Tata Motors increases capex by 25% to Rs 38,000 crore in FY24, hopes for market outperformance

On the back of a record FY23 performance, Tata Motors, India's largest automobile company by revenues, plans to revise its capex upwards by 25% to Rs 38,000 crore in FY24, with improved chip supplies and expected sustenance in demand for both JLR and standalone business. The company plans to invest in products, platforms, and debottlenecking of capacity.  

In FY23, the business recorded an all-time high revenue of Rs 3.46 lakh crore with an EBITDA of Rs 37,000 crore and a profit before tax of Rs 1,500 crore. The India business delivered a net debt that was the lowest in 15 years at Rs 6,200 crore.

The company is targeting a net zero debt position by FY25 and hopes to deliver positive cash flows. The company plans to bring down the net debt of JLR from 3 billion pounds to 1 billion pounds at the end of FY24.

Speaking to media post Q4 earnings call, PB Balaji, Group CFO, Tata Motors said, the company will be investing Rs 30000 crore in Jaguar Land Rover business and about Rs 8000 crore in the standalone business. The company had invested about Rs 23000 crore in JLR and Rs 7000 crore in the standalone in FY-23.

"We remain optimistic on demand, despite moderation in demand, we hope to deliver a strong performance across all businesses. We expect the momentum will be maintained in FY24 with the supply chain stabilising in JLR. We are firing on all cylinders and we hope to repeat this in FY24. The investments are all future-focused. It goes into fortifying our portfolio, new platforms and products, and in debottlenecking of factories," said Balaji. 

He further mentioned that even the tie-ups for specialized chips for JLR is starting to improve and also expects that the worst is over for JLR.

On the semiconductor challenges, Balaji says there is no impact on the domestic business at present and the worst is behind for JLR and he hopes for the supplies to normalize within a couple of quarters. Its British subsidiary was sitting on an order book of 2 lakh vehicles at the end of FY23.

On the commercial vehicle front, where Tata Motors is the second largest player, the Group CFO highlighted that the underlying demand is quite strong on the back of robust infrastructure investment, fleet renewal requirements, e-commerce business, and healthy freight rates. “We are foreseeing a strong ecosystem for commercial vehicles in the coming months and we are optimistic on the demand even on the rural side,” he added. On a full-year basis, the commercial vehicle business reported revenue growth of 35 percent, EBITDA, and EBIT margins at 7.4 percent and 5.2 percent. The company sold 392,900 units of trucks up 21.8 percent year-on-year. 

During FY23, the company received the second tranche of investment of Rs 3,750 crore from TPG under its EV arm, this will go into building the portfolio of electric vehicles. The company also completed the formalities of taking over Ford's Sanand plant.

The company has sold close to 50,000 electric vehicles with a market share of 84%, and the new fund infusion will go into the expansion of products, network, and Balaji says the company is ahead of its internal plans. The company plans to introduce at least two or three new models in the coming years.  

On the outlook, the company is aiming for higher realizations and cost savings to secure double-digit EBITDA margins for FY24 and improve the performance of all business verticals.

JLR on a strong recovery path: 
As part of its Reimagine strategy - Balaji said, there is a clear roadmap defined and the company's "hands are full" in executing it. The company plans to launch about half a dozen Land Rovers till FY-26, whereas the Jaguar brand will move to all-electric by that time frame.

Also, the company's China business is doing well and its China JV too posted its highest-ever profits in FY23.

"We continue to enjoy over 9% market share in China's 4 million units premium vehicle market. Our performance has remained steady. Despite the covid led lock down for two months and semiconductor challenges, we were able to post record profits last financial year. All the efforts of FY-19 to FY-21, is starting to deliver robust business," added Balaji.

A statement released by the company said Q4 FY23 was one of the "strongest quarters" for TML Group with consolidated revenues at Rs 1,05,900 crore, EBITDA at Rs 14,100 Cr, and net auto debt reduction of Rs 13,800 crore during the quarter.

"The volumes continued to improve on strong Indian demand and better supplies at JLR. Pricing actions and a richer mix led to improved ASPs and higher revenue growth. Easing inflation, better mix, pricing actions and favourable operating leverage resulted in strong improvements in margins and profits," added the statement.

The Board of Directors has recommended a final dividend of Rs 2/- per Ordinary Share (100% of Face Value) and Rs 2.1 per share for DVR shareholders subject to approval by the shareholders at the AGM.

On the way ahead, the company added that it remains optimistic on the demand situation despite near-term uncertainties and expects a moderate inflationary environment in the near term. In the domestic market, the company's plants dedicated to passenger vehicle manufacturing are running at 90 percent utilisation.

“The year ended on a strong note with all automotive verticals delivering robust performances leading to multiple all-time high achievements. The distinct strategy employed by each business is delivering, in unison, leading to a sharp improvement in overall results. We remain confident on growth with cash flow generation, to achieve our stated goals,” added Balaji.