Analysis Beyond Consensus

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Tata Motors | Annual Report Analysis

Tata Motor’s (TAMO) FY12 annual report analysis highlights improved cash flow led by better operational performance of JLR coupled with benefits of negative working capital kicking in. We observe that for global peers the proportion of R&D cost expensed in P&L is almost equal to cash cost vis-à-vis JLR where it is much lower than the cash cost. Actuarial losses on pension continue for the fourth consecutive year, which are allowed to be adjusted in reserves under IFRS. Cumulative cash contribution to pension fund over the last four years is higher than P&L charge. Interest cost on FCCBs and NCDs continue to skirt P&L as per option given under the Companies Act.

Market Data 52-week range (INR) Share in issue (mn) M cap (INR bn/USD mn) : 320/ 137 : 2,707.7 : 555 / 9,916

Avg. Daily Vol. BSE/NSE (‘000) : 15,835.7

Shareholding Pattern (%)

Key highlights

Cash contribution to the pension fund was INR17.6bn vis-à-vis P&L charge of INR8.9bn. Thus, despite a higher cash contribution than P&L charge, underfunded status of pension fund has gone up from INR20bn to INR26.5bn on account of actuarial losses of INR14.9bn which has been charged to reserves under IFRS. Intangibles and goodwill as at FY12 end stood at INR259.7bn and INR40.9bn respectively which account for 91% of net worth. Product development expenditure was INR104.8bn (FY11: INR62.7bn), of which INR90.9bn (FY 11 : INR 53.1) has been capitalised, to be amortised over 3-10 years. We expect amortization cost in P&L to catch up with the cash expense once the base of product development increases in the BS. Interest capitalized on CWIP during FY12 is INR7.7bn (FY11 : INR5.1bn). CWIP includes INR31.2bn for tangible assets and INR128.2bn for product development. TAMO continued with the policy of charging redemption premium on NCD and FCCB to the securities premium account as per option given under Companies Act. Our...