as it comes back on track at the earlier, obviously ensuring safety of our people.

The second question is on growth of CV which I think Girish has already answered. Let me collection — second question are answered.

Girish, the question is more to you and Shailesh price increases taken in CV and PV so far this year, how much of that RM impact is likely in Q1? Do you want to pick it up Girish and Shailesh?

Girish Wagh — President- Commercial Vehicles Business Unit

Yes, Balaji. So, we have already taken a price increase of around 1% to 1.5% on 1st January of this calendar year, which is Q4 of FY21. And then on 1st April, we took another increase of 2.5% across all the models, which is this quarter. So that’s the kind of price increase we’ve already taken.

In terms of raw material impact for first quarter, I think it can be divided into two groups. One is the precious metals, which goes into after treatment. So that is more internationally linked. And therefore, that is kind of going up and we have six monthly contracts there. The second one, of course, is the steel, which is although linked to the international prices is also dependent on domestic consumption. And as of now with the auto demand going down, we are ready to have any dialogue in terms of the steel price increase. So that’s the situation on the commodity costs in this quarter. Shailesh?

Shailesh Chandra — President – Passenger Vehicles Business Unit

Yes, so I think the second part of the question the response would be the same for PV. As far as the price increase is concerned, in Q4 of FY ’21, we have taken about 1.6% weighted average price increase. And then in April, sorry, in May we have taken additional 1.8% weighted average price increase. Back to you Balaji.

P B Balaji — Group Chief Financial Officer

Thank you. Maybe there is time for one last question. This is from Nishant Vyas, Adrian coming your way. Can you shed some light on the CJLR business improvement plan? What’s the timeline for EBIT breakeven for that business?

Adrian Mardell — Chief Financial Officer of Jaguar Land Rover

Yes. Of course, Balaji. I mean, if you look at the data, and in fact, the charts, I should have called it out actually. The year-over-year chart to show quite a dramatic improvement, last year, over the previous year. I think the number is GBP99 million improvement, you’ll see that. So my first response is, it’s already happening. It’s already happening, the health of CJLR is starting to improve. It’s nowhere near where we wish it to be.

What the semiconductor shortages in CJLR would teach us a lot of things, because a lot of our turnaround model in the import business actually was a result of deliberately constraining the pipeline, a huge improvement in transaction values, reduced VME and gross margin. Some of that may be enforced on us over the next few months. We’ll see how the market responds. We hope the market respond favorably there.

And the other side of this is the Charge program, which we talked about, as well, last time to you. We now introduced the Charge program formally to CJLR working alongside our Chery partners and colleagues. And we’ll just be tougher on spend. We’ll just be tougher on spend, because there’s still opportunities for structural cost reduction in CJLR. So you think about how we’ve applied Charge within Jaguar Land Rover, a resetting of eight years of our structural cost base. We haven’t done that yet within CJLR.

So there’s lots of opportunity. It takes a bit more time because we have to bring our partners along with us, of course. But I do expect us going forward to find ways to actually improve our viability, profitability in CGLR. But it was a dramatic turnaround in the previous 12-months, so please, we shouldn’t pass that point by.

P B Balaji — Group Chief Financial Officer

Thank you. So with this, I think we are on the dot, 8 o’clock here. So thanks everybody from TML and JLR side, and more importantly thanks everybody who attended the call, taking the time to attend the session and understand our results. Much appreciated. Please stay safe and sound. And I wish you all the very best to you and your families in the coming days. Thank you and look forward to speaking to you next time.

Operator

[Operator Closing Remarks]