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MD & A
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CORPORATE OVERVIEW (1-31)
STATUTORY REPORTS
FINANCIALS (123-204)
Risks
Deterioration in economic conditions:
The impact of the
global financial crisis and European sovereign debt crisis
continues to be a cause of concern, despite concerted efforts
to contain the adverse effect of these events on global recovery.
In addition to India, the Company has automotive operations
in the UK, South Africa, South Korea, Spain, Thailand and in
Indonesia (being commissioned). The Indian automotive
industry is affected substantially by the general economic
conditions in India and around the world. The demand for
automobiles in the Indian market is influenced by factors
including the growth rate of the Indian economy, easy
availability of credit, and increase in disposable income among
Indian consumers, interest rates, freight rates and fuel prices.
During the global financial crisis in FY 2008-09, RBI had eased
its monetary policy stance to stimulate economic activity.
Subsequently, as the Indian economy started recovering from
the downturn, inflation pressures increased substantially,
followed by several interest rate hikes by RBI. With inflation
moderating in FY 2011-12, RBI reduced interest rates (repo
rate and reverse repo rate) by 50 basis points in April 2012,
however, muted industrial growth along with higher inflation
and higher interest rates still continue to pose downside risks
to overall growth. The automotive industry in general is cyclical
and economic slowdowns in the past, have affected the
manufacturing sector including the automotive and related
industries. Deterioration in key economic factors such as growth
rate, interest rates and inflation as well as reduced availability
of financing for vehicles at competitive rates, may adversely
affect our automotive sales in India and results of operations.
Jaguar Land Rover operations have significant presence in the
UK, North America, Continental Europe and China, as well as
sales operations in many major countries across the globe. The
global economic downtown significantly impacted the global
automotive markets, particularly in the United States and
Europe, including the UK, where Jaguar Land Rover operations
have significant presence. The Company’s strategy with respect
to Jaguar Land Rover operations, which includes new product
launches and expansion into growing markets such as China,
Russia and Brazil, may not be sufficient tomitigate the decrease
in demand for the products in established markets and this
could have a significant adverse impact on the financial
performance. In response to the recent economic slowdown,
the Company further intensified efforts to review and realign
our cost structure such as reducing manpower costs and other
f ixed costs. Jaguar Land Rover business is exploring
opportunities to reduce cost base through increased sourcing
of materials from low cost countries, reduction in number of
suppliers, reduction in number of platforms, reduction in
engineering change costs, increased use of off-shoring and
several other initiatives. While the markets in the United States
in FY 2011-12, have begun to show signs of recovery and
stability, the UK and Europe continue to struggle. If industry
demand softens because of the impact of the debt crisis, or
low or negative economic growth in key markets or other
factors, the results of operations and financial condition could
be substantially and adversely affected.
Interest rates and other inflationary trends:
Due to anti
inflationary monetary policy pursued by the RBI, the interest
rates continued to be at higher levels and affected the growth
of EMI-driven products in India throughout FY 2011-12. The
impact of high inflation, interest rates, rising wages and raw
material costs, coupled with suppressed aggregate demand
in the economy, severely impacted the rate of industrial growth.
As the rate of inflation has started to show some easing, the
RBI has lowered policy rates (i.e. repo and reverse repo) in
April 2012. On April 17, 2012, the RBI reduced the Repo Rate
by 50 basis points from 8.50% to 8.00% and Reverse Repo Rate
from 7.50% to 7.00%. The current Repo Rate cut comes after
the RBI raised it by 375 basis points during the period of
March 2010 - October 2011, presumably for anchoring
inflationary expectations. Although interest rate and inflation
have shown some signs of softening in the recent months,
FINANCIAL HIGHLIGHTS (32-45)