EXPLANATORY STATEMENT
The Explanatory Statement pursuant to Section 102 of the Companies Act, 2013 (“the Act”), given hereunder sets out all material facts relating to the special business mentioned at Item Nos. 4 to 7 of the accompanying Notice dated May 23, 2018.
Item No. 4
The Board of Directors (“the Board”), based on recommendation of the Nomination and Remuneration Committee (“NRC”), appointed Ms Hanne Birgitte Sorensen as an Additional Director as also an Independent Director of the Company on January 3, 2018 and she holds office as a Director up to the date of this AGM, pursuant to the provisions of Section 161(1) of the Act.
Ms. Sorensen (52) is a Danish national and holds an MSc. in Economics and Management from the University of Aarhus. She is on the Boards and Committees of various international companies. Previously, she has held various positions in finance business within the A.P. Moller – Maersk A/S Group in Denmark between 1994 and 2016, including as the CEO of Damco, the CEO of Maersk Tankers, and the Senior Vice-President and Chief Commercial Officer of Maersk Line.
Ms Sorensen has given her declaration to the Board that she meets the criteria of independence as provided under Section 149 (6) of the Act and Regulation 16(1)(b) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“SEBI Listing Regulations”) and is eligible to be appointed as a Director in terms of Section 164 of the Act. She has also given her consent to act as a Director.
Ms Sorensen, being eligible and offering herself for appointment, is proposed to be appointed as an Independent Director of the Company for a term of five consecutive years from January 3, 2018 up to January 2, 2023 in compliance with Section 149 of the Act read with Schedule IV to the Act. Pursuant to the provisions of Section 160 (1) of the Act, the Company has received notice from a member signifying his intention to propose the appointment of Ms Sorensen as a Director.
In the opinion of the Board, Ms Sorensen is a person of integrity, possesses the relevant expertise / experience and fulfills the conditions specified in the Act and the SEBI Listing Regulations for appointment as Independent Director and she is independent of the management.
Given her global experience and the Company’s adherence to policy on diversity, gender and geographical, the Board considers it desirable and in the interest of the Company to have Ms Sorensen on the Board of the Company and accordingly the Board recommends the appointment of Ms Sorensen as an Independent Director as proposed in the resolution set out at Item No. 4 for approval by the members.
The terms and conditions of appointment of Independent Director shall be open for inspection by the members at the Registered Office of the Company on all working days, except Saturdays, during business hours up to the date of the meeting and also at the venue during the meeting.
Except for Ms Sorensen and/or her relatives, no other Director, Key Managerial Personnel or their relatives are, in any way, concerned or interested, financially or otherwise, in the resolution set out at Item No. 4 of the Notice.
Item No. 5
Pursuant to Section 148 of the Act read with the Companies (Audit and Auditors) Rules, 2014, as amended from time to time, the Company is required to have the audit of its cost records for specified products conducted by a Cost Accountant. Based on the recommendation of the Audit Committee, the Board had on May 23, 2018, approved the appointment and remuneration of M/s Mani & Co., the Cost Auditors (Firm Registration No. 000004) to conduct the audit of the Cost records maintained by the Company, pertaining to the relevant products prescribed under the Companies (Cost Records and Audit) Rules, 2014, for the financial year ending March 31, 2019 at a remuneration of Rs.5,00,000/- (Rupees Five Lakh Only).
It may be noted that the records of the activities under Cost Audit is no longer prescribed for “Motor Vehicles and certain parts and accessories thereof”. However, based on the recommendations of the Audit Committee, the Board has also approved the appointment of M/s Mani & Co. for submission of reports to the Company on cost records pertaining to these activities for a remuneration of Rs.20,00,000/- (Rupees Twenty Lakh Only) for the said financial year.
In accordance with the provisions of Section 148 of the Act read with Rule 14 of the Companies (Audit and Auditors) Rules, 2014, as amended from time to time, ratification for the remuneration payable to the Cost Auditors to audit the cost records of the Company for the said financial year by way of an Ordinary Resolution is being sought from the members as set out at Item No. 5 of the Notice.M/s Mani & Co. have furnished a certificate dated May 14, 2018 regarding their eligibility for appointment as Cost Auditors of the Company.
The Board recommends the Ordinary Resolution set out at Item No. 5 of the Notice for approval by the members.
None of the Directors, Key Managerial Personnel or their relatives are, in any way, concerned or interested, financially or otherwise, in the resolution set out at Item No. 5 of the Notice.
Item No. 6
The Company had obtained members’ approval for borrowing up to Rs.3,000 crores by way of Non-Convertible Debentures (“NCDs”) at the Annual General Meeting (“AGM”) held on August 22, 2017, which is valid for a period of one year from date of the said approval. The Company has borrowed Rs.1,500 crores by way of unsecured NCDs up to May 2018 in accordance with the aforesaid members’ approval.
As per the provisions of Section 42 of the Act read with Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014, a company making a private placement of its securities is required to obtain approval of the members by way of a Special Resolution for each offer or invitation before making such offer. However, in case of offer for NCDs, it shall be sufficient if the Company passes a previous Special Resolution only once in a year for all the offers or invitation for such debentures during the year.
The NCDs issued on private placement basis is one of the cost effective sources of long term borrowings raised by the Company. The Company had obtained members’ approval vide Postal Ballot on June 27, 2014 to borrow from time to time any sum(s) of monies which, together with monies already borrowed by the Company (apart from temporary loans obtained or to be obtained from the Company’s Bankers in the ordinary course of business) upto an amount not exceeding Rs.30,000 crores. The borrowings of the Company (on standalone basis excluding joint operations) as at March 31, 2018 aggregate approximately Rs.17,494 crores, of which outstanding NCDs aggregate to Rs.8,097 crores. The Company’s Net Debt-Equity ratio (on standalone basis excluding joint operations) as at March 31, 2018 is 1.13:1 and the Company believes that the aggregate borrowings would be well within acceptable levels.
In continuation of its efforts to strengthen its capital structure, the Company intends to augment the resources through a mix of internal accruals and long-term borrowings to ensure that they are aligned in terms of quantum, risk, maturity and cost with its earning profile. Accordingly, it is proposed to issue NCDs on a private placement basis aggregating upto Rs.2,500 crores, in one or more series/tranches during the period of one year from the date of passing of this Resolution, with an intention to finance, inter-alia, the repayment of certain NCDs/term loans from Banks, to fund part of the ongoing capital expenditure and for general corporate purposes. The Company intends to raise NCDs for tenures ranging between 2 to 10 years and expects the borrowing cost of NCDs to be lower than 1 year MCLR rate of State Bank of India (prevailing at 8.15% p.a. as on March 31, 2018) plus a spread of 100 bps, considering the current credit rating of the Company of AA by ICRA and AA+ by CARE.
It is therefore proposed to pass an enabling resolution authorizing the Board of Directors to make specific issuances based on the Company’s requirements, market liquidity and appetite at the opportune time.
In the opinion of the Board, the above proposal as set out in Item No. 6 of the Notice is in the interest of the Company and accordingly the Board recommends the same for approval by the members.
None of the Directors, Key Managerial Personnel or their relatives are, in any way, concerned or interested, financially or otherwise, in the resolution set out at Item No. 6 of the Notice.
Item No. 7
Stock options in the hands of the employees have since long been recognised as an effective instrument to align the interests of the employees with that of the Company. With a view to ring fence and incentivize key talent to drive long term objectives of the Company, to ensure that employee payoff match the long gestation period of certain key initiatives, to drive ownership behavior and collaboration amongst employees, it is proposed to approve and adopt Tata Motors Limited Employees Stock Option Scheme 2018 (“TML ESOP Scheme 2018” / “the Scheme”).
The Nomination and Remuneration Committee (‘‘NRC’’) at its meeting held on May 23, 2018 formulated the detailed terms and conditions of the Scheme which was duly approved by the Board of Directors at its meeting held on the even date, subject to approval of the members.
Jaguar land Rover (“JLR”) currently has a long term incentive plan, which provides cash payment to certain employees based on the JLR’s performance against long-term metrics related to performance and strategic priorities (over a period of three years).
The Board believes that the above two initiatives to link the employees performance in Tata Motors and JLR together with other initiatives taken in the Tata Motors group would assist in improving the financials of the Company, both standalone and consolidated.
The Scheme has been formulated in accordance with the provisions of the Act and the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 (“SBEB Regulations”). The salient features of the Scheme are as under:
- Brief description of the Scheme :
The Scheme is intended to reward, retain and motivate the Eligible Employees of the Company for their performance and participation in the growth and profitability of the Company. The Eligible Employees shall be granted all the stock options in one tranche, as determined by the NRC, which will vest on particular dates and could be exercisable into Ordinary Shares, on the terms and conditions as provided hereunder, in accordance with the provisions of the applicable laws and regulations for the time being in force.
- Total number of options to be granted:
Not exceeding 1,38,00,000 (One Crore Thirty Eight Lakh Only) options may, in aggregate, be granted that would entitle the grantees to acquire, in one or more tranches, not exceeding 1,38,00,000 (One Crore Thirty Eight Lakh Only) Ordinary Shares of the Company of the face value of Rs.2/- (Rupees Two Only) each fully paid up (representing 0.406% of the issued share capital of the Company as on date). The total aggregate limit of 1,38,00,000 (One Crore Thirty Eight Lakh Only) options may be adjusted for any corporate action(s), as may be decided by the Board.
- Identification of classes of employees entitled to participate in the Scheme:
The following Eligible Employees, as may be decided by the NRC, shall be granted options under the Scheme:
- Employees of the Company in the levels of LC, L1, L2 and select L3 (around 200 employees forming 2% of the white collar population).
- Employees falling in the above level by way of new appointments or promotions over the next 3 years, i.e. by July 1, 2021, shall be granted options on a pro-rata basis for the period from the date of his/her joining/promotion upto the remaining time to vest.
- Expatriates and existing Whole-Time Directors would be excluded in terms of their individually negotiated contracts.
As per SBEB Regulations, the following category of employees/directors shall not be eligible to participate in the Scheme:
- An employee of the Company who is a promoter or belongs to the promoter group;
- A director who either by himself or through his relatives or through any body corporate, directly or indirectly, holds more than 10% of the outstanding equity shares of the Company; and
- Independent Directors of the Company.