Motilal Oswal Financial Services

Tata Motors

BSE SENSEX

40,794

Bloomberg

Equity Shares (m)

M.Cap.(INRb)/(USDb)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

12M Avg Val (INR M)

Free float (%)

S&P CNX

12,056

TTMT IN

3,397

502.6 / 7

India business worst is behind

239 / 106

-8/-9/-22



JLR – performance over last two years impacted by adverse macro/mix…:

4927

JLR has endured a turbulent operating environment over the last two

61.6

29 November 2019

Update | Sector: Automobiles

CMP: INR161

TP: INR195(+21%)

Buy

JLR – turnaround in sight led by better mix, cost cuts

Financials & Valuations (INR b)

Y/E Mar

2019 2020E 2021E

Net Sales

3,019 2,851 3,114

EBITDA

297.9 336.5 396.9

PAT

-14.8

-1.2

42.0

EPS (INR)

-4.4

-0.3

11.7

Gr. (%)

LTP

BV/Sh (INR)

177.2 177.6 189.0

RoE (%)

-1.9

-0.2

6.4

RoCE (%)

5.2

5.1

8.3

P/E (x)

13.8

P/BV (x)

0.7

0.9

EV/EBITDA (x)

2.9

3.3

2.9



years, led by a troika of adverse macro, product mix (due to pipeline

favoring Jaguar) and market mix (due to the underperformance in China

led by product quality issues, high inventory, high discounts and low

dealer profitability).

…but part of those challenges being addressed…:

Some of the

aforementioned challenges, particularly on product/market mix, are likely

to ease based on product pipeline visibility and initiatives undertaken by

JLR in China. JLR’s product pipeline is dominated by LR, with four of the

five new product launches over the next 2-3 years coming from the LR

brand. LR’s contribution is already improving since 2QFY20. In China, JLR

has been focused on (a) reducing inventory (now at lowest levels since

2017), (b) improving dealer profitability and (c) brand-led pull strategy. JLR

has been outperforming its peers in China since Jul’19.

…and firm focus on controlling cost/capex will lead to steady recovery:

JLR’s cost-cutting initiatives under ‘Project Charge’ have started reflecting

in P&L, with GBP0.5b of the targeted GBP1b of cost savings achieved till

Sep’19 and the balance GBP0.5b on track to be achieved in 2HFY20. On

the investment side, it has cut capex and working capital by GBP1.7b (v/s

target of GBP1.5b) till Sep’19. More importantly, ‘Project Accelerate’

would focus on driving longer-term structural improvements in costs,

sales, time to market, and quality.

India business – bottoming out but recovery to be gradual:

Over the last

4-5 months, TTMT’s CV business has aggressively cut systemic inventory

by ~29k. Systemic inventory is now the lowest in the last six quarters and

dealer inventory is at ~35 days. This sharp reduction in

volumes/production resulted in high pressure on profitability. Despite

stable gross margins in 1HFY20 (v/s FY19), EBITDA/EBIT margin shrank by

530bp/800bp YoY in 1HFY20 due to operating deleverage. We do believe

that the worst of the CV cycle is behind (barring any disruption during BS6

transition), but a sustained recovery in volumes would be gradual.

Valuation and view:

Over the last three years, JLR has suffered from an

adverse product/market mix and higher capex, resulting in negative FCFF

over FY18-20. JLR has been focused on cutting capex/cost, benefits of

which have started to reflect now. Finally, the mix is normalizing with a

recovery in LR and China. On the other hand, India business appears to

have bottomed out in 2QFY20, although a full-blown recovery may be a

few quarters away. Hence, we had recently upgraded the stock to Buy as it

offers a favorable risk-reward. Our target price stands at ~INR195.

Jinesh Gandhi

Research analyst

(Jinesh@MotilalOswal.com); +91 22 6129 1524

Aanshul Agarawal

Research analyst

(Aanshul.Agarawal@MotilalOswal.com); +91 22 7193 4337

Investors are advised to refer through important disclosures made at the last page of the Research Report.

Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

Tata Motors

JLR – performance over last two years impacted by weak macro/mix…



JLR has endured a turbulent operating environment over the last two years, led

by a troika of adverse macro, product mix and market mix.

Over the last two years, the automotive industry has been adversely impacted

by (a) anti-diesel trend in the EU and UK, (b) trade-war related noise, (c) the

WLTP and Brexit impact in EU and the UK, (d) China slowdown and (e) price

deterioration in China.

This was aggravated by JLR’s product pipeline being tilted toward Jaguar (five

new products in Jaguar v/s two in LR over FY16-19), resulting in an adverse

product mix and higher variable marketing expenses.

Further, China market moderation in FY19 also coincided with JLR’s severe

underperformance due to product quality issues, high inventory, high discounts

and low dealer profitability.

The aforementioned issues translated into lower volumes (-11% in FY19 and -3%

CAGR over FY17-19), higher variable marketing spend (+300bp in 1QFY20 over

FY18 average) and higher warranty cost. The gross margin shrank by ~280bp and

EBIT margin by ~670bp over FY17-19.

Exhibit 2: …driving a rise in share of Jaguar in volumes (%)

Jaguar (% of total vols)

Exhibit 1: JLR product pipeline skewed toward Jaguar…

Models

Jaguar XE

Jaguar XF

Jaguar F-Pace

LR Discovery

RR Velar

Jaguar E-Pace

Jaguar I-Pace

Launch schedule

May-15

Sep-15

Apr-16

Mar-17

Jul-17

Jan-18

Sep-18

Source: Company, MOFSL

Exhibit 3: JLR has underperformed in China since FY19…

Prem. PV Ind. Retail Gr (%)

JLR Retail Gr (%)

Exhibit 4: …resulting in lower contribution from China

China (% of Total JLR)

Source: Company, MOFSL

29 November 2019

Tata Motors

Exhibit 5: Variable marketing spend has increased…

VME (% of sales)

8.8

Exhibit 6: …and lower volumes resulted in op. deleverage…

Total Fixed Cost (% of sales)

6.9

5.8

26.3

30.3

30.8

33.5

35.5

FY18

FY19

1QFY20

Source: Company, MOFSL

Exhibit 7: …exerting pressure on both gross and EBIT margins

Gross Margins (%)

EBIT Margins (%)

14.1

8.0

6.0

4.2

-0.7

-5

Source: Company, MOFSL

…but part of those challenges are being addressed…



Some of the aforementioned challenges, particularly on product/market mix,

are likely to ease based on product pipeline visibility and initiatives undertaken

by JLR in China.

JLR’s product pipeline is dominated by LR, with four of the five new product

launches over the next 2-3 years coming from LR brand. Of these four LR

products, the new Evoque was launched in 1HFY20 and the new Defender is

planned for launch in 4QFY20. LR contribution is already improving since

2QFY20.

In China, JLR has been focused on (a) reducing inventory (now at lowest levels

since 2017), (b) improving dealer profitability and (c) brand-led pull strategy.

With inventory correction behind and the launch of new Evoque, JLR has been

outperforming its peers in China since Jul’19.

Also, realized FX hedge losses are likely to reduce based on Sep’19 current

unrealized forex hedge loss reserve.

29 November 2019

Tata Motors

Exhibit 8: JLR product pipeline in favor of LR…

Models

RR Evoque

LR Defender

Jaguar XJ EV

Range Rover

RR Sport

Launch schedule

Mar-19

Mar-20

Jan-21

CY21

Type

New

Source: Company, MOFSL

Exhibit 9: …which augurs well for product mix

LR (% of total vols)

Jaguar (% of total vols)

1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 Oct-19

Source: Company, MOFSL

Exhibit 10: Post corrective actions in China, volumes are

recovering at JLR…

Prem. PV Ind. Retail Gr (%)

JLR Retail Gr (%)

22.9

16.2

9.6

8.5

Exhibit 11: …helping improve contribution in volume

China (% of Total JLR)

25.1

18.1

20.4

14.6

12.5

17.7

5.4 2.5 4.6

2.1

1.8

5.1

-29.2

-42.6

-47.1

1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 Oct-19

-43.8

Source: Company, MOFSL

1QFY19

2QFY19

3QFY19

4QFY19

1QFY20

2QFY20

Source: Company, MOFSL

Exhibit 12: JLR’s dealer stock level reduced to the lowest level since 2017

Source: Company, MOFSL

29 November 2019

Tata Motors

Exhibit 13: Realized FX hedge losses to reduce based on current spot rates

Realized Fx Hedge losses

5.1

% of sales

5.1

2.9

1.2

266

1,246

1,312

703

305

2.7

1.9

496

* Based on current unrealized Fx hedge loss as of Sep-19

Source: Company, MOFSL

…and focus on controlling cost/capex will lead to steady recovery



JLR has embarked on cost- and investment-cutting initiatives since FY19 through

Project Charge (target of reducing investments by GBP1b, working capital by

GBP0.5b and costs by GBP1b) and Project Accelerate (driving a structural

improvement).

Cost-cutting initiatives under Project Charge have also started reflecting in P&L,

with GBP0.5b of the targeted GBP1b cost savings achieved till Sep’19 (GBP150m

in FY19 and GBP350m in 1HFY20) and the balance GBP0.5b on track to be

achieved in 2HFY20.

Targeted areas for cost cutting have been staff cost (~6,000 reduction in

workforce delivering GBP400m of annual savings), material cost (~GBP300m

targeted in FY20) and fixed overheads (~GBP300m targeted in FY20, of which

GBP120m delivered in 1H).

On the investment side, it has cut capex and working capital by GBP1.7b (v/s

target of GBP1.5b) till Sep’19 (GBP1.1b in FY19 and GBP0.6b in 1HFY20) by

reducing capex in non-product/non-core engineering and lowering inventory.

More importantly, Project Accelerate would focus on driving longer-term

structural improvements in costs, sales, time to market and quality.

Exhibit 14: Project Charge cost savings and reduction in capex/working capital have been good (GBP m)

Cost (GBP m)

500

200

110

150

200

300

1QFY20

2QFY20

2HFY20

Target

3QFY19

400

300

1QFY20

300

2QFY20

100

4QFY19

2HFY20

Target

600

Capex

W.C

Total

3QFY19

Source: MOSL, Company, MOSL

29 November 2019

Tata Motors

Exhibit 15: JLR – 2HFY20 EBIT margin estimated at ~5.4% (v/s 4.8% in 2Q)

3.4

1.6

0.2

2.7

2.0

0.5

5.4

Source: Company, MOFSL

Exhibit 16: Roadmap to achieve long-term EBIT margin guidance of 7-9%

Source: Company, MOFSL

Exhibit 17: Project Accelerate is focused on long-term structural improvements

Source: Company, MOFSL

29 November 2019

Tata Motors

India business: Bottoming out, but recovery to be gradual



India CV business has been impacted by a sharp decline in retail demand over

the last 12 months, resulting in continued efforts on inventory reduction over

the last six months.

Over the last 4-5 months, TTMT’s CV business retails have been higher by ~25%,

resulting in systemic inventory reduction of ~29k from Jun’19 levels. Systemic

inventory is the lowest in the last six quarters and dealer inventory is at ~35

days (based on current low retails).

This sharp reduction in volumes/production exerted high pressure on

profitability. Despite stable gross margins in 1HFY20 (v/s FY19), the EBITDA/EBIT

margin shrank ~530bp/~800bp YoY in 1HFY20 due to operating deleverage.

We believe that the worst of volumes for CV is behind (barring any disruption

during BS6 transition), but a sustained recovery in volumes would be gradual.

India business margin recovery is entirely hinged on volume recovery, which we

believe will be visible only from Jul-Aug’20.

Exhibit 18: CVs - inventory reduction process is largely completed

Wholesale

109

113

125

126

-5

Retail

Inventory reduction

Source: Company, MOSL

Exhibit 19: Trend in S/A segment mix

M&HCVs

LCVs

PVs

Source: Company, MOSL

29 November 2019

Tata Motors

Exhibit 20: S/A EBIT margin erosion is largely reflection of operating deleverage in 1HFY20

Gross margins (%)

EBITDA margins (%)

EBIT margins (%)

Source: Company, MOSL

Exhibit 21: 1HFY20 margins have eroded substantially

EBITDA Margins

CVs

PVs

EBIT Margins

CVs

PVs

FY18

FY19

1HFY20

Source: Company, MOFSL

FY18

FY19

1HFY20

Source: Company, MOFSL

Valuation and view



Recovery in JLR volumes in FY20 to be driven by return of market stability:

JLR’s volumes were under pressure in FY19 due to several headwinds. However,

with (a) several upgrades and refreshes coming over the next 12-18 months and

(b) completion of inventory de-stocking, JLR’s volumes are expected to stabilize

in FY20. We expect JLR volume (including JV) CAGR of 5% over FY19-22 (after 3%

decline in FY17-19). This, coupled with the possibility of a mix improvement and

a reduction in variable marketing spend, would drive an improvement in

realizations. However, Brexit and trade war are key risks to volumes and JLR’s

competitive positioning.

JLR’s

profitability to improve driven by mix, cost cutting and operating

leverage:

JLR has several levers, both cyclical and structural, in the form of (a)

targeted GBP1.3b cost cutting (incl. GBP300m savings in depreciation post

impairment), (b) mix improvement (growth in LR and China), (c) operating

leverage, (d) cost savings on modular platform on full rollout of modular

strategy and (e) low-cost Slovakia plant. The convergence of the multiple factors

stated above could drive a recovery in the EBIT margin and leave scope for

positive surprises on profitability. JLR’s targeted transition from ‘push’ to ‘pull’

strategy for volumes, particularly in China, would be a critical variable for margin

expansion. We estimate JLR’s EBIT margin at 3.1%/3.9% for FY20/21 (v/s -0.7%

in FY19).

29 November 2019

Tata Motors



India business bottoming out:

With a steadfast focus on reducing inventory

over the last two quarters due to the challenging demand environment, it took a

substantial production cut, resulting in a sharp drop in wholesale volumes in

9MCY19. With initial signs of green shoots in PVs/CVs, we believe the worst is

over for the India business, although a recovery could be gradual. Structurally,

TTMT’s India CV business is expected to grow in line with the market, whereas

the India PV business should deliver a strong outperformance led by an exciting

product pipeline.

Valuation and view:

Over the last three years, JLR has suffered from an adverse

product/market mix and higher capex, resulting in negative FCFF over FY18-20.

JLR has been focused on cutting capex/cost, benefits of which have started to

reflect now. Finally, the mix is normalizing with a recovery in LR and China. On

the other hand, India business appears to have bottomed out in 2QFY20,

although a full-blown recovery may be a few quarters away. Hence, we had

recently upgraded the stock to Buy as it offers a favorable risk-reward. Our

target price stands at ~INR195.

Exhibit 22: TATA MOTORS: Sum-of-the-parts valuation

INR B

SOTP Value

Tata Motors - Standalone

JLR (Adj for R&D capitalization)

JLR - Chery JV EBITDA Share

Tata Motors Finance

Total EV

Less: Net Debt (Ex TMFL)

Tata Sons

Total Equity Value

Fair Value (INR/Sh) - Ord Sh

Upside (%)

Valuation Parameter Multiple (x)

EV/EBITDA

P/BV

2.5

FY20E

175

476

-12

676

446

305

-47.5

FY21E

373

579

1,012

485

603

168

3.8

FY22E

472

657

1,201

427

849

222

37.3

50% discount

Fully Diluted

Source: MOFSL

29 November 2019

Tata Motors

Tata Motors|

Story in Charts

Exhibit 23: JLR volumes growth trajectory

18.3

15.5

9.5

JLR volumes (incl JV; '000 units)

15.6

10.4

5.4

1.3

(10.8)

4.6

14.8

Exhibit 24: JLR EBITDA and EBITDA margin trend

EBITDA (GBP m)

17.5

18.9

14.1

12.1

11.7

8.2

12.5

EBITDA margin (%)

11.2

FY13

FY14

FY15

FY16

FY17

FY18

FY19 FY20E FY21E

FY13

FY14

FY15

FY16

FY17

FY18

FY19 FY20E FY21E

Source: Company, MOFSL

Exhibit 25: JLR’s CFO/capex/FCF trend (GBP m)

CFO

Capex

FCF

Exhibit 26: S/A business growth trajectory over FY19-21

Revenues (INR b)

18.0

5.9

-17.6

3.4

-32.9

30.6

Growth (%)

19.5

19.8

-23.4

FY13

FY14

FY15

FY16

FY17

FY18

FY19 FY20E FY21

FY13

FY14

FY15

FY16

FY17

FY18

FY19 FY20E FY21E

Source: Company, MOFSL

Exhibit 27: S/A EBITDA and margins trend

EBITDA (INR b)

7.9

4.8

4.1

EBITDA Margins (%)

8.3

6.7

4.9

3.8

Exhibit 28: Consolidated earnings trajectory

EPS (INR)

-1.4 -2.2

(5)

(8)

FY15

31.2

44.1

43.6

38.4

19.8

22.9

-4.4

-0.3

11.7

FY13

FY14

FY16

FY17

FY18

FY19 FY20E FY21E

FY13

FY14

FY15

FY16

FY17

FY18

FY19 FY20E FY21E

Source: Company, MOFSL

29 November 2019

Tata Motors

Key operating metrics

Exhibit 29: Snapshot of Revenue model

000 units

JLR

Jaguar

Growth (%)

% of Total JLR Vols

Land Rover

Growth (%)

% of Total JLR Vols

Total Volumes (incl JV)

Growth (%)

ASP (GBP '000/unit)

Growth (%)

Net JLR Sales (GBP b)

Growth (%)

INDIA

MH&CVs

Growth (%)

LCVs

Growth (%)

Total CVs

Growth (%)

Total PVs

Growth (%)

Total Volumes

Growth (%)

ASP (INR 000/unit)

Net S/A Sales (INR b)

Growth (%)

FY15

-3.5

16.1

394

12.4

83.0

475

10.4

3.0

12.8

143

16.5

222

-25.8

365

-13.5

138

-5.3

502

-11.4

723

363

5.9

FY16

102

33.5

18.8

442

12.2

81.2

544

14.6

-5.8

1.9

176

23.6

205

-7.7

381

4.6

152

10.1

533

6.1

804

428

18.0

FY17

179

75.1

29.8

422

-4.5

70.2

601

10.4

4.0

9.2

176

-0.3

209

2.1

385

1.0

157

3.9

542

1.8

817

443

3.4

FY18

176

-1.4

27.8

457

8.3

72.2

634

5.4

3.9

5.9

192

9.2

257

22.7

449

16.6

190

20.8

639

17.8

906

579

30.6

FY19E

177

0.7

31.4

388

-15.2

68.6

565

-10.8

0.8

-6.1

225

17.1

295

14.9

520

15.9

211

11.2

731

14.5

946

692

19.5

FY20E

166

-6.3

29.0

406

4.8

71.0

573

1.3

5.5

6.1

138

-38.5

209

-29.2

347

-33.2

128

-39.6

475

-35.1

979

465

-32.9

FY21E

174

4.8

29.1

425

4.5

70.9

599

4.6

1.0

5.0

158

14.1

229

10.0

387

11.6

154

20.4

541

14.0

1,028

557

19.8

29 November 2019

Tata Motors

Financials and Valuations

Income Statement (Consolidated)

Y/E March

Total Income

Change (%)

Expenditure

EBITDA

% of Net Sales

Depreciation

EBIT

Product Dev. Exp.

Interest

Other Income

EO Exp/(Inc)

Forex Gain/ (Loss)

PBT

Tax

Effective Rate (%)

Reported PAT

Change (%)

% of Net Sales

Minority Interest

Share of profit of associate

Net Profit

Adj. PAT

Change (%)

2015

26,31,590

13.0

22,10,452

4,21,138

16.0

1,33,886

2,87,252

28,752

48,615

8,987

930

-917

2,17,026

76,429

35.2

1,40,597

-0.3

5.3

-868

134

1,39,863

1,40,465

-1.1

2016

27,30,456

3.8

23,12,693

4,17,763

15.3

1,67,108

2,50,655

34,688

48,891

8,854

18,504

-16,169

1,41,258

30,251

21.4

1,11,007

-21.0

4.1

-989

5,775

1,15,793

1,30,334

-7.2

2017

26,96,925

-1.2

23,27,802

3,69,124

13.7

1,79,050

1,90,074

34,136

42,380

7,545

-11,146

-39,101

93,148

32,512

34.9

60,636

-45.4

2.2

-1,022

14,930

74,544

67,288

-48.4

2018

29,15,505

8.1

25,77,462

3,38,043

11.6

2,15,536

1,22,507

35,319

46,818

39,576

-19,751

11,853

1,11,550

43,419

38.9

68,131

12.4

2.3

-1,025

22,783

89,889

77,826

15.7

2019

30,19,384

3.6

27,21,436

2,97,948

9.9

2,35,906

62,042

42,246

57,586

29,653

2,96,516

-9,059

-3,13,712

-24,375

7.8

-2,89,337

-524.7

-9.6

-1,020

2,095

-2,88,262

-14,785

-119.0

2020E

2,851,467

-5.6

2,514,999

336,468

11.8

221,375

115,093

38,683

64,513

29,111

697

-20,590

19,721

9,211

46.7

10,510

-103.6

0.4

-362

-11,684

-1,536

-1,164

-92.1

(INR Million)

2021E

3,114,393

9.2

2,717,516

396,877

12.7

248,603

148,273

40,084

65,729

33,200

-13,562

62,098

18,603

30.0

43,495

313.8

1.4

-463

-1,052

41,980

LTP

(INR Million)

2021E

7,196

672,794

679,990

911,239

-36,601

1,560,685

3,024,249

1,623,837

1,400,412

250,000

7,478

48,609

1,407,116

383,966

170,652

297,541

542,867

1,552,930

742,335

597,281

-145,814

1,560,685

Balance Sheet (Cons.)

Y/E March

Share Capital

Reserves

Net Worth

Loans

2015

6,438

5,56,181

5,62,619

6,92,115

-13,900

12,45,167

15,82,066

7,44,241

8,37,825

2,86,401

46,970

1,53,367

10,34,685

2,92,723

1,25,792

3,21,158

2,56,948

11,14,081

5,74,073

3,28,305

-79,396

12,45,167

2016

6,792

7,82,732

7,89,524

6,19,612

44,748

14,58,212

19,76,068

9,11,348

10,64,720

2,59,189

7,598

2,37,670

11,02,234

3,26,557

1,35,709

3,04,604

2,54,033

12,13,200

6,15,618

4,60,226

-1,10,965

14,58,212

2017

6,792

5,73,827

5,80,619

7,44,891

11,740

13,41,781

16,28,389

6,75,681

9,52,708

3,36,988

6,733

2,03,379

12,37,735

3,50,853

1,40,756

3,60,779

2,91,474

13,95,762

6,25,326

6,22,314

-1,58,027

13,41,782

2018

6,792

9,47,487

9,54,279

7,79,944

19,671

17,59,144

21,56,778

9,17,952

12,38,826

4,00,335

1,165

2,08,128

14,23,465

4,21,377

1,98,933

3,46,139

4,45,929

15,12,775

7,69,398

5,38,766

-89,309

17,59,144

2019

6,792

5,95,003

6,01,795

9,11,239

-36,601

14,81,664

22,58,724

11,53,858

11,04,866

3,18,838

7,478

1,57,707

14,31,544

3,90,137

1,89,962

3,26,488

5,12,867

15,38,770

7,16,907

6,01,347

-1,07,226

14,81,664

2020E

7,196

631,983

639,179

911,239

-36,601

1,519,411

2,674,021

1,375,234

1,298,788

250,000

7,478

49,661

1,319,686

273,428

156,245

345,057

532,867

1,406,203

664,040

546,857

-86,517

1,519,411

Deferred Tax

Capital Employed

Gross Fixed Assets

Less: Depreciation

Net Fixed Assets

Capital WIP

Goodwill

Investments

Curr.Assets

Inventory

Sundry Debtors

Cash & Bank Bal.

Loans & Advances

Current Liab. & Prov.

Sundry Creditors

Other Liabilities

Net Current Assets

Appl. of Funds

E: MOFSL Estimates

29 November 2019

Tata Motors

Financials and Valuations

Ratios (Con.)

Y/E March

Basic (INR)

EPS

EPS Fully Diluted

EPS Growth (%)

Cash EPS

Book Value (Rs/Share)

DPS

Payout (Incl. Div. Tax) %

Valuation (x)

Consolidated P/E

EV/EBITDA

EV/Sales

Price to Book Value

Dividend Yield (%)

Profitability Ratios (%)

RoE

RoCE

RoIC

Turnover Ratios

Debtors (Days)

Inventory (Days)

Creditors (Days)

Asset Turnover (x)

Leverage Ratio

Debt/Equity (x)

2015

43.6

-1.1

85.2

174.8

0.0

3.7

1.8

0.3

0.9

0.0

23.1

15.7

39.2

2.1

1.2

2016

38.4

-12.0

87.6

232.5

0.0

4.2

1.5

0.2

0.7

0.0

19.3

15.1

34.5

1.9

0.8

2017

19.8

-48.4

72.5

171.0

0.0

8.1

2.0

0.3

0.9

0.0

9.8

9.2

22.6

2.0

1.3

2018

22.9

15.7

86.4

281.0

0.0

7.0

2.3

0.3

0.6

0.0

10.1

6.4

12.0

1.7

0.8

2019

-4.4

65.1

177.2

0.0

3.3

0.3

0.9

0.0

-1.9

5.2

7.7

2.0

1.5

2020E

-0.3

61.2

177.6

0.0

3.3

0.4

0.9

0.0

-0.2

5.1

7.9

1.9

1.4

2021E

11.7

LTP

80.8

189.0

0.3

2.8

13.8

2.9

0.4

0.9

0.2

6.4

8.3

11.3

2.0

1.3

Cash Flow Statement

Y/E March

OP/(Loss) before Tax

Int/Div. Received

Depreciation

Direct Taxes Paid

(Inc)/Dec in WC

Other Items

CF from Op Activity

Extra-ordinary Items

CF after EO Items

(Inc)/Dec in FA+CWIP

Free Cash Flow

(Pur)/Sale of Invest.

CF from Inv Activity

Issue of Shares

Inc/(Dec) in Debt

Interest Paid

Dividends Paid

CF from Fin Activity

Inc/(Dec) in Cash

Add: Beginning Bal.

Closing Balance

E: MOFSL Estimates

2015

1,39,863

7,777

1,33,864

-41,940

-36,718

1,36,570

3,39,415

20,191

3,59,606

-3,15,396

44,210

-37,570

-3,52,966

1,22,288

-63,070

-7,204

52,014

58,655

1,52,629

2,11,283

2016

1,10,238

8,258

1,70,142

-19,939

25,515

96,855

3,91,069

8,857

3,99,925

-3,26,232

73,693

-68,134

-3,94,366

74,332

-47,483

-57,039

-1,739

-31,930

-26,371

2,11,283

1,84,913

2017

75,566

36,653

1,79,050

-18,951

32,542

8,954

3,13,814

-11,822

3,01,992

-3,04,135

-2,143

-76,664

-3,80,799

1,16,583

-53,363

-1,212

62,053

-16,754

1,71,536

1,54,782

2018

90,914

39,542

2,15,536

-30,212

-64,337

23,333

2,74,776

-36,202

2,38,574

-3,50,486

-1,11,912

88,470

-2,62,016

75,183

-54,106

-960

20,117

-3,325

1,39,868

1,36,543

2019

-2,88,262

29,653

2,35,906

-31,897

-1,734

-6,334

-62,668

-2,96,516

-3,59,184

-20,450

-3,79,634

50,420

29,971

-63,118

1,31,296

-57,586

-1,104

9,489

-3,19,725

1,36,543

-1,83,182

2020E

-1,536

29,111

221,375

-9,211

-2,141

362

237,961

-697

237,264

-346,459

-109,195

108,046

-238,413

38,920

-64,513

-25,593

-26,742

-183,182

-209,924

2021E

41,980

33,200

248,603

-18,603

11,782

463

317,426

-350,228

-32,802

1,052

-349,175

-65,729

-1,169

-66,898

-98,647

-209,924

-308,571

29 November 2019

Tata Motors

Corporate profile

Company description

Tata Motors is the largest CV manufacturer in India

with 50.1% market share in MHCV and 40.8% in

LCVs in FY19. It also manufactures passenger cars

and UVs. In FY09, it acquired Jaguar & Land Rover

from Ford for USD2.5b.

Exhibit 1: Sensex rebased

Source: MOFSL/Bloomberg

Exhibit 2: Shareholding pattern (%)

Sep-19

Promoter

DII

FII

Others

38.4

15.7

19.0

27.0

Jun-19

38.4

16.0

19.5

26.1

Sep-18

37.3

17.4

18.8

26.5

Source: Capitaline

Exhibit 3: Top holders

Holder Name

Citibank N.A. New York Nyadr Department

Life Insurance Corporation Of India *

Reliance Capital Trustee Co Ltd - Funds*

Government Of Singapore *

SBI-Etf Sensex*

% Holding

11.1

5.1

3.4

2.5

1.3

Source: Capitaline

Note: FII Includes depository receipts

Exhibit 4: Top management

Name

N Chandrasekaran

Ratan N Tata

Guenter Butschek

Vedika Bhandarkar

H K Sethna

Designation

Chairman

Chairman Emeritus

Managing Director & CEO

Addtnl Independent Director

Company Secretary

Exhibit 5: Directors

Name

Ralf Speth

Falguni Nayar

Hanne Birgitte Sorensen

Name

Nasser Munjee

Om Prakash Bhatt

Source: Capitaline

*Independent

Exhibit 6: Auditors

Name

B S R & Co LLP

Mani & Co

Parikh & Associates

Type

Statutory

Cost Auditor

Secretarial Audit

Exhibit 7: MOSL forecast v/s consensus

EPS

(INR)

FY20

FY21

MOSL

forecast

-0.3

11.7

Consensus

forecast

2.7

12.8

Variation (%)

-111.0

-8.5

Source: Bloomberg

Source: Capitaline

29 November 2019

Tata Motors

Explanation of Investment Rating

Investment Rating

Expected return (over 12-month)

BUY

>=15%

SELL

< - 10%

NEUTRAL

< - 10 % to 15%

UNDER REVIEW

Rating may undergo a change

NOT RATED

We have forward looking estimates for the stock but we refrain from assigning recommendation

*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within

following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.

Disclosures

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though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report

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Research Analyst views on Subject Company may vary based on Fundamental

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to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these

securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not

located in Hong Kong & are not conducting Research Analysis in Hong Kong.

For U.S.

Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under

applicable state laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers

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brokerage and investment services provided by MOFSL , including the products and services described herein are not available to or intended for U.S. persons. This report is

intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as

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The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S.

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In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets

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Specific Disclosures

1 MOSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.

2 MOSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company

3 MOSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months

4 MOSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report

5 Research Analyst has not served as director/officer/employee in the subject company

6 MOSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months

7 MOSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months

8 MOSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months

9 MOSL has not received any compensation or other benefits from third party in connection with the research report

10 MOSL has not engaged in market making activity for the subject company

29 November 2019

Tata Motors

********************************************************************************************************************************

The associates of MOFSL may have:

- financial interest in the subject company

- actual/beneficial ownership of 1% or more securities in the subject company

- received compensation/other benefits from the subject company in the past 12 months

- other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the

specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even

though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.

- acted as a manager or co-manager of public offering of securities of the subject company in past 12 months

- be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the

company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies)

- received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.

The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report

Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not

consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from

clients which are not considered in above disclosures.

Analyst Certification

The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the

research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.

Terms & Conditions:

This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and

may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent

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nature. The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty,

representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The

report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial

instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as

customers by virtue of their receiving this report.

Disclaimer:

The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or

distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for

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in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances.

The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment

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expressed may not be suitable for all investors. Certain transactions -including those involving futures, options, another derivative products as well as non-investment grade

securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of

the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and

should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make

modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and the employees may from

time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to

perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a

separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of

information that is already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or

may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on,

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all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.

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misuse and further agrees to hold MOFSL or any of its affiliates or employees free and harmless from all losses, costs, damages,

expenses that may be suffered by the person

accessing this information due to any errors and delays.

Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263;

Website

www.motilaloswal.com.CIN

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Malad(West), Mumbai- 400 064. Tel No: 022 7188 1000.

Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst:

INH000000412. AMFI: ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579;PMS:INP000006712. Motilal Oswal Asset Management Company

Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth

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Ltd. which is a group company of MOFSL. Private Equity is offered through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL.

Research & Advisory services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no

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* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National

Company Law Tribunal, Mumbai Bench.

29 November 2019