Compliance with the SEC's rules for disclosures on "conflict minerals" may be time consuming and costly as well as result in reputational damage.
Under the Dodd-Frank Act, the SEC has adopted rules that apply to companies that use certain minerals and metals, known as conflict minerals, in their products, including certain products manufactured for them by third parties. The rules require companies to conduct due diligence as to whether or not such minerals originated from the Democratic Republic of Congo or adjoining countries, and further require companies to file certain information with the SEC about the use of these minerals. The Company expects to incur additional costs to comply with these due diligence and disclosure requirements. In addition, depending on the Company's findings or its inability to make reliable findings about the source of any possible conflict minerals that may be used in any products manufactured for the Company by third parties, the Company's reputation could be harmed.
The Company may be materially and adversely affected by RBI policies and actions.
In June 2015, after the RBI announced an interest rate cut coupled with a cautious statement on inflation, the Bombay Sensex dropped over six hundred (600) points, which may have impacted the price of the Company's shares or ADSs. The Company can make no assurances about future market reactions to RBI announcements and their impact on the price of its shares or ADSs. Furthermore, the Company's business could be significantly impacted were the RBI to make major alterations to monetary or financial policy. Certain changes, such as the raising of interest rates, could negatively affect the Company's sales and consequently its revenue, any of which could have a material adverse effect on the Company's financial condition.
The Indian Securities Market is volatile and could affect the Company's share prices.
Indian stock exchanges, including the BSE, have, in the past, experienced substantial fluctuations in the prices of their listed securities. The problems, if they continue or recur, could affect the market price and liquidity of the securities of Indian companies. These problems have included temporary exchange closures, broker defaults, settlement delays and strikes by brokers. In addition, the governing bodies of the Indian stock exchanges have from time to time imposed restrictions on trading in certain securities, limitations on price movements and margin requirements. Furthermore, from time to time disputes have occurred between listed companies and stock exchanges and other regulatory bodies, which, in some cases, may have had a negative effect on market sentiment.
SEBI received statutory powers in 1992 to assist it in carrying out its responsibility for improving disclosure and other regulatory standards for the securities markets. Subsequently, it has prescribed regulations and guidelines in relation to disclosure requirements, insider dealing and other matters relevant to the securities market. There may, however, not be an adequate level of information available about companies listed on the Indian stock exchanges.
Political changes in India could delay and/or affect the further liberalisation of the Indian economy and materially and adversely affect economic conditions in India generally and the Company's business in particular.
The Company's business could be significantly influenced by economic policies adopted by the Government of India. Since 1991, successive governments have pursued policies of economic liberalisation and financial sector reforms. The Government of India has at various times announced its general intention to continue India's current economic and financial liberalisation and deregulation policies. However, protests against such policies, which have occurred in the past, could slow the pace of liberalisation and deregulation. The rate of economic liberalisation could change, and specific laws and policies affecting foreign investment, currency exchange rates and other matters affecting investment in India could change as well. While the Company expects any new government to continue the liberalisation of India's economic and financial sectors and deregulation policies, there can be no assurance that such policies will be continued.
The Government of India has traditionally exercised and continues to exercise influence over many aspects of the economy. The Company's business and the market price and liquidity of the Company's shares may be affected by interest rates, changes in policy, taxation, social and civil unrest and other political, economic or other developments in or affecting India. In addition, a change in the Government of India's economic liberalisation and deregulation policies could disrupt business and economic conditions in India generally. Any of these factors could have a material adverse effect on the Company's financial condition and results of operations.
Terrorist attacks, civil disturbances, regional conflicts and other acts of violence, particularly in India, may disrupt or otherwise adversely affect the markets in which the Company operates, the Company's business and profitability.
India has from time to time experienced social and civil unrest and hostilities, including terrorist attacks, riots and armed conflict with neighbouring countries. Events of this nature in the future could influence the Indian economy and could have a material adverse effect on the Company's business as well as the market for securities of Indian companies, including the Company's shares and ADSs. In addition, any deterioration in international relations, especially between India and its neighbouring countries, may result in investor concern regarding regional stability, which could adversely affect the price of the Company shares or ADSs. Furthermore, India has witnessed local civil disturbances in recent years, and it is possible that future civil unrest as well as other adverse social, economic or political events in India could have an adverse impact on the Company's business. Such incidents could also create a greater perception that investment in Indian companies involves a higher degree of risk and could have an adverse impact on the Company's business, results of operations and financial condition, and the market price of the Company's shares or ADSs.
Any downgrading of India's debt rating by a domestic or international rating agency could negatively impact the Company's business.
Any adverse revisions to India's credit ratings for domestic and international debt by domestic or international rating agencies may adversely impact the Company's ability to raise additional financing as well as the interest rates and other commercial terms at which such additional financing is available. This could have an adverse effect on the Company financial results and business prospects, ability to obtain financing for capital expenditures and the price of the Company shares or ADSs.
The Company will be required to prepare financial statements under Ind-AS (which is India's convergence to IFRS).
The Company currently prepares annual and interim financial statements under Indian GAAP and annual financial statements under IFRS. The Company will be required to prepare annual and interim financial statements under Indian Accounting Standard 101 "First-time Adoption of Indian Accounting Standards", or Ind-AS from April 1, 2016.
Ind-AS differs in certain respects from Indian GAAP and IFRS and therefore financial statements prepared under Ind-AS may be substantially different from financial statements prepared under Indian GAAP or IFRS. There can be no assurance that the Company's financial condition, results of operation, cash flow or changes in shareholders' equity will not be presented differently under Ind-AS compared to Indian GAAP or IFRS. When the Company adopts Ind-AS reporting, it may encounter difficulties in the ongoing process of implementing and enhancing its management information systems. There can be no assurance that the adoption of Ind-AS will not adversely affect the Company's financial condition or results of operations.
Business Summary
The Company's business segments are (i) automotive operations and (ii) all other operations. The Company's automotive operations are further subdivided into Tata and other brand vehicles (including vehicle financing) and Jaguar Land Rover. The Company primarily operates in the automotive industry. The Company's automotive segment operations include all activities relating to the development, design, manufacture, assembly and sale of vehicles including vehicle financing, as well as sale of related parts and accessories. The acquisition of the Jaguar Land Rover business has enabled the Company to offer premium cars in developed markets such as the United Kingdom, the United States and Europe as well as in emerging markets such as China, Russia and Brazil, where it was not present prior to the acquisition of Jaguar Land Rover. Going forward, the Company expects to focus on profitable growth opportunities in its global automotive business through new products and market expansion. Within automotive operations, the Company continues to focus on integration and synergy through sharing of resources, platforms, facilities for product development and manufacturing, sourcing strategy and mutual sharing of best practices.
The all other operations segment includes information technology, or IT services, and machine tools and factory automation solutions.
Overview of the Company's Business
In automotive segment, the Company manufactures and sells passenger cars, utility vehicles, light commercial vehicles, and medium and heavy commercial vehicles. The Company further divides these categories based on the size, weight, design and price of the vehicle. The Company's subcategories vary between and within Tata and other brand vehicles and Jaguar Land Rover businesses.
- Passenger Cars: The Company's range of Tata-branded passenger cars include the Nano (micro), the Indica, the Vista, and the Bolt (compact), the Indigo eCS, the Manza and the Zest (mid-sized) in the sedan category. The Company has expanded its passenger car range with several variants and fuel options designed to suit various customer preferences. The Company's Jaguar Land Rover operations have an established presence in the premium passenger car category under the Jaguar brand name. There are four car lines under the Jaguar brand name, including the F-TYPE two seater sports car coupe and convertible (including all-wheel drive derivatives) the XF sedan (including the Sportbrake and all-wheel drive derivatives), the XJ saloon, and the new XE sports saloon.
- Utility Vehicles: The Company manufactures a range of Tata-branded utility vehicles, including the Sumo and the Safari (SUVs), the Xenon XT (lifestyle pickup), the Tata Aria (crossover), and the Venture (multipurpose utility vehicle). Under the Safari brand, the Company offers two variants: the Dicor and the Safari Storme. Under the Sumo brand, the Company offers the Sumo Gold. There are six car lines under the brands of Range Rover and Land Rover in the premium all-terrain vehicles categories, comprising the Range Rover, Range Rover Sport, Range Rover Evoque, Land Rover Discovery, Discovery Sport and the Defender.
- Light Commercial Vehicles: The Company manufactures a variety of light commercial vehicles, including pickup trucks and small commercial vehicles. This also includes the Tata Ace, India's first indigenously developed mini-truck, with a 0.75 ton payload with different fuel options, the Super Ace, with a 1-ton payload, the Ace Zip, with a 0.6 ton payload, the Magic and Magic Iris, both of which are passenger variants for commercial transportation developed on the Tata Ace platform, and the Winger. In addition, the Company introduced a new generation of Ultra LCV trucks in Fiscal 2015. The company's offerings in the LCV bus segment include the Cityride & Starbus range of buses.
- Medium & Heavy Commercial Vehicles: The Company manufactures a variety of medium and heavy commercial vehicles, which include trucks, tractors, buses, tippers, and multi-axled vehicles, with GVWs (including payload) of between 8 tons and 49 tons. In addition, through Tata Daewoo Commercial Vehicles, or TDCV, the Company manufactures a wide array of trucks ranging from 215 horsepower to 560 horsepower, including dump trucks, tractor-trailers, mixers and cargo vehicles. The Prima line of trucks is aimed at its customers in India and South Korea, and the Company has partially extended the offering by offering Prima LX variants of various products of the Prima line. The Company also offers a range of buses, which includes the Divo Coach, the Semi Deluxe Starbus Ultra Contract Bus and the new Starbus Ultra. The Company's range of buses is intended for a variety of uses, including as intercity coaches (with both air-conditioned and non-air-conditioned luxury variants), as school transportation and as ambulances.
Other Operations
The Company's other operations business segment mainly includes information technology services, and machine tools and factory automation services.
Information Technology Services: As at March 31, 2015, the Company owned a 72.32% equity interest in its subsidiary, Tata Technologies Limited, or TTL. TTL specialises in providing engineering services out-sourcing, product development IT services solutions for product lifecycle management, or PLM and Enterprise Resource Management, or ERM, to the world's leading automotive, aerospace and consumer durables manufacturers and their suppliers. TTL's services also include product design, analysis and production engineering, knowledge-based engineering and customer relationship management systems. TTL also distributes, implements and supports PLM products from leading solutions providers worldwide such as Dassault Systems and Autodesk.
TTL has its international headquarters in Singapore, with regional headquarters in the United States, India and the United Kingdom. TTL has a combined global workforce of around 7,804 professionals serving clients worldwide from facilities in the North America, Europe, and Asia Pacific regions. TTL responds to customers' needs through its subsidiary companies and through its six offshore development centres in India, Thailand and Romania.
The Company's Strategy
The Company believes that it has established a strong position in the Indian automobile industry by launching new products, investing in research and development, strengthening its financial position and expanding its manufacturing and distribution network. The Company has increased its presence in the global automotive markets and enhanced its product range and capabilities through strategic acquisitions and alliances. The Company aims to position itself as a major international automotive company by offering products across various markets by combining its engineering and other strengths as well as through strategic acquisitions. The Company's strategy to achieve these goals consists of the following elements:
Continued focus on new product development: During Fiscal 2015, the Company launched the following products:
- Zest: In August 2014, the Company launched the Zest, a sub-four meter compact sedan. It is manufactured at the Pimpri and Ranjangaon plants in Pune, India.
- Bolt: In January 2015, the Company announced the launch of a sporty hatchback, the all-new Bolt, which is manufactured at the Pimpri plant in Pune, India.
- SuperAce Mint: The Tata Ace family of mini trucks offers last mile cargo transport solutions. With the launch of the SuperAce Mint in March 2015, the Company aims to penetrate further into the small pick-up market.
- Xenon and Prima: In January 2015, the Company launched its new-generation Xenon and Prima commercial vehicles in the Malaysian market, with partner DRB-HICOM Commercial Vehicles. Futher, the company launched the prima in middle east markets (South Africa, Oman, Dubai) and Nepal. These were launched in SAARC as well.
- The Company extended the Prima LX range of trucks with the launch of the Multi-axle truck variants - 2523.T & 3123.T The Company has developed new Bus models for JnNURM II under Standard, Mini and Midi categories.
- Ultra: In Fiscal 2015, the Company launched the Ultra range of trucks in light commercial vehicle and intermediate commercial vehicles categories, which aims to offer superior technology and design that ensures lowest total cost of ownership through higher uptime because of increased driver comfort, superior aggregates and customised requirements.
- Land Rover Discovery Sport: In September 2014, Jaguar Land Rover revealed to the market the new Discovery Sport, a versatile premium compact sport utility vehicle that is the first member of the new Discovery family. Sales of the new Land Rover Discovery Sport have been underway since early 2015.
- Evoque: In February 2015, Jaguar Land Rover began sales of the locally-manufactured Evoque through its joint venture with Chery Automobile Co. Ltd. in China. The 2016 Range Rover Evoque made its world debut at the Geneva Motor Show in March 2015, the first model from Jaguar Land Rover to feature full-LED adaptive headlamp technology.
- Jaguar XE: The Jaguar XE made its global debut at the 2014 Paris Auto Show and went on sale in May 2015. It is the first aluminium monocoque vehicle in the midsize vehicle category.
- Jaguar XF: The 2016 Jaguar XF made its official world debut at the 2015 New York International Auto Show on April 1, 2015. As with other new Jaguar models, the XF features strengthened, lightweight aluminum-intensive construction. It is expected to go on sale during Fiscal 2016.
- Jaguar F-PACE: The Jaguar F-PACE performance crossover is based on the C-X17 Concept Vehicle, which was revealed to the market at the Frankfurt Motor Show in 2013. It is intended to be an ultimate practical sports car and to offer a combination of Jaguar sports car-inspired exterior design and a practical and spacious luxury interior.
- Range Rover Evoque Convertible: The Range Rover Evoque Convertible, which features a refreshed exterior and the new 2.0 litre Ingenium diesel engine, is expected to go on sale in Fiscal 2016.
The Company's capital expenditures totalled Rs. 34,889.61 crores, and Rs. 28,278.99 crores for Fiscal 2015 and 2014, respectively, and the Company currently plans to invest approximately Rs. 388 billion in Fiscal 2016 in new products and technologies.
The Company's research and development focuses on developing and acquiring the technology, core competence and skill set required for the timely delivery of its envisaged future product portfolio with industry-leading features across the range of commercial and passenger vehicles. For the passenger vehicle product range, the focus is on stunning design, driving pleasure and connected car technologies. For the commercial vehicle product range, the focus is on enhancing fuel-efficiency and minimising the total cost of ownership. The Company has continued its endeavour to adopt technologies for its product range to meet the requirements of a globally competitive market. All the Company products and engines comply with prevalent regulatory norms. The Company has also undertaken programs for development of vehicles which run on alternate fuels such as LPG, CNG, bio-diesel, electric-traction and hydrogen.
Jaguar Land Rover has aimed to enhance its technological strengths through in-house R&D activities, including the development of two new engineering and design centres which centralise Jaguar Land Rover's capabilities in product design and engineering. In addition, Jaguar Land Rover has completed the purchase of 62 acres of land to double the size of its Advanced Design and Engineering Centre in Whitley, United Kingdom to support development and production of ultra-low emission vehicles. An investment of GBP 50 million is also being made for the construction of the National Automotive Innovation Centre, or NAIC, which will open in spring 2017. The NAIC is expected to provide a technology hub for Jaguar Land Rover's research team to work collaboratively with academics and R&D specialists from across the automotive supply chain.
Furthermore, Jaguar Land Rover participates in advanced research consortia that bring together leading manufacturers, suppliers and academic specialists in the United Kingdom and are supported by funding from the UK Government's Technology Strategy Board.
Leveraging the Company's capabilities: The Company believes that its in-house research and development capabilities, including those of its subsidiaries such as Jaguar Land Rover, TDCV, Trilix S.r.l., or Trilix, in Italy, and Tata Motors European Technical Centre Plc., or TMETC, in the United Kingdom and the joint ventures with Marcopolo of Brazil in India, Thonburi in Thailand and Tata Africa Holdings (SA) (Pty.) Ltd in South Africa, will enable it to expand its product range and extend the geographical reach. The Company continually strives to achieve synergies wherever possible with its subsidiaries and joint ventures. The Company aims to invest in plant modernisation and to increase manufacturing capacity and efficiency.
The Company's product portfolio of Tata-brand vehicles, which includes the Nano, Indica, Indica Vista, Indigo, Indigo Manza, Sumo, Sumo Grande, Safari, Safari Storme, Aria, Zest, Bolt and Venture, enables it to compete in various passenger vehicle market categories. The Company also offers alternative fuel vehicles under the Nano and Indigo brands.
The Company also intends to expand its sales reach and volumes in rural areas, where an increase in wealth has resulted in a declining difference between urban and rural automobile purchase volumes.
Jaguar Land Rover has also boosted its manufacturing capabilities, both in the United Kingdom and other markets. In June 2014, the Halewood plant benefited from a GBP 200 million investment to support the introduction of the Land Rover Discovery. In October 2014, Jaguar Land Rover's GBP 500 million Engine Manufacturing Centre in Wolverhampton in the United Kingdom began operations. This new facility houses an engine-testing centre alongside manufacturing and assembly halls, and aims to meet the highest standards of sustainable production to build Jaguar Land Rover's new Ingenium engine family, the first derivative of which is the 4-cylinder diesel engine first introduced in the Jaguar XE. Furthermore, at the Solihull plant, a new manufacturing facility was opened to commence production of the new Jaguar XE saloon and Jaguar Land Rover's all new performance crossover, the F-PACE, early next year. Jaguar Land Rover has also affirmed its GBP 600 million investment plan across three sites in the West Midlands, United Kingdom. The largest single investment has been made at its Castle Bromwich plant to upgrade the facility for the production of Jaguar XF, which consists of a GBP 320 million aluminium body shop to facilitate lightweight vehicle manufacturing. Furthermore, in October 2014, Jaguar Land Rover opened its inaugural overseas manufacturing facility in China with its joint venture partner, Chery Automobile Company Ltd., with a total production capacity of 130,000 units a year, where the CJLR Range Rover Evoque is being produced. In December 2014, Jaguar Land Rover started construction of its R$750 million (Brazilian reals) manufacturing facility in the state of Rio de Janeiro, in Brazil, that is expected to employ 400 people. The Company expects that production will begin in 2016 and will have an annual capacity of around 24,000 vehicles. The Company expects that the Discovery Sport will be among the vehicles manufactured at the plant.
Continuing focus on high quality and enhancing customer satisfaction: One of the Company's principal goals is to achieve international quality standards for its products and services. To that end, the Company has established a comprehensive purchasing and quality control ecosystem that is designed to consistently deliver quality products and superior service. The Company scored 834 in 2015, up from 799 in 2014, ranking 4 in the J.D. Power Asia Pacific 2014 India Customer Service Index (CSI) Survey. The Company believes that its extensive sales and service network also enable it to provide quality and timely customer service. The Company is encouraging focused initiatives at both sales and service touch points to enhance customer experience and strive to be best in class. Furthermore, Tata Motors Finance Ltd, or TMFL, the Company's vehicle financing division, has enhanced its "Office of the Customer" initiative as well as its rural branch network and infrastructure in order to increase interactions and build relations with the Company's customers and dealers.
Zest, one of the Company's latest additions, received the Zee Ignition Car of the Year Award, and its new Petrol Revotron engine, which was featured in over 35% of Zest sales, received the Technology of the Year Award from ET Zig wheels and Engine of the year Award from Overdrive.