TO THE MEMBERS OF TATA MOTORS LIMITED
The Directors present their Seventy Fourth Annual Report along with the Audited Financial Statement of Accounts for the Financial Year 2018-19.
DIVIDEND
In view of inadequate profits for FY 2018-19, no dividend is permitted to be paid to the Members as per the provisions of the Companies Act, 2013 (‘the Act’) and the Rules framed thereunder.
TRANSFER TO RESERVES
The Board of Directors has decided to retain the entire amount of profits for FY 2018-19 in the Profit and Loss Account.
FINANCIAL PERFORMANCE AND STATE OF THE COMPANY'S AFFAIRS
OPERATING RESULTS AND PROFITS
The Indian economy in FY 2018-19 started with a healthy 8.2% growth in the first quarter on the back of domestic resilience. Growth eased to 7.3% in the subsequent quarter due to rising global volatility, largely from financial volatility, normalized monetary policy in advanced economies, externalities from trade disputes, and investment rerouting. Further, the Indian rupee depreciated because of the crude price shock, and conditions exacerbated as recovery in some advanced economies caused faster investment outflows
Global growth is moderating as the recovery in trade and manufacturing activity is losing its steam. Despite ongoing negotiations, trade tensions among major economies remai elevated. Growth in the United States has remained solid, bolstered by fiscal stimulus. In contrast, activity in the Euro Area has been somewhat weaker than previously expected, owing to slowing net exports. China registered growth of 6.5% in 2018. A rebound in private fixed investment helped offset a decline in public infrastructure and other state spending. However, industrial production and export growth have decelerated, reflecting easing global manufacturing activity. Japan’s economy also saw annualized growth of 0.8% due to bad weather and natural disasters. The GDP rate of Russia slowed down to 0.8% in 2018. At a growth rate of 1.2%, South Africa’s economic expansion would still be above the 0.8% level at which the economy expanded in 2018. The Middle East economy growth looks uncertain with the cut in oil production in compliance with OPEC+ deal and geopolitical risks will continue to cap the growth
The Tata Motors Group registered a growth of 3.3% in income from operations to Rs. 3,01,938 crores in Financial year 2018-19 as compared to Rs. 2,92,341 crores in FY 2017-18. This was due to better sales volume in the business in India and due to favorable translation impact from Great Britain Pound (‘GB£’) to Indian Rupee (Rs.) of Rs. 14,517 crores. Earnings before other income, interest and tax, were Rs.3,774 crores in FY 2018-19 compared to Rs.11,788 crores in FY 2017-18. The decrease was primarily driven by the performance of Jaguar Land Rover business, including higher depreciation and amortization and fixed marketing expenses / selling costs. The Company’s net loss (attributable to shareholders of the Company) was Rs.28,826 crores in FY 2018-19 as compared to a profit of Rs.8,989 crores in FY 2017-18. In FY 2018-19, the Company has taken an impairment charge of Rs.27,838 crores for Jaguar Land Rover, due to weak sales and profitability change in the market conditions, especially in China and technology disruptions.
Tata Motors Limited recorded revenue from operations (including joint operations) of Rs.69,203 crores in FY 2018-19, 17.9% higher from Rs.58,690 crores in FY 2017-18. Growth in demand of Medium and Heavy Commercial Vehicle ('M&HCV') and Light Commercial Vehicle ('LCV'), new product offerings in passenger cars and Utility Vehicles ('UV'), resulted in increase in EBITDA margins to 7.4% in FY 2018-19 as against 4.1% in FY 2017-18. Profit Before and After Tax (including joint operations) for FY 2018-19 were at Rs.2,399 crores and Rs.2,021 crores, respectively as compared to Loss Before and After Tax (including joint operations) of Rs.947 crores and Rs.1,035 crores respectively for FY 2017-18.
Jaguar Land Rover (‘JLR’) (as per IFRS) recorded revenue of GB£24.2 billion in FY 2018-19 compared to GB£25.8 billion in FY 2017-18, down by 6.2% broadly in line with the decline in wholesales (excluding CJLR) which were down 6.9% primarily as a result of the challenging conditions in China.
Consolidated EBITDA for FY 2018-19 was GB£2.0 billion, lower compared GB£2.8 billion for FY 2017-18, as a result of the lower wholesales, higher incentive and warranty costs, partially offset by Project Charge cost efficiencies and favourable realised foreign exchange movements. The Loss Before Interest and Tax ('EBIT') was GB£(180) million in FY 2018-19 compared to EBIT of GB£971 million in FY 2017-18, due to the lower EBITDA, higher depreciation and amortisation and lower profits from the China joint venture.
The Loss Before Tax excluding exceptional items in FY 2018-19 was GB£(358) million compared to Profit Before Tax excluding exceptional items of GB£1.1 billion in FY 2017-18, primarily reflecting the lower EBIT, higher interest costs and unfavourable revaluation of hedges and foreign currency debt in FY 2018-19 compared to favourable revaluation in the prior year. Exceptional charges totalled £3.3 billion for FY 2018-19, including a £3.1 billion asset impairment in Q3 and a further £149 million for employee separation charges in Q4.
Free cash flow was negative £1.3 billion for FY19 (including £1.4 billion positive free cash flow in Q4) after lower investment of £3.8 billion and £403 million of working capital inflows. As at 31 March 2019, JLR had £3.8 billion of cash and a £1.9 billion undrawn credit facility resulting in £5.7 billion of total liquidity.
TMF Holdings Limited (‘TMFHL’), the Company’s captive financing subsidiary, reported consolidated revenues of Rs.3,975 crores (FY 2017-18: Rs.2,908 crores) and Profit After Tax of Rs.164 crores in FY 2018-19 (FY 2017-18: Rs.76 crores).
Tata Daewoo Commercial Vehicle Company Limited (‘TDCV’) (as per Korean GAAP) registered revenues of KRW 651.36 billion, a drop of 25.0% over FY 2017-18. The Loss After Tax was KRW 28.02 billion as compared to Profit After Tax of KRW 33.66 billion in FY 2017-18. Lower profitability was mainly due to lower sales and lower absorption of fixed costs partially offset by material cost reduction.
VEHICLE SALES AND MARKET SHARES
The Tata Motors Group sales for the year stood at 12,74,072 vehicles, up by 4.3% as compared to FY 2017-18. Global sales of all Commercial Vehicles were 5,27,286 vehicles, while sales of Passenger Vehicles were at 7,46,786 vehicles.
TATA MOTORS
Tata Motors recorded sales of 6,79,288 vehicles, a growth of 16.2% over FY 2017-18, higher than the Indian Auto Industry grew by 5.9%. The Company’s market share increased to 15.5% in FY 2018-19 from 14.1% in FY 2017-18. The Company’s exports on standalone basis were marginally higher by 1.4% to 53,140 vehicles in FY 2018-19 as compared to 52,404 vehicles in FY 2017-18.
Commercial Vehicles ('CV')
The CV Industry started FY 2018-19 on a very strong note, which continued through first half before being impacted by the implementation of the increased Axle load norm. This resultant drop in demand along with increase in parc capacity, the liquidity crunch triggered by the NBFC crisis, coupled with other factors dampened the demand largely in second half. However, overall FY 2018-19 was a year of robust growth for the CV industry. Tata Motors CV Business sales in the domestic market for FY 2018- 19, witnessed a robust growth of 17.2% with 4,68,788 units sold. The market share of Tata Motors for FY 2018-19 was 45.1%. All the four segments showed strong growth with three out of four segments inching up their market share.
Some of the highlights for the year were: