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Tata Motors Ltd (TATAMOTORS) Q3 FY23 Earnings Concall Transcript

TATAMOTORS Earnings Concall - Final Transcript

Tata Motors Ltd (NSE:TATAMOTORS) Q3 FY23 Earnings Concall dated Jan. 25, 2023.

Corporate Participants:

P.B. Balaji — Group Chief Financial Officer

Adrian Mardell — Chief Financial Officer

Girish Wagh — Executive Director

Shailesh Chandra — Managing Director, Tata Motors Passenger Vehicles Ltd., and Tata Passenger Electric Mobility Ltd.

Bennett Birgbauer — Treasurer



Good day and welcome to Tata Motors Q3 FY’23 Earnings Conference Call. I’m joined today by Mr. P. B. Balaji, Group CFO, Tata Motors; Mr. Girish Wagh, Executive Director, Tata Motors; Mr. Shailesh Chandra, MD, Tata Motors Passenger Vehicles Limited and Tata Passenger Electric Mobility Limited; Mr. Adrian Mardell, Interim CEO, Jaguar Land Rover; Mr. Richard Molyneux, Acting CFO, Jaguar Land Rover; and my colleagues from the Investor Relations team.

Today, we plan to walk you through the earnings presentation followed by Q&A. [Operator Instructions] I now hand over to Balaji to begin the presentation.

P.B. Balaji — Group Chief Financial Officer

Yeah. Thank you. Once again, thanks everybody for taking the time to join the call. As is customary, let’s run through the deck as the reasonable clip and thereafter spend as much time as possible on Q&A. So customary safe harbor statement, nothing — nothing to report here, the normal one that is in segments, again, draw your attention to the changes that we have done over the last one year, that’s appear will be there.

Next slide, please. Quarter as such was a pretty intense quarter and I draw your attention to the Auto Expo, which I’m sure Shailesh and Girish will quickly touch upon their slide as well, a pretty intense affair and an exciting presentation from Tata Motors across the whole team of moving India and something that have been very well received in the market as well. We also completed the acquisition of the Ford facility in Sanand, and this was now completely — they’re now getting into the integration of employees there. We also issued a drawdown notice for the Tranche 2 of INR3,750 crores, $500 million to TPG Rise and the funds are expected to be receive by end of January. And JLR order book redemption and the semiconductor situation is something that Adrian is going to talk about.

Next slide, please. Over on the quarter, very satisfying performance with a revenue of INR88,500 crores, EBITDA was 11.1% and profit before tax of exceptional items of INR3,200 crores, a growth of 22.5% and an EBIT — EBITDA improvement of 90bps and EBIT improvement of 270 bps. The key callout here is that after long all the three auto verticals are actually profitable and improving their performance, and therefore that’s driving the margin and HCF improvement that you see in the 4% sustain that in the coming quarters as well.

Next slide, please. The source of growth a lot of it coming from volume and mix, and of course, pricing starting to come through as well as they start taking pricing above and inflation starts stabilizing. Profitability improvement coming across JLR CV/PV, which is what I referred to earlier and the only plain alignment is the losses we’ve taken in Tata Motors Finance, which something, which I’ll talk about towards the end.

Automotive debt down to INR57,500 crores. And the point that I’m sure, there’s a question is going to come. In the case of JLR, we do see a stretch in meeting the net debt zero targets. So we will update, where we are on this in the end of March. Again, confident in TML India as far as that number assumption we should be able to get it to net zero there. So our intention is to work on all other areas as well.

Next slide, please. So with this, let me hand you over to Adrian to take us through the presentation on the JLR. Adrian over to you.

Adrian Mardell — Chief Financial Officer

Yeah. Thanks, Balaji.Next slide, if you would, please. Okay. So these are our KPIs for the quarter, standard format you see versus last quarter and then the same quarter last year.

Retails were slightly lower than last quarter. We’ll get into the details of that a little bit later. We did improve significantly our deliveries of MLA units Range Rover, Range Rover Sport. They principally get targeted to North America and to China. North America was actually up 34% quarter-over-quarter and China was lower because of the COVID shutdowns is the punch line, but you’ll see that more detail later.

Revenue, because of that strengthening mix and the overall increase in wholesales, wholesales did actually increase by 5.7% versus last quarter, significant increase, significant improvement. You will see that above the $6 billion level and we anticipate being above $6 billion revenue for the foreseeable future. Of course, PBT with very strong breakeven points are still below 300,000 units annually and nearly 75,000 units per quarter. In fact, they were down to 70,000 units in Q3. Half of that PBT number is actually a revaluation game on conversion of our dollar-denominated debt mostly. And we’ll get into that, and they just slides. EBITDA of the [Indecipherable] 11.9% EBIT was particularly encouraging at 3.7%, significantly higher than the comparative periods. And cash once we breakthrough that breakeven point with our average transacting values and average GVR being above GBP70,000 per unit now. It really does escalate into a considerable cash positive for GBP90,000, the best cash quarter for seven quarters.

Next slide, please. Okay, so these are the key highlights. We’ll get into some more the details around these later. The order banks did grow, we will explain our expectations on that going-forward. Refocus did deliver again up to GBP850 million, which again, it will repeat our confidence in more than GBP1 billion on that as well. And very importantly, our cash liquidity continues to be strong GBP3.9 billion. And we actually secured the extension of our revolving credit facility at the end of December and then into early January that got extended to GBP1.5 billion — GBP2 billion through to April 2026.

Next slide, if you would please. So these are the quarter three highlights on retail and wholesale volumes. You see the big callouts. At the top there, marginally on wholesales 5.706%, 15% year-over-year, but focus on retail, first of all, as I’ve mentioned, the actual retails did fall a little bit. This is by nameplate. Basically, we’ve improved the deliveries on Defender and you will see increasingly going forward. Now we’ve moved to three shift on Defender, a lot of our orders on the Defender nameplate will start to fall in the retails increase. Range Rover held up. But within that, we’re starting to improve our MLA deliveries Range Rover and Range Rover Sport, which is a fundamental in this quarter’s delivery. From a wholesale perspective, steady improvement, 506% this quarter, just a little bit more of the quarter before. That’s the progression we’re starting to see now, the progression, I think we can start to anticipate going forward. Again, you can see that Defender delivery increasing in quarter three to almost 24,000 units and the Range Rover’s and Range Rover Sports coming through also as well.

Next slide, if you would please. And this is by region, really important say those biggest units, Range Rovers’ and Range Rover Sports. Now we’ve doubled the volume of deliveries, were starting to impact North America heavily. You can see that both on the retail and the wholesale piece and even though those units were made available within China. Of course, the lockdowns in December within the retailer facilities in China then that they weren’t in a position to take those deliveries. And so the reduction in both the China retail and wholesale was inventory we hold as sales pending pass over to China. The actual uplift in China in the first three weeks of January is very strong. As those dealer outlets have opened, of course, the dealers are — have an appetite to take those units, they move in very, very quickly and that would be our anticipation post New Year also. Electrified, number of units have grown to 67%, but you can see we’re in a frame of 65% to 70% now. That’s likely to continue for the foreseeable future.

Next slide, please. Okay, so the bridge versus the same profitability last year have had small loss last year, EBIT 1.4%, so volume and mix is starting to influence this considerably and that would be a shape. We would expect to continue going forward. The pricing and VME is still very low obviously it’s collaboratory data, around those units, actually being passed over very low levels, 0.6%, VME and their targeted levels on targeted nameplates within targeted regions, most of our larger units have zero VME this point in time. We do, however, as we’ve talked before, some considerable headwinds on material cost inflation, commodity inflation. Utility prices also, but they are starting to pitch our way. And also we’ve had to go into the marketplace to buy premium ships to keep supply go that’s all a part of our material cost, again, we’re starting to see that taper down. And my expectation going forward is the pricing in VME will begin to offset the material cost increases in quarter four and beyond.

We are investing more. We’re absolutely spending more within our commercial areas, our commercial function both on marketing now. Our marketing is still only two-thirds of the level it was pre-semiconductors, of course. So coming from a low-base, but we will be actually starting to spend more fixed marketing as confidence on supply comes through over the next weeks and months. Particularly, our engineering spend to move towards our re-imagined electrified future, is starting to increase pace. And we’ll show you that in more detail when we get to the capital slide. And the operational exchanges, the big news is the revaluation I’ve mentioned of our dollar-denominated debt. Sterling appreciated from INR112 to INR120 in the quarter. You see mostly that within the rebar line. But our operational position is still ahead of our AGs that crystallize within the quarter and therefore there is a net gain on operational FX. Well, that’s up to the 3.7% EBIT, GBP265 million PBT, encouraging quarter for us.

Next slide, please. So this is the cash that flows from that. You can see the GBP265 million, I’ve just referenced. GBP800 million cash profit after tax, look you know our model works really well that number moves up towards GBP1 billion. That’s where we were at the end of FY’21, that’s where we expect to get back to over the next few quarters. And that’s why the underlying cash flow is still strong, even though investment spending is starting to increase. Working capital was a nice rewind this quarter of GBP306 million. But it’s only a small fraction of the adverses, we’ve had on working capital since March ’21, GBP1.77 billion negative from that point. Most of that oil rewind as we move through the several next quarters. And what you’re looking for here is production and wholesale volumes to grow through 30,000 units a month, then 35,000, and when we get to 40,000 units a month, which is where we were at in March ’21, most of that will actually rewind. So a lot of cash is going to come through from working capital, as we build back our production volumes and our wholesale volumes, of course, free cash flow GBP490 million best result for seven quarters, very pleasing, on just 79,600 units.

Next slide, please. So this is the breakeven slide. I won’t dwell on it, just to say, we’re still at the 280,000 level in Q3, while average it to around 300,000 full year, we are starting to invest more, including our fixed marketing and our commercial digital strategy. So our costs would increase. But with the mix, strengthening on MLA and Defender units, we’ve expect a containment a breakeven over the next two to three quarters or so.

Next slide, please. This is the investment number I mentioned, it is worth referenced in last year ahead. So GBP622 million in total, up just over GBP100 million, pretty much all of that, but more than all of that is in the engineering spends. We are bring in more engineers, of course, into the organization to deliver a re-imagined strategy on our electrified future and that’s starting to impact on our cost base as it to do so. More of that is being capitalized now 48%, which demonstrates the maturity of those architectures is starting to grow and improve. We were down at 26% only earlier in the year. So this is actually a good sign and I do expect investment to continue to increase beyond GBP650 million towards GBP700 million over the next quarter or two.

Next slide, please. This is update. Okay, next one. So our re-imagined electrified strategy, look, there’s no change to our electrified strategy. I know I’m on-record of saying that, I thought I’d dwell here, on the key highlights, which is exactly the same as previous highlights, you would have seen from a electrified journey. MLA architecture is out there, with beautiful car. You see there and it’s Range Rover Sports, the order banks have been filled by those two products. It is that the epitome we believe of modern luxury, beautiful proportions to that vehicle and the Range Rover Sports, the minimalist luxury view inside the vehicle. That’s a great signature to vehicles and the quality and view of vehicles, we will put forward going forward. Within two years, we will have a full electrified BEV Range Rover. It’s just two years away now, recognizing our order bank support for that product for the next 12 months. Also the gap between orders and new electrified vehicle is closing. And we’ll continue to close as we go through 2023.

We will then in ’25 come forward with our first all new electrified Jaguar products. And then beyond that area other Range Rover and other Defender products will come along in the next two years, within two years most of our vehicles will have full electrified offerings and that will be complete in all modules before the end of the decade. We’re estimating 60% of sales by then, will be BEV product. But the important point, we would have offerings across a range over that period of time. We still maintain zero tail pipe emissions by 2036 net zero carbon emissions by the end of that decade. So our electrified future continues at pace and the investments, we’re now making they’re going to grow towards it over the next 12 to 18 months at least.

Next slide, please. Okay. So these are our wholesale volumes, I think the important thing here, you can see the gradual improvement, but I like to look at quarter versus last year. So Q2 ’23 versus Q2 ’22, you can see there about a 15% increase, we know Q3 is a 15% increase and that starts to give you an indication of what we should begin to expect in quarter four. So we are expecting that number to grow in Q4 and obviously, to continue to grow going forward. So we do think we’ve made a lot of progress on supply, particularly on semiconductors, particularly for this calendar year, but there are still challenges of course COVID in China is a challenge, and we’ll talk about that in a few moments, but we are improving a breakeven points of stabilizing and therefore our profitability EBIT revenue and cash will be growing as we go forward.

Next slide, please. Okay. Range Rover and Range Rover Sport, the MLA architecture are fundamental to the delivery of our business model, and our business success. And we explained in great detail over the early quarters of last year, how it was difficult for us to gain the parts to grow the volumes we’ve broke through that in September you can see the average weekly as have grown quarter-over quarter. We will deliver more production units in Q4, it won’t be that same size of scale of increase, but it will be a sizable 10%, 15% improvement in Q4 over Q3 also we can maintain our 33% to 35% worth of deliveries on these products and that will maintain our average selling price, the levels you’ve seen, as well as a strong variable profit mix portfolio going forward. It’s really is now starting to show through our business results, particularly in Q3 and going forward.

Next slide, please. Okay. So what’s going to happen to order banks? Well, first point is they did continue to grow in quarter three and we’ve hopefully broke out the amount of deliveries, we passed over to customers 85,000 versus the amount of new orders, 95,000. So at this level of marketing spend, and we are only spending two-thirds of the level on marketing, we were before semiconductor shortages. But at this level, you can expect new orders to grow by 30,000 or thereabouts a month, but our fulfilled orders or retails will start to grow now. We’re already seeing that in Q4. And top because of the opening up of China, but I do anticipating waterfall fulfilled orders to be above new orders and therefore our order banks to start to taper down towards the level which is more natural maybe towards the 200,000 level over the next three to four months.

Most of them, as we said before in those three nameplates, Range Rover, Range Rover Sport and Defender, we have gone to third shift on Defender. And therefore, as we come out of quarter four, deliveries in particular and our fulfilled orders on Defender will grow. And then we’ve also mentioned, we expect to build another 10% or 15% more than the other two or so. So very confident at retail levels or FFO orders are going to move towards a 100,000 level over the course of the next months and quarters.

Next slide, please. This is a super important slide, we’ve drought on it several times, that we run to the top piece is a range of retail inventory targets and that dark blue line is no creeping towards the bottom of that band, which means the vehicles in the right place and that will trigger incremental retails in Q4 as I’ve mentioned a couple of times. Around wholesale stock, inventory we own, the bands there you see below between 30,000 and 45,000 units. We’re still within that band towards the bottom of it. So if you add those two numbers together 82,000, inventory end-to-end BEV vehicles at the end of December that was the highest number we had in inventory for several quarters back to around May 2021. That’s a good healthy sign that we’re starting slowly to fill the pipeline, which will trigger more retails, etc., etc. This really is starting to improve for although, there are still issues we can get on a daily basis in terms of supply.

Next slide, please. Inflation has been a theme over year. What did we say at the start to the year? We said, Refocus would offset inflationary claims. Nine months through this period, inflationary claims have been GBP660 million. Refocus have been GBP850 million, half of which is in the commercial space. So we’re doing what we said we would do. Investment number because we mentioned earlier, when our accelerating and bringing more engineers in — by future won’t be the savings going forward and our expectation is to commercial performance, the market performance, will actually then begin to offset inflation in Q4 and beyond, together with our efficiencies, through our agile transformation activities, which we’ve referenced previously also. So we are doing and we will do this year exactly what we said, we could do offsetting those high inflationary claims.

Next slide, please. You need to mentioned COVID and China we’ve all seen the reports and the extent of the contagion within the Chinese population. Q3, it was impacted, of course, by lockdowns particularly at the dealers and also some disturbance in terms of the units we could build. Employee absence for a short period was high. I’m really pleased to say that more than 90% of our employees are the production facilities, and 99% of our employees within our national sales company have now returned to work. And the retailers definitely opened up the three weeks in January, obviously with Chinese New Year, there’s a care point around. What happens to the population following that, but we do anticipate given the scale of contagion in the December period that we’ll get back to business very quickly in China at the backend of Q4. There is a care point around production facilities in China, supplier production facilities that we are monitoring. And we’re bring information back around that as we closeout the year results, but it is possible for us to be stopped within the U.K. production within need production and within China production, as a result of those supplier facilities. They won’t be the scale and the size of the stoppages we’ve seen previously. We don’t believe.

Next slide, please. Look year-to-date, I’m proud on Q3 here, but this is a summary so far year-to-date. I won’t read it out. Apart from say, we all know, EBIT margin positive across the first nine months. Investment is lower, but growing. Free cash flow is just under GBP300 million. I’ve shown there, hopefully, what our expectation is for Q4, above 80,000 units, on wholesale, maybe closer to 85,000 plus, if we continue as we have in the first month. Revenue will exceed GBP5 billion, close to GBP6 billion, again. We will be positive on EBIT with that. And our investment will grow, probably around to GBP700 million, GBP600 million something and our free cash flow, we believe with those physicals will be more than GBP400 million positive, which will make us positive free cash for the full year. And the rest of the data you see there.

What are our priorities? Obviously, continue to secure chip supplies own through the strategic tie-ups. But two, to the excellence of the work the team is now — we really do have excellent teams in place now ensure we keep our supply and outline going, continue Range Rover and Range Rover Sport ramp up, I’ve mentioned. Our expectation that will grow by 10% to 15% in Q4 over Q3, improve on the 80,000 units, we’ve done in quarter three, within quarter four now. Refocus complete, including more of those price increases come — coming through as we deliver more cars to customers. And obviously, our job is to deliver positive data, so EBIT margin and free cash flow in quarter four and also for the full year. I think that’s my last slide.

P.B. Balaji — Group Chief Financial Officer

Thank you, Adrian. Let’s quickly move on to the Tata’s Commercial Vehicle space, Girish and I will take the session. If you recollect, we had signaled as earlier saying that we will be focusing squarely on modern market shares, the registration market shares and shifting to a demand pull business model that did cost a bit of grease in the month of October. But since then we’ve been sequentially improving our market share as the propositions are starting to land and we’re starting to see this across the rest of all the portfolios were.

Next slide, please. From a point I would like to call or give — take a look at the CNG, the light green bar there, substantial drop in CNG composition as the price of CNG started engine closer towards diesel. And we should expect to see this trend reverse once the CNG prices start stabilizing and going down. So we are very much invested in CNG. But this is a current ways is played out. And the other thing that I will call out here is the whole international business, where you will notice the whole sales have been pretty anemic as it challenges in international business continues.

Next slide, please. From financial performance standpoint, the demand pull model is translating into improved profitability of almost 580 bps, revenues growth, of course, at 22.5% pretty strong, and EBIT now at 5.9%, up 650 bps.

Next slide, please. Drivers of this particular profitability, you would see — draw your attention to the realizations adjusted against variable cost, you will notice this number used to be negative in the past, I’m setting it almost 480 bps as the strategy starts playing out. And what you do see as now the structural cost disadvantages that I’ve come through this quarter, some of — most of it related to the investment that we’re making in the new technology, hence translating into higher employee cost and then invest in the business as you have more and more money into FME’s that’s join the number there.

Next slide, please. Let me give it to Girish to talk about the business highlights.

Girish Wagh — Executive Director

Great. Thanks, Balaji. So clearly — the industry grew by around 16% over Q3 of FY’22 has seen the growth rates have been dropping out. But this is also due to the base effect. And that’s what we will see in Q4 also the growth rate we put on further. For Tata Motors, since we have been focusing on retails, I think our retails were ahead of wholesales by 6% in the quarter gone by. And this is also in-line with our preparation to unwind as the gear up for the RD transition in the month of April. I think good thing for the industry, the commodity prices did soften in Q3. And that’s how it is remaining in Q4 also as of now. And we are keeping a track of how the steel prices especially moves, steel prices [Indecipherable] those more in Q1 of next year.

Balaji spoke about the CNG. So I think with the CNG benefit going down and more so it is concern in the minds of the customers about variability in CNG price. I think the volumes have come down. And in the SCV, they’ve come around 12% of the portfolio, ILCV they have come down to around 14% of the portfolio and we would recollect, our LCV is use to be almost around 40%. Within the segments, I think medium and heavy commercial vehicles have seen a very good growth, almost 50% growth. over Q3 of last year, again due to the base effect. And even higher growth in the passenger. So passenger segment is back, I think the — it was the worst suffering warning during the COVID period and during the COVID recovery.

For us the non-vehicle business is spare parts, I think continues to do pretty well. Spare parts and consumables, and in fact, in the nine months, in this financial year, we have grown by around 28% over last year. And the penetration also keeps on increasing. So the share of the overall market is continuously increasing quarter-over-quarter. On the product point, we continue to launch new products. And for the year, we launched more than 40 new products, as well as 150 plus variants. And this includes is Ace electric vehicle or which we’ve already started the deliveries in the beginning of this month. The new range of pickups, the both Intra and Yodha, I think has a very, very good traction in the market and also good premium that we are able to charge as the question. And we also the CNG trucks, which have started seeing some traction.

Coming to auto expo, we did introduce a comprehensive range and I’m going to speak about that a little later. Going ahead, we will continue to have the focus on these three things, which is retail pull, improving the lion’s share, which is the registration and of course, while doing all this, I think realization improvement agenda will continue. To push this agenda, we continue to engage with all the key stakeholders in the ecosystem. Meet customers and financials also, we are trying to get them onboard. I think we see a very good commitment from the stakeholders to the revised, we are working on the revised operating model that we have put in.

RD transition is what we are preparing towards, migration will happen from April 2023. And of course, as we did in BS-VI in April ’20 even now, I think we will come up with a lot of value enhancement for the customers. So it won’t be the plane simple price increase. With the COVID situation globally, we did bring semiconductor supply situation back on our radar. While it was a bit worrisome 15 year back, I think in fortnight things have improved. But we will continue to keep this as well as electric vehicle aggregates on our radar.

In international markets, I think in most of the markets, the volumes have dipped significantly more than 50% and in this kind of an environment, we are focusing on maintaining our market shares in all the markets. Margins, I think margins have also been doing well, and also the channels health, we are ensuring the channels health even in the lower volume, which is extremely important when the volumes start picking up.

Next slide. Talking about Electric Mobility, so as I said, I think we completed very successful trials of the Ace electric vehicle in our customers operations. Both we started with e-commerce players, but we also had the FMCG players joining the bandwagon as also parcel and courier companies. But I think the product has done very, very well, which is leading to even more enquiries for the product. I think we started these deliveries and as you can see in the third bullet, we have also now started pulling material from the supply chain, although we had a COVID scare. I think we will start ramping up the production of this vehicle. We did showcase almost eight zero emission concepts in auto expo, which I’ll speak about.

On our Smart City Mobility Solutions business that we have put in place, we signed a definitive agreement now with the Delhi Transport Corporation as well as Bangalore for 15,921 buses respectively. So that’s around 24, 21. In addition, we also got an order of 200 buses from Jammu and Srinagar. Our e-bus fleet now has cumulatively across more than 6 crore — 60 million kilometers, with more than 95% of time till December. The revenue generated by this business in the nine months has been INR260 crores. And at this level of revenue, I think the business is giving good profits.

On the digital businesses, I think we continue to grow the fleet edge penetration. Our connected truck platform with total vehicles crossing 337,000, which is around 135,000 customers and the usage also has been growing consistently with having — we have obviously 80% customers been active usage on the fleet edge. E-book, which is our online marketplace, we used to sell spare parts for this, now we also added consumables like diesel exhaust fluid and lubricants. And in addition to that, I think we also started adding some of our retailers as well as mechanics, as customers, so they can also order on this platform and we see a very healthy growth almost 165% growth over the previous year.

I spoke about digital new generation during the last quarter. And we continue to push this agenda. In the entire portfolio, we had almost 16% of our sales coming from yields generated through digital means. We still have a good headroom because the convergence can improve further from the level that we reached next.

Next. So talking about auto expo, I think the whole auto expo was making a statement of our journey towards net zero greenhouse gas emissions. So we committed by 2045, we will be net zero greenhouse gas emissions and as our commitment towards that we demonstrated 14 concepts. We had hydrogen propulsion, in terms of hydrogen ICE power tractor, a hydrogen fuel cell tractor and also hydrogen fuel cell bus, which actually will see commercial application from the next quarter. So this is to meet the IOCL order that we had received last year. We also availed five electric vehicle concepts. Ace, of course, the delivery are started, Starbus EV which is already on the road. The Ultra E.9, which is the next vehicle we see having good customer interest. Magic EV, which is for the last mile intercity passenger transportation. And Prima 28 ton tipper, which is a good option to de-carbonize the closed loop usage of tippers especially in mining.

We also introduced two new fuel agnostic architectures, which addresses our entire range from 7 to 55 tons. And these two architectures can take any powertrain, so ICE as well as electric, in electric, battery-electric and then hydrogen fuel cell electric as well as H2X. We, of course, revealed Yodha CNG and INTRA bi-fuel, which are available for sale now, commercial sale, Prima LNG tipper, which is also ready for commercial sale and we are working with few customer, and of course, premium version of our Winger. In addition to this, we also had good interactive exhibits to explain our fleet edge, the connected truck platform, the Sampoorna Seva, which is our bouquet of services, as also Infra, which also attracted good attention. I think this was a very holistic display of — not just our commitment towards net zero greenhouse gas emissions, but also I hope we are driving solve the cutting-edge products and services.

Back to you, Balaji.

P.B. Balaji — Group Chief Financial Officer

Thank you. Thanks, Girish. Next slide, please. Moving onto passenger vehicles — next slide, here the callout is the consistent improvement in market shares and a strong growth, market bidding growth that continues here and the third callout is CNG plus EV is now almost 17% of the portfolio. And next slide is like, slightly improved further once the new CNG launches have come in as well as Tiago EV launches is there. EV continues to be on own. We have surpassed the max one of us selling 50,000 new EV vehicles from the stock. And for the calendar year, it was all almost 37,000, making almost 1% of our market share is in EVs now.

Next slide. From a performance perspective, 37% revenue growth, INR300 crores almost of profits, EBITDA of 6.9% and there is a one-off of about 80 odd bps that you see in EBITDA, but EBITDA of about 1.5%. So strong performance continues in the profitability, we should continue to see a steady improvement on this one.

Next slide. In terms of drivers, here again, you see the realizations and variable cost is now starting to improve further. So demand is underlying. Contribution margin of the business is starting to improve. And investments fundamentally, in the EV business with employees building up the team that is what you see over there as well as investments and products is what you see on the DNA aside, those are the two things that brought down the fixed cost line.

Next slide, please. Let me hand it over to Shailesh to give you a sense of the business.

Shailesh Chandra — Managing Director, Tata Motors Passenger Vehicles Ltd., and Tata Passenger Electric Mobility Ltd.

Thank you, Balaji. Let me start with the key highlights on the industry. Quarter three was — our retail heavy I would say, and the industry reached its highest ever quarter — highest in retail in its history of more than 10.58 lakhs and wholesale also grew by 23% as compared to the quarter three of last financial year. EV industry has continued to show strong growth year-on-year versus last quarter 130% growth, primarily lead by Tata Motors. It is notable to see the last calendar year, which was fairly [Indecipherable] industry above that its highest level at INR3.8 million as compared to somewhere around 2019, where it was at INR3.3 million, INR3.4 million level. So steep jump, I would say, nearly 25% growth as compared to where we were in 2021. As far as Tata Motors is concerned, we have been around 14% market share, consistently the throughout financial year. PV and EV business has delivered an industry-leading growth of 33% of PV and a high growth for the EV also.

Like, the industry we also had the highest ever quarterly retail at 139,000. For the calendar year 2022, we are third OEM cross the 5 lakh mark. And we also, as Balaji mentioned that during the last quarter, we crossed the 50,000 milestone for EVs since its inception. And in the last calendar year, as Balaji what numbered at — it was actually 44,000 — nearly 44,000 sales that we did for the EVs in the last calendar year. We maintained our number one assuming our position as of year-to-date. And Nexon and Punch are among the top three in the 40 plus odd SUVs that we have in the market. As far as, EV sales year-to-date is concerned for the financial year, it is at 32.4 units with the market share of 85%.

Going-forward, the drive spots given that the inventory in the channel has gained — there are new product launches that we seen recently in the industry and improved supplies quarter four should be strong as far as [Indecipherable] concerned when compared to quarter three. And as far as EV growth is concerned, there are a lot of states who have announced for EV policy. And that should support the EV growth in quarter four. As far as Tata Motors is concerned the Tiago EV deliveries have commenced in this month. We have a strong order book. We had extended introductory pricing for the first 20,000 customers, which we have already crossed in terms of bookings.

We — in the auto expo, have showcased the Harrier and Safari Red #Dark, this is going to be launched in this quarter itself. As far as BS-VI Phase 2 transition is concerned, it is on-track and [Indecipherable] deadlines. We — until January, completed the acquisition of Ford plant in Sanand. And we saw very strong response to the product and [Indecipherable] talk about in the next slide. We are proud as far as our challenges are concerned, I think after a long duration of supply driven industry, now we are in a situation, we are surprised that it completely normalized. It is meeting the demand for all the regular models, except for some popular models, which are still high on waiting list. Overall, enquiry to retail time has increased for the industry. You see this is signal lack of [Indecipherable] among the customers that includes supplies and price increase post music too, we have to see if real impact on the demand [Indecipherable] so far. In terms of accessories, we are going to go for very focused demand generation initiatives specifically in certain segments, as well as hypermarkets and as far as margin is concerned we are taking [Indecipherable]. And we are continuing to drive other levers of margin improvement.

Next slide. Giving a quick overview of what did we showcase in the auto expo. The theme for this auto expo was moving India forward, whose safer, smarter and greener vehicles. And we had about 12 showcases both on EV as well as ICE side. We showcased Tiago EV, which we already launched. Harrier EV also showcased. This is the generation two product for us. Sierra EV is going to be launched in 2025, it was also showcased. And Avinya, which is the generation fleet [Indecipherable]. So it expected to be launched by end of 2025. These are the four products that we showcased.

On the ICE portfolio, I already talked about this, Harrier and Safari has shared, cars which will come with [Indecipherable] as well as the 14-inch screen. This gets launched in this quarter, as I said. It was a big discussion that we have showcased in the auto expo, which is CNG twin cylinder technology. I think this segment has always suffered with a handicap of having no boot space, because boot was occupied by the cylinder and that this very innovative idea of a having this twin cylinder which releases in the space in retails in way, the boot space is released, otherwise [Indecipherable]. This would come in the first half of next financial year.

Then we also showcased the ICE version of Curvv, if you remember in April 2022, we’ve showcased EV version. And along with this product, we’ve also showcased the two TGDi engines, no gasoline, 1.2 liter and 1.5 liter, which will help us in coming with products, which we create than 4 liter in the ICE space. And this was received very well, this is what I have to share.

Back to Balaji.

P.B. Balaji — Group Chief Financial Officer

Thank you, Shailesh. Next slide, please. All CV/PV cash flows draw attention to cash profit-after-tax strong and therefore more than adequately funding the capex that we have and we gradually drawback the working capital that we lost in the first quarter. So that’s what is happening.

Next slide, please. Investments, you can refer yourself keeping the slide. But just to guide that for the full year, the investment spending is likely to be around INR6,000 crores number, no change on that one.

Next slide, please. Tata Motors finance, I want to take a few minutes on this, because this is a disappointment for us this quarter, where the GNPA increase that we saw in this portfolio is two reasons. Number one, the restructured book that’s actually starting to perform pretty poorly and it’s continuing to do bad and going from bad to worse and as well as a one-time upgradation on the — one time hit because of the RBI upgradation norms that we’ve had. So therefore we have started to get further provisions put through in the restructured book, this is now almost 9% of the AUM of INR41,000 crores that we have and there are lot of efforts underway, as you would expect to normalize the static restructured book. And therefore, this work is going to be pretty intense in this quarter as well. The early results are encouraging and the GNPA is starting to reduce November, December and January so far has been trending where with mature efficiencies improving to 102%. The normal book is quite comfortable. We don’t see stress there and capital adequacy also is quite comfortable there. But clearly, this is an area where we need to drive a lot of efforts to ensure that we get our collection efforts of particularly on the restructured book.

Next slide, please. Overall, therefore our priorities, you can read through yourself, but maybe the only thing I’d like to highlight is, the view on the demand, which I’m sure a lot of you are asking as well. We remain cautiously optimistic both in JLR and as well as India. And there are enough global uncertainties yet, as you all aware of, but we still remain optimistic. And we can’t be complacent and hence both in JLR and in India on the innovation intensity, as well as activating the market and ensuring that we win our rightful place here. And of course, chip supplies are likely to improve further. And therefore volumes will continue to ramp-up steadily, particularly in JLR. And commodity prices, we do we expect stability and therefore the focus on profitable growth should deliver a strong EBIT and free cash flows in Q4 as well.

So that’s what I have to say, the individual priorities by business as we have already covered. So let me not go through that. Let me start covering the questions that have come through already. Can we move to the questions session?

Questions and Answers:

P.B. Balaji — Group Chief Financial Officer

Okay. So maybe let’s start with, I think, Ben, this is coming your way. Ben or Adrian, I don’t know if you can take it. Could you — that is not the terms of the extension of the revolver? How much was undrawn and drawn interest rate increased by? And additionally, given the cash position of the company enjoys, is there a scope for optimizing the revolver debt balance further? And there’s another question in terms of also about how much of repayment are you planning given the cash position there? But do you want to wrap this all after one response, Ben?

Bennett Birgbauer — Treasurer

Yeah. I can cover that, Balaji. So broadly, the terms of the revolver are in terms of covenants and things like that the documentation is pretty much identical to the prior revolver. The pricing margin did go up 50 basis points to 3.35%. But that’s on a drawn basis and on non-drawn basis, all we do which we paid 35% of the margin. So the annualized cost of a GBP1.5 billion revolvers of about GBP18 million. So it’s from our perspective, it’s the cheapest fire insurance you can possibly have. In terms of, is there scope for optimizing the revolver debt balance, while just because I think it is low cost liquidity insurance, and we actually used to have a higher revolver than that, I don’t really think we’re considering taking down the revolver. We obviously have the net debt target that will still working towards, but I don’t really see changing the size of the revolver at this point.

P.B. Balaji — Group Chief Financial Officer

Thank you, Ben. Next question, I think is from Chandramouli. So I think Adrian, this is coming your way. On JLR, how are we thinking about the demand outlook once we clear out our strong order backlog, is the current hawkish interest rate environment, where to — continuing to the next year? What is your view on demand? And the next I think the same question coming into Girish later on? Adrian?

Adrian Mardell — Chief Financial Officer

Yeah. Thanks, Balaji. So from our perspective, look, our order bank is historical highest, we had to pre-supply challenges that double the level and you’ve seen the size of the increases of reductions. So we believe our order banks are going to stay naturally high, particularly on the Range Rover. But we sell it for more than 12 months now. We’re not taking new orders until ’24 model year and on the Range Rover Sport, while we’re rectifying Defender. So we will see a marginal reduction quarter-on-quarter. But I still believe will be this time next year, talk in about order banks which are higher than ideal. So at today’s level of known uncertainty in the marketplace on recession and interest rates at the levels we see in front of us going forward today, I believe the challenge continues through ’23 to be supply rather than demand, we have plenty of opportunity to increase demand and stimulate that given we’re only spending two-thirds of the level on fixed marketing, we were 12 months, 18 months ago also.

P.B. Balaji — Group Chief Financial Officer

Yeah. Thanks, Adrian. Girish, this is coming your way, same question on volume itself. On India CVs, how are we thinking about price hikes heading into the stricter emission standards, beginning ’24, FY’24, is going to be all at-once or more face than nature?

Girish Wagh — Executive Director

So the cost increases for RD are going to be lesser as compared to what we had seen in BS-VI Phase 1. But even in BS-VI Phase 1, I think we had taken all the increases of the price increases in one go. I think there is only one another factor that we had to keep a watch on which is the commodity increases, which may happen again in Q1 of next financial year. And this is — both these things put together, we’ll see what is the kind of price increase, which has to passed on, but from the point of view of RD, I think it will also vary model-to-model, but mostly it will be passed on out in one go.

P.B. Balaji — Group Chief Financial Officer

Yeah. Just sticking to you, just following the [Indecipherable] LCV, which MCV is strong growth, LCV segment is showing a decline. Can you highlight the reasons?

Girish Wagh — Executive Director

Yeah. So I think it is more of ILCV, which is showing a decline which in our parlance is 7 tons to 15 tons or now it has gone up to 7 to 18 tons. So as you rightly pointed out, M&HCV is growing because of higher freight availability. I think this year, we see that the freight supply is actually more than the trucks, which are being put into the market and therefore fleet utilization is going up. As far as, ICV is concerned one of the thing, which is playing out is the base effect, right? So the declines, which are happened in ILCV was much lower than that of M&HCV, number one. And number two, we also see that ILCV one had seen a significant penetration of CNG, where to some extent, the diesel vehicles that also under utilization in a last portion of CNG got pushed in, or bought in more so. And I think those are coming back for usage now. So it is more of a base effect and we do expect that this year, well the M&HCV is may grow about 45% on a year-on-year basis for the entire year, ILCV may end-up growing only 14% to 15%. I don’t know whether in ILCV, you were also referring to the small vehicles. So let me talk about that also. As far as small vehicles are concerned, even here I think it is the base effect, which is coming in. But this continues to grow, the growth rate is tapering quarter-over-quarter, but still I think, it appears that for the entire fiscal, you should see the growth rate of more than 20%.

P.B. Balaji — Group Chief Financial Officer

Yeah, thank you. Adrian, this is coming your way, this is from Dinesh Gandiya. In terms of JLR, you talked about higher inflation and supplier claims, largely related to constrained volumes. Can you talk about the quantum of these two? Till what production level would you have to compensate vendors and some related question also, chip related cost inflation is expected to start moderating in CY’23 as supplies improve. Is that a fair assessment? And you also talked about increased SG&A spend, what are the targeted levels to which you want in create SG&A spend? So maybe three distinct questions there.

Adrian Mardell — Chief Financial Officer

Yeah. Okay. So let me talk them in order of they were asked. So, look, the inflation claims and the reason for supply claims, there is multiple reasons below that. And in terms of the level that we expect to be normal, if you go back to FY’21, on a previous call, I have referred to FY’21 a lot, before supply constraints. In a normal level for us, we still believe will be the 120,000 units plus a quarter, 40,000 plus a month, 500,000 a year. And once we get towards that level we will be clear around much more we can push it beyond to that. So for a normal environment and our supplier is setup for a normal environment, we would need to build wholesale 40,000 plus units a month and with just above 26,000 — 27,000 at the moment.

So there’s a long way from today to normal. But we do believe that increasingly quarter-over-quarter, we will in calendar year ’23 move towards that normal level. Until we get fully to that level, a number of the reasons for the claims. In particular, the utilization supplier factories, which are within this number, will still be there, right? Once we get to that level, if we have no a natural requirements to go buy parts outside of normal channels that’s eliminated. Then again, we will eliminate another cars go there — no primary parts or chip supply from the vendors, the brokers, that will be eliminated as well.

However, we will still be left with commodity prices. At the moment, they are looking to be heading more aggressive against this. And they will still be there. And a lot of our contracts with suppliers have to pass on commodity costs. So there will be some level, that’s the only problem we have, we probably won’t be talking about it by the way. But it’s wrapped up within that 200 plus million a month, including some more on utility is lower than it was, and including the wage — the wage demands, which hopefully will come down with the interest rate pressures that are going to be pullout.

From an SG&A perspective, we would increase spend, but revenue will increase as well. So think about SG&A increasing commensurate with improvements in revenue. It’s just about 9% of revenue today, maybe a shade over think about that being a broad guideline going forward on SG&A. So we won’t be spending above our entitlement to spend, but as revenue grows, we’ll need to stimulate some of that demand, both of those datasets would increase.

P.B. Balaji — Group Chief Financial Officer

Thank you. I understand some of my questions are, as a bit muffled and try my level best increase my volume. Next question comes from Rakesh Kumar. Adrian, back to you again. With [Indecipherable] incentives coming down in Europe, do you see risk to JLR compliance with cash free targets? And given JLR FCF generation in third quarter and seasonally strong fourth quarter, is it FCF breakeven outlook for FY’23 conservative? And I’ll separately pickup the Tata’s battery manufacturing plants in Europe.

Adrian Mardell — Chief Financial Officer

Okay, so if I take PF [Phonetic] one before. Look, we’ve been very consistent on PF volumes over the last several quarters, around 11%. We obviously monitor this really carefully. When I look at the order bank that we’ve reference the PF orders in that order bank I see slightly richer than that at the moment. So up to 14%. So there’s no indication at this point in time to any customer incentive changes on PF. As having a sizable impact on the orders that we actually receiving, nothing at this point in time. So I’d say, what we see today, no, to the first one. There is no impact on PFs. We don’t expect to be non-compliant in Europe over this next phase either the strong JLR cash flow in the third quarter, I think if we go back to the page that we talked to earlier, we are expecting the strong cash flow in quarter four. The underlying cash should be broadly at the level that we saw in Q3 may be around the GBP200 million, I’m hopeful, cash from operations would increase a bit, with the increased volume. Our investments are going to increase as well as we’ve said. So maybe those two will balance out, we’re only three weeks through the quarter. There is 10 weeks to go. And with supply, obviously, still be in fragile, things can change. But that’s what I see today, broadly speaking, underlying cash being similar, if not a shade higher in Q4 over Q3.

So working capital was a big build back this quarter GBP300 million that probably is going to fall a little bit, depends on how many units we actually built-in the March, the mid-February through end of March period, but it’s likely to be less than the GBP306 million. So we see in total of the total cash to be slightly lower in Q4, even though the volumes are higher because that working capital point, but we do believe that’s going to drive us through breakeven, maybe up to a GBP100 million in total for the full year.

P.B. Balaji — Group Chief Financial Officer

Thanks, Adrian. On the battery plants for Tata’s in Europe, I think as we had mentioned earlier as well, this will be a Tata Sons entity that we investing, where you have JLR and Tata Motors as two anchor customers and locations in India and Europe. Obviously, at this point then — this all that I can share, and as and when we are ready to announce more we will talk about that.

Okay, this question is actually coming on popular demand and therefore, Shailesh, this is coming your way. Considering the strong EV order book, what are the rational for the price cut in next on variant that we saw two variants back? And what’s your take on the brand impact for the price cuts? And is this supported by cost reductions? Multiple people have asked it in different ways pointing this question on top?

Shailesh Chandra — Managing Director, Tata Motors Passenger Vehicles Ltd., and Tata Passenger Electric Mobility Ltd.

So the call on price cut has been taken after holistic consideration taking into account multiple factors. One is that, we have a future growth aspiration as far as Nexon EV is concerned. And with the improving capacity and supply, I think this was one big consideration. Also the visibility of underlying structural costs, and which we have been able to reduced over the last two to three years effort of deeper localization that we have been working on. There is — it has also an added factor of inventing — pending [Indecipherable] benefits, also the relook at relative price positioning of our entire EV portfolio and most importantly, keeping the value proposition fiercely strong to the change in competitive brand scale. So these were the four, five factors, I would say that has really one behind this, as far as brand is concerned, I think Nexon brand enjoys a very strong referral from its large customer base of 40,000 plus now. And in terms of its value proposition, it is the best in terms of compelling mix of best tech features, premium in-cable experience, multiple range options. I think the revised pricing action with improved range only makes it higher on consideration and more desirable for our customers. I think this isn’t [Indecipherable] behind this.

P.B. Balaji — Group Chief Financial Officer

Yeah. Thanks, Shailesh. There is a question on ADRs, which we thought, we expect it, because you just pick it out, why the Tata Motors decide to deals it ADRs. Is it cost of compliant versus pressure on shares on account of shareholders once in missed directly in India management thoughts? We have explained that the original purpose of which ADRs were listed I think is probably now not relevant anymore. And with the Indian market, getting deeper and wider, there is no constraint on fundraise and also all our bond issuances anyway we don’t need the ADRs to be listed there to do that. And at the same time compliances are getting more complicated and therefore it may have just decided. The risk reward equation one looked at it, it didn’t make sense for us to continue as part of simplification, we have knocked that off. That’s the background to it. They stand delisted as of yesterday.

What is now the net auto debt deleveraging timeline the Tata Motors has? I thought I already covered it, maybe I’ll just talk about the second liner, how does the listing of Tata Technologies help towards that? We have announced our intention, it’s now Tata Technologies Board decision and therefore we will be working with them closely.

Question from [Indecipherable]. Could you talk about the impact of RDs for both CV and PV, I think, Girish have already covered that piece. Also an update on the discounting trends in CV industry. Update on the Tiago EV order book, Shailesh? And we’ve already talked about the price cut in Nexon? Why don’t you finish that and then I’ll go to JLR on the VME trend?

Girish Wagh — Executive Director

Yeah. So I think on the discounting, as we have been speaking about it for the medium and heavies and the intermediate and light commercial vehicles, we have started to pulling back the discounts from the month of September. And we see a good impact of that flowing into our results for Q3. And we will continue to been on this path even if you book to bring down the discounts and also bring more transparency in sales. As far as the small commercial vehicle are concerned, I think discount reduction journey, we have started earlier, right from Q1 of this year. So we’ll continue that as well. And ensure that finally, it helps us build margins in each of the product lines. Shailesh?

Shailesh Chandra — Managing Director, Tata Motors Passenger Vehicles Ltd., and Tata Passenger Electric Mobility Ltd.

As far as Tiago EV order book is concerned, I’ve already mentioned that we have crossed 30,000, which was the size, which we have kept for the introductory prime. So that is the status as of now. As far as the delivery is concerned, we started the deliveries — sorry we started the supplies about say in last month itself. And this month, we are ramping up. And I think we have set the target that we should always keep the waiting period within six months and that would be the intention. We have kept some level of fungibility between the electric vehicle models that we have sold. We will be able to temporary ramp up to ensure that the waiting period is kept within the period, which is acceptable to the customers.

P.B. Balaji — Group Chief Financial Officer

Thanks, Shailesh. Adrian, this — the third point is coming your way. JLR, how do we see the VME trending, given the macro and aggressive pricing from EV OEM? I think Morgan Stanley also had a question on this one?

Adrian Mardell — Chief Financial Officer

Yeah. Thanks, Balaji. Look, we’re not seeing any signs this point in time of lifts in VME, even though I can understand the sentiment behind the question. I think in the environment wherein while we still had demand and orders increasing above supply that will to continue to be the place. As VME is mixed by region and by nameplates, of course, and with the buyers that we have in the customer orders we have on Range Rover, Range Rover Sport, Defender, North America and China, they are the big buyers as within the data today. You know the Armstrong VME is 0%, 0%, 0%, 0% and 0%. So with this level of order intake and the buyers of those products on a instability within the production and supply pipelines, we will continue to be very, very low, there will be a point in time with that stuff, we will start to let in. So another question, where asked about what normal is? If normal is 40,000 units a month plus for us, which likely is, I think it’s reasonable to assume at this point will be passed and more, but those non-big three units to the other regions and then VME will start to gradually lift to 2%, 2.5% level at some point. We’re not seeing any sign of that within the data we have today.

P.B. Balaji — Group Chief Financial Officer

Thank you. Next question, I move to Raghunandhan from Emkay. There is other questions have been answered, but the one that is new, which is on the EV/PV subsidiary from when would you get PLI scheme benefits. And are you currently accounting — how are you accounting these incentive?

As far as, the PLI benefits is concerned, the key is to ensure that the domestic value addition norms are met and we are getting vehicles accordingly certified. And at this point and we will had to file when the financial year is over, then you file for the PLI benefits and you get it subsequently. Given the fluidity of the situation at this point in time and we are going through the process and to the first time that we will be filing this year, currently, no accrual has been done on these incentives. And once we get one round of things coming to, then we will be in a position to review it on that one.

Okay. I think already explained that one. Just — capacity I think, it is low as CLSA. What are the domestic passenger vehicle capacity currently? And when are the Ford capacity coming on stream?

Girish Wagh — Executive Director

Yeah. So as far as large capacity is concerned, we have been now at around 50,000 per month. We have further the ability to debottleneck the capacities in our two plants, which is in Pune and Sanand, which is the existing facility, not the Ford one, by the additional 10% to 15%. And we are targeting to operationalize the fourth plant in 12 to 18 months timeframe.

P.B. Balaji — Group Chief Financial Officer

Yeah. Thank you. I think there’s a question from Jinesh on passenger vehicle, a sharp drop in other expenses on a quarter-on-quarter basis. Was there any one-offs? I think most of it is linked to just cost phasing across quarters, nothing to read and then beyond routine stuff there.

Then another one is in terms of when can you expect to see these exciting products that we have displayed on auto expo?

Girish Wagh — Executive Director

Yeah, so none of these products were concepts. These are products all going to come in two to three years’ timeline. We already mentioned about that Harrier EV is going to come in 2024, Sierra and Avinya will come in 2025. And these were the three electric vehicle products that we have shown. Tiago is already launched that was the fourth one. As far as ICE products are concerned, Cruvv is also going to come in 2024. Then the CNG models, which were — cylinder similar model of Punch and Altroz already mentioned earlier that it’s going to become in the first half of the next financial year. Those are [Indecipherable].

P.B. Balaji — Group Chief Financial Officer

Yeah, thank you. Ben, this is the next question is from Gemma. This is on — can you confirm if you still be looking to use cash to repay the 2023 maturities versus refinancing through the markets. And the breakeven guidance implied GBP300 million next year for the last quarter, which I think Adrian has already addressed that. So Ben can you take the first piece?

Bennett Birgbauer — Treasurer

Yeah. On the refinancing, so I think the default or base plan is that — we had an expectation of circa GBP750 million, GBP800 million of cash flow in the second-half, which Adrian already talked about and that would be sufficient to cover on the two balance we have maturing in February and March for GBP800 million equivalent and it’s probably also worth mentioning that, in June of this year, we had a GBP600 million equivalent, China bank will though due to mature, and actually we signed an agreement in January 2 on extend that for three years from January of this year some maturing the facility would end in January 2026, through our annual review, so we’ve at least pushed out the maturity until January of 2024 and now.

P.B. Balaji — Group Chief Financial Officer

Thanks, Ben. The next set of questions coming in from Kapil Singh. First one to you, Shailesh, Tiago EV, what’s the percentage of first time buyers that you’re seeing in the order book?

Shailesh Chandra — Managing Director, Tata Motors Passenger Vehicles Ltd., and Tata Passenger Electric Mobility Ltd.

First time buyers are roughly 25% to 30% is what we have seen, who are buying a car for the first time that’s substantial then electric vehicles we are not — never seen this. Mostly the people had in both buying this as a second or a third although high percentage was using this as the only car and also the primary car. First time buyers we have seen significant types of buyers.

P.B. Balaji — Group Chief Financial Officer

Yeah. And the related question is this gross margin dilutive for the PV business, at the initial stages, yes, but after that it will start trending towards the margins with the main vehicle will be making for that sort of period of time. But that’s part of the planning that we have for the overall portfolio. CV sentiment Index, Girish, what’s your latest update in CV packet?

Girish Wagh — Executive Director

I think, in SCV Cargo, you have seen some softening. But I can probably attribute that to post festive season drop in trade. So future expectations still remains strong. In tippers, the sentiment index are improved marginally, that is also expected, because the previous one was during monsoons where the tipper usage is low. In ILCV, it has dipped a bit, again, because of post-season, post festive season impact. And for small commercial vehicles, it remains quite stable.

P.B. Balaji — Group Chief Financial Officer

Yeah. And linked to that question from Rajesh [Indecipherable]. In the medium term, how the fuel mix change, happened in as far your opinion between CNG, EV adoption versus ICV incident. How does it — how should one think about it?

Girish Wagh — Executive Director

So I think as we go ahead, the pathways is going to deep through CNG or LNG. As far as CNG penetration is concerned, currently, I think the bigger invitee is the volatility in CNG prices, were the CNG prices actually went up very fast. So that is a bigger anxiety in the minds of the customer. With the actions that the government has taken in nine months, the CNG prices will stabilize at this level or a bit lower level. The CNG vehicles do have any inerrant TCO advantage, so one will see a fair bit of penetration happening again in ILCV and SCV segments. As far as long range is concerned, yes, I think few customers will start coming in, because I think OEMs have addressed the range issue. So we have some trucks, which we launched which can run for 1,000 kilometers on CNG. As far as LNG is concerned, I think this depends on availability of filling infrastructure. Otherwise, I think we are ready with the product. In terms of EV, I think when we clearly see higher penetration in the buses first. Because of the government push and one will also see a good penetration happening in the last mile distribution due to the pull from companies, who are having their own net zero greenhouse gas emission commitments. I think that’s how we will see EV penetration happening more in buses and small commercial.

Shailesh Chandra — Managing Director, Tata Motors Passenger Vehicles Ltd., and Tata Passenger Electric Mobility Ltd.

I have to talk about the CNG. My view is that, see if we have to take a view by the end of this decade, the mix will be around 25% to 30% for CNG, 25% to 30% for EV and rests would be gasoline, but the time mix of ex-fuels, because that is the direction where things are going, these are — about significantly come down below 5%. So that part will be the outlook.

P.B. Balaji — Group Chief Financial Officer

Thank you. The question from Vinay Singh, Morgan Stanley. Do you think price cuts in EVs in China and other regions, do you see that as a risk to ICE pricing for the entry level cars? Is that a EV cars, as JLR launches in EV just were that’s other angle as well?

Adrian Mardell — Chief Financial Officer

Sorry, Balaji.

P.B. Balaji — Group Chief Financial Officer

No. I’m saying with the price cuts that you’re seeing in China and do you see that as a risk to the ICE pricing for Jaguar entry and JLR and EV profitability of JLR launches at EVs in 2024?

Adrian Mardell — Chief Financial Officer

Yeah. We don’t at this point actually, recognized not lot of our smaller units, smaller value transaction price units in China are generated within China within the joint venture. We don’t see any risk at this point in time or any evidence of this on to weakening of prices for any of our imported models. In fact the VME reference back to the previous question, the average VME last quarter, which will be the first sign of that we, of course, the average VME last quarter was as low as 0.8% across all units imported into China. So we’ve seen very, very low levels and strong demand at this point.

P.B. Balaji — Group Chief Financial Officer

Yeah, thanks. And on the PV side, we already answered the question on the EV price cuts that have happening, but is there another angle to it. With the raw material cost index not coming down, how do you see the EV profitability going forward?

Shailesh Chandra — Managing Director, Tata Motors Passenger Vehicles Ltd., and Tata Passenger Electric Mobility Ltd.

I think, we need to keep in mind that one there is related premium that the customer is ready to pay for EVs versus ICE. And there is about 25% to 30%. ICE prices are going to go up. So therefore it will support the higher price for EVs, while the secular trend of the components for EVs will keep on coming down. There has been off temporary volatility that we have seen in the battery prices, which was very steep last calendar year. But I also — already have started moderating in this year. So we have to take more long-term view of the battery prices, rest of the components are coming down also as the scale is increasing. So there will be short-term pressure on the cost because of these volatilities. But we have to focus on driving the field, because that is what is going to bring down the cars further as we are driving the deeper localization. You also need to remember that the next three, four years will be the benefit of PLI also in between. So I think keeping all these in mind, it is going to be in mid-term, very beneficial from a mix perspective.

P.B. Balaji — Group Chief Financial Officer

Thank you. Thanks, Shailesh. I think with that we are done with all the questions that I’ve been asked in terms of the team rather than the names. So if there’s anything else that you want us to answer, I would suggest please reach out to our investor relations team and will be more than happy to respond to you. So thanks a lot for taking the time to attend the section. We hope you found it informative and look forward to catching up with soon. Thank you.

Girish Wagh — Executive Director

Thanks, Balaji. Thank you.


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