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 is required to prepare annual and interim financial statements under 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 enter the premium cars market in developed markets such as the United Kingdom, the United States, Europe and China as well as several emerging markets such as Russia, Brazil and South Africa. 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 the 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 Bolt and the Tiago both in the compact segment, the Indigo eCS, 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 five car lines currently manufactured under the Jaguar brand name, including the F-TYPE two-seater sports car coupe and convertible the all new XF sedan, the XJ saloon, the XE sports saloon and the all new luxury performance SUV called the F-PACE, which became available for sale in April 2016.
- Utility Vehicles (UV): 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 five car lines under the Land Rover brand comprising the Range Rover, the Range Rover Sport, the Range Rover Evoque (including the Evoque convertible which will become available for sale in June 2016), the Land Rover Discovery and the Land Rover Discovery Sport. The Company ceased production of the Land Rover Defender in January 2016.
- Light Commercial Vehicles (LCV): 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 0.7 ton payload with different fuel options, the Super Ace and the ACE Mega both 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. The Company's offerings in the LCV bus segment include the Cityride and the Starbus ranges of buses.
- Medium & Heavy Commercial Vehicles: The Company manufactures a variety of medium and heavy commercial vehicles, which include trucks, tractors, buses, tippers, and multiaxled vehicles, with Gross vehicle weight (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 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, 2016, the Company owned a 72.32% equity interest in its subsidiary, Tata Technologies Limited, or TTL. TTL specialises in providing engineering services outsourcing, 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 8,087 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 off shore 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 2016, the Company launched the following products:
- Ace Mega: The Ace Mega is a small pickup truck in the Small Commercial Vehicle (SCV) segment which offers performance combined with fuel efficiency a low cost of ownership.
- SIGNA range of M&HCV: The SIGNA range offers improved cab experience, connected vehicle related functionalities and an improved driveline.
- Ultra Electric: The Company has launched its first full-electric bus with zero emissions and reduced noise operations.
- Further, during Fiscal 2016, the Company increased its global presence and launched the Prima in Kenya, Uganda and Bangladesh, the Ultra Bus in Sri-Lanka, Ultra trucks in Bangladesh, the Elanza bus in UAE and the ACE Express and ACE mega in Sri-Lanka and Nepal.
- Range Rover Evoque: The Company launched the refreshed 2016 model in August 2015 and the Evoque convertible will go on sale in June 2016.
- Jaguar XE: The all new Jaguar XE went on sale in May 2015, excluding the US, where sales commenced in May 2016, and is currently being manufactured at the Solihull plant in the UK. The XE was the first Jaguar Land Rover vehicle to feature Jaguar Land Rover's in-house 2.0 litre 4 cylinder engines.
- Jaguar XF: The all new light weight Jaguar XF uses the same aluminum-intensive architecture as the Jaguar XE and was launched in September 2015.
- Jaguar XJ: The Company launched the refreshed 2016 model year XJ in December 2015.
- Jaguar F-PACE: The Company revealed the Jaguar F-PACE luxury performance SUV at the Frankfurt Motor Show in 2015. The F-PACE went on sale in April 2016 and utilizes the same aluminum-intensive architecture as the Jaguar XE and XF.
- Tiago – The Company launched the Tiago in April 2016.
The Company's capital expenditures totaled Rs. 32,024.42 crores, and Rs. 34,889.61 crores for Fiscal 2016 and 2015, respectively, and the Company currently plans to invest approximately Rs. 398 billion in Fiscal 2017 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. The Company has also undertaken programmes for development of vehicles which run on alternate fuels such as LPG, CNG, bio-diesel, electric-traction and hydrogen. The Company recently signed a contract to supply 25 Tata Starbus Diesel Series Hybrid Electric Bus with Full Low floor configuration, with the Mumbai Metropolitan Region Development Authority (MMRDA). It has plans to expand its product base further, which is supported by its strong brand recognition in India, its understanding of local consumer preferences, its in-house engineering capabilities and its extensive distribution network. With growing competition, changing technologies and evolving customer expectations, the Company understands the importance of bringing new platforms to address market gaps and further enhancing the existing range of vehicles to ensure customer satisfaction.
Jaguar Land Rover has invested to enhance its technological strengths through in-house research and development activities, including the development of its engineering and design centers which centralise Jaguar Land Rover's capabilities in product design and engineering.
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.