27 August 2016

1QFY17 Results Update | Sector: Automobiles

Tata Motors

BSE SENSEX S&P CNX CMP: INR504 TP: INR562 (+12%) Buy 27,782 8,573 Bloomberg TTMT IN Equity Shares (m) 3,395.9 M.Cap.(INR b)/(USD b) 1,710.3 / 25.5

52-Week Range (INR) 522/266 1, 6, 12 Rel. Per (%) 1/47/41 Avg Val, (INR m) 4,037 Free float (%) 67.0 Financials & Valuations (INR b) Y/E Mar 2016 2017E 2018E Net Sales 2,755.6 2,879.2 3,242.4 EBITDA 402.4 410.2 487.6 NP 125.2 134.5 182.6 Adj.EPS(INR) 36.9 39.6 53.8 EPS Gr. (%) -15.5 7.5 35.7 BV/Sh. (INR) 237.9 276.5 327.0 RoE (%) 18.3 15.4 17.8 RoCE (%) 14.3 11.2 13.0 P/E (x) 13.7 12.7 9.4 P/BV (x) 2.1 1.8 1.5

Estimate change TP change Rating change

Below estimates; JLR Margins impacted by lower China incentive & MTM Fx impact; Expect recovery from 2QFY17 Consol sales at INR659b (v/s est INR633b; +9% YoY). EBITDA at INR76.2b (v/s

est INR82.9b; +12% YoY). Adj. PAT at INR18.8b (v/s est INR24.3b; -60% YoY). JLR realization at GBP45k (v/s est GBP44k) grew 2.8% QoQ (flat YoY) driven by

favorable Fx. EBITDA margins at 12.3% (v/s est ~15.4%) were impacted due to MTM impact on payables (~150bp impact), lower incentives in China (~100bp impact) and partly due to launch expenses. However, adj PAT came in at GBP265m (v/s est ~GBP255m) boosted by higher share of Cherry JV profits and lower depreciation and Fx gains.

S/A EBITDA margins (ex JV) were at 5.7% (v/s est 7.4%), decline of 240bp QoQ (-40bp YoY) due to higher staff cost. Adj PAT was at INR996m (v/s est ~INR 3.35b) declined by 80% QoQ.

Earnings call highlights: a) Other expenses had Fx loss on realized hedges of GBP123m, there was commensurate benefit reflecting in sales. b) China JV: Margins are strong, but will moderate due to additional cost as full capacity commissions. c) F-Pace has average waiting period of 3-4 months.

Valuation & view: While we raise our EPS for FY17 by 8%, we cut FY18 by 5%. The stock trades at 9.2x/7.3x FY17/18E consol EPS. We expect JLR’s operating performance to start improving from 2QFY17, driven by continued volume momentum and gradual benefit of weaker GBP. S/A business should benefit from CV cycle recovery and favorable product lifecycle for PV business. Maintain Buy.

Jinesh Gandhi (Jinesh@MotilalOswal.com); +91 22 3982 5416 Venil Shah (Venil.Shah@MotilalOswal.com); +91 22 3982 5445 /Aditya Vora (Aditya.Vora@MotilalOswal.com); +91 22 3078 4701

Investors are advised to refer through important disclosures made at the last page of the Research Report. Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

Tata Motors

27 August 2016 2

JLR: Below estimates; EBITDA margins at 12.3% (v/s est 15.4%) impacted by lower China incentive & MTM Fx impact JLR’s (ex Chery JV) wholesale volumes up 9% YoY (-19% QoQ) to 120,776 units

(v/s est ~138,531 units), driven by Jaguar volume growth of ~63% YoY to 34,572units, while LandRover volumes declined by 3.6% YoY to 86,204 units.Incremental growth for Jaguar came from newly launched F-Pace.(~13406 units)

Chery JV volumes registered strong growth of ~13,558 units (+8% QoQ).Including JV, JLR volumes grew ~17% YoY (-17% QoQ) to ~134,334 units (v/s est~155,847 units).

JLR realization at GBP45k (v/s est GBP44k) grew 2.8% QoQ (flat YoY) driven bybetter mix.

Net sales at GBP5.5b (v/s est. GBP5.4b) grew ~9% YoY (-17% QoQ) driven byvolume growth.

JLR adj. EBITDA margins at 12.3% (v/s est ~15.4%) partly due to MTM impact ofadverse Fx on payables (~150bp impact), lower incentives in China (at GBP6mv/s GBP62m in 1QFY16) and partly due to launch expenses of F-Pace, EvoqueConvertible and XE in US.

EBITDA margins adj for MTM fx impact of payables (~GBP83m) were at 14%. Adj EBITDA declined ~18% YoY (-37% QoQ) to GBP672m (v/s est GBP834m). Cherry JV continued to beat our estimates with share of PAT at ~GBP45b despite

operation at 42% utilization. The JV’s wholesale volumes were at 13,558 units(v/s 12,532 units in 4QFY16). JLR’s share in profit of Chery JV declined by 8%QoQ.

As a result Adj PAT came in at GBP265m boosted by higher share of Cherry JVprofits and lower taxes, which was partially offset by higher depreciation andlower Fx gains YoY.

Exceptional items included ~GBP50m of recoveries related to Tiajin portexplosion.

Total Capex and Product development spend for the quarter was GBP692m and(12.7% of revenues)

JLR’s 1QFY17 negative FCF was GBP633m, with negative CFO of GBP54m. Thiswas post investment spending of GBP692m and GBP647m of seasonal andlaunch related increases in inventory.

Exhibit 1: Trend in Land Rover’s product mix (incl JV)

4 5 5 6 6 6 5 2 0 11 12 15 14 11 12 12 13 12

21 21 22 24 21 22 19 20 20

14 15 16 17 15 14 14 12 13

17 15 9 13 18 22 25 28 29

33 32 34 27 29 24 25 25 26

1Q

15

2Q15

3Q15

4Q15

1Q16

2Q16

3Q16

4Q16

1Q17

Defender Discovery RR Sport RR FL2/DS Evoque

Source: Company, MOSL

Exhibit 2: Trend in Jaguar’s product mix (incl JV)

- - - - 25

57 42 32 25 22 22 23 18

15

7 10

15 7

53 59 61 67 42

23 37 39

20

39

1Q15

2Q15

3Q15

4Q15

1Q16

2Q16

3Q16

4Q16

1Q17

XE XJ XF F-Type F-Pace Others

Source: Company, MOSL

Tata Motors

27 August 2016 3

Exhibit 3: Trend in JLR’s market mix (incl JV)

17 16 18 20 19 22 20 19 22 17 22 15 25 19 24 17 22 17 19 17 22

22 28 17 25 25 26 31 29 29 19 17 18 19 18 20 16 17 15 13 17 20 19 15 15

1Q

15

2Q

15

3Q

15

4Q

15

1Q

16

2Q

16

3Q

16

4Q

16

1Q

17

N. America UK Europe China ROW

Source: Company

Exhibit 4: Share of China volumes moderate to 20% (incl JV)

21

26 25 24

30 27 28

18 17 18 19 18

20

1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

3Q15

4Q15

1Q16

2Q16

3Q16

4Q16

1Q17

Share of China vols (%)

* Incl Chery JV volumes

Source: Company, MOSL

Exhibit 5: Premium model share at 46% levels

52 55

61

57 60 59

63

59 56

52 50

48 46

1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

3Q15

4Q15

1Q16

2Q16

3Q16

4Q16

1Q17

Share of premium models (%)*

* RR+ RR Sport+ Evoque+ F-Type

Source: Company, MOSL

Exhibit 6: JLR realizations rises marginally QoQ

43,5

94

42,4

58

40,1

11

43,4

33

45,2

11

45,2

46

45,7

90

44,2

24

46,4

85

46,2

42

48,0

05

46,5

48

45,2

06

43,4

60

42,0

04

43,9

91

45,2

16

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

1QFY

16

2QFY

16

3QFY

16

4QFY

16

1QFY

17

Source: Company, MOSL

Exhibit 7: JLR margins impacted by lower incentive in China and negative Fx impact of payables

529

458

531

820

647

809

1,01

7

920

1,08

7

933

1,09

6

1,01

6

821

589

834

1,06

9

672

14.5

13.9

14.0 16.2

15.8 17.5

19.1

17.2

20.3

19.4

18.6

17.4

16.4

12.2

14.4

16.2 12.3

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

1QFY

16

2QFY

16

3QFY

16

4QFY

16

1QFY

17

EBITDA (GBP m) EBITDA Margin (%)

Source: Company, MOSL

JLR: Key takeaways from the call EBITDA margins adj for MTM Fx impact on working capital items was 14%. While Other expenses had Fx loss on realized hedges of GBP123m, there was

commensurate benefit reflecting in sales. JLR would eventually and gradually benefit from favorable GBP as hedges would

restrict benefit in near term, adverse impact of MTM on payables would weighon operating performance in the near term

Other expenses also higher due to launch expense for F-Pace, Evoqueconvertible and XE launch in US.

Lower incentives in China impacted EBITDA margins by 100bp YoY basis. Themanagement indicated that it expects it to be at lower level than in the past.

Tata Motors

27 August 2016 4

China JV: Margins are strong, but will moderate due to additional cost as fullcapacity commissions.

Variable marketing expenses for JLR were under control due to favorableproduct lifecycle

Favorable Fx offers some opportunity to increase volumes. Pension liability: It completed triennial valuations of the pension liabilities.

However, there is not much difference in deficit situation as against earlier. F-Pace has average waiting period of 3-4 months. Evoque convertible might not be volume driver, but should help revive interest

in Evoque By 2020, only small portion of JLR volumes would be from EV/hybrid,but contribution from EV/Hybrid to pick-up substantially post 2020.

Standalone: Revenues in line; Higher staff cost pulls down EBITDA margins S/A volumes (incl Joint operations) increased 8% YoY (-14%QoQ) to 127k units,

driven by 9% YoY growth in CVs while PVs grew by 6% YoY in 1QFY17.Passengercar segment grew by 15% on the back of incremental volumes of newlylaunched Tiago. MHCV volumes grew by 8% YoY while LCV sales continued theirmomentum with a 12% YoY growth.

Realization declined ~5% QoQ (+2% YoY) to INR814k/unit (v/s est. INR839k perunit) due to adverse product mix.

Net sales at INR103.2b (v/s est. INR103.9b) up 11% YoY (-18% QoQ). EBITDA at ~INR6.9b (v/s est ~INR7.6b) grew 22% YoY. EBITDA margins (including joint operations) were at 6.7% (v/s est 7.4%), decline

of 140bp QoQ (+60bp YoY). Raw material cost decline of 80 bps and otherexpense decline of 50 bps was more than offset by a 280 bps rise in staffexpenses.

EBITDA margins of the standalone business (excluding joint operations of TataCummins and Fiat) came in at 5.7% (+100bp YoY) in 1QFY17.

Further, Adj PAT was at INR996m (v/s est~INR 3.35b) declined by 80% QoQprimarily due to higher tax (v/s Tax credit in 4QFY16) and higher depreciationexp (+16% QoQ).

Exceptional item of ~INR1.087b was exchange loss including revaluation offoreign currency borrowings, deposits

S/A net debt reduce to ~INR166b (v/s ~INR137b in 4QFY16). Company has taken a price hike of 1% in June-16 for its CVs (except for ACE

models and its variants)

Exhibit 8: Trend in segment mix Segment 1QFY17 1QFY16 YoY (%) 4QFY16 QoQ (%)

M&HCVs 41,191 37,604 9.5 54,011 -23.7Contribution (%) 32.5 32.1 36.8

LCVs 50,654 46,914 8.0 61,309 -17.4Contribution (%) 39.9 40.0 41.8

Total CVs 91,845 84,518 8.7 115,319 -20.4Contribution (%) 72.4 72.1 78.6

Cars 31,283 27,016 15.8 26,496 18.1 Contribution (%) 24.7 23.1 18.1

UVs 3,711 5,626 -34.0 4,950 -25.0Contribution (%) 2.9 4.8 3.4

Total Volumes 126,839 117,160 8.3 146,766 -13.6

Source: Company, MOSL

Tata Motors

27 August 2016 5

Exhibit 9: Weaker CV mix impacts QoQ realizations

555

5

58

521

5

64

594

5

86

596

6

49

701

6

91

717

7

74

800

8

94

817

8

56

814

(5.7) (8.9) (9.6)(1.6)

7.1

4.9 14.3

15.2 17.9 18.1

20.3

19.3

14.2 29.4 13.9

10.6 1.7

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

FY13 FY14 FY15 FY16 FY17

Avg. Realization Growth YoY %

Source: Company, MOSL

Exhibit 10: EBITDA declines due to higher staff costs

7,74

4

7,33

4

2,33

8

4,02

1 2,

065

1,77

6

-3,3

78

-5,2

81

-2,1

46

-1,4

23

-4,6

40

2,99

3 5,

651

7,09

3

5,68

6 10

,217

6,90

5

7.3 5.9

2.2 3.6

2.3 2.0

(4.3)

(6.2)

(2.8) (1.6)

(5.1)

2.8 6.1

6.8 5.7

8.1

6.7

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

FY13 FY14 FY15 FY16 FY17

EBITDA (INR m) EBITDA Margin (%)

Source: Company, MOSL

Valuation and view Ex-China demand remains strong, JLR to gain share across geographies: FY16

was year of transition for JLR as it would have 3 unprecedented events viz a)own engine plant for the 1st time, b) China manufacturing plant and c) entryinto high volumes with Jaguar XE. Jaguar portfolio has potential to go up 3x involumes led by XE and Crossover F-Pace. China JV has started in 4QFY15,starting with 3 models (XF, Evoque Discovery Sport). These 3 models currentlycontribute 45-50% of China volumes, and as per management it has potential togo up 2.5x over 2-3 years on local production. Volume momentum is expectedto improve driven by Discovery Sport, Jaguar XE and Evoque (in China JV).

China growth normalizing, as transitory issues receding: We expect volumerecovery to continue as it emerges from transitory issues, driven by a)stabilization of Chery JV, b) New XF from 3QFY17, and d) recovery in the market.Despite China's volume growth moderation, it is still expected to outgrow othermarkets with 8-10% CAGR over CY14-20. JLR is expected to outperform in China,driven by strong product pipeline, dominance in the fast growing SUV segmentand dealer network expansion.

JLR’s profitability has many levers: JLR has several levers, both cyclical andstructural, in form of a) favorable Fx, b) operating leverage driven by recovery involumes as transitory issues recede, c) ramp-up in Chery JV, d) full roll-out ofmodular strategy, and e) incremental production from low-cost countries.

CV cycle bottomed out, New launches in PV segment to help revival: CVbusiness has bottomed out. We expect the momentum in MHCV volumes tocontinue in FY17, while LCV volumes have showed signs of recovery; we expectrecovery to strengthen in 2HFY17. We estimate ~23% CAGR in CV volumes overFY16-18E. PV business, after witnessing no major launch since Nano launch in2009, is gearing up for 2 launches every year till 2020. While its Zest and Boltfailed to impress, we believe new launches in the UV space arrest the decline inthe PV business. We estimate ~26% PV volume CAGR over FY16-18E (~17%CAGR de-growth over FY12-15).

Raise EPS by 7/2%: We raise our FY17 EPS estimate by ~8% to factor in forcontinued improvement in Chery JV performance and lower depreciation in JLR.However, sharp cut in S/A EPS due to cut in volumes, impact of mix and higherdepreciation and interest has resulted in FY18 EPS by ~5%.

Tata Motors

27 August 2016 6

Valuation & view: The stock trades at 12.7x/9.4x FY17E/FY18E consolidated EPS.We maintain Buy on stock with TP of INR562 (FY18 SOTP based). We value JLR at4x EV/EBITDA and Indian business at 8x EV/EBITDA.

Exhibit 11: TATA MOTORS: Sum-of-the-parts valuation INR B Valuation Parameter Multiple (x) FY17E FY18E

SOTP Value Tata Motors - Standalone EV/EBITDA 9.0 335 501 JLR (Adj for R&D capitalization) EV/EBITDA 4.0 986 1,173 JLR - Chery JV EBITDA Share EV/EBITDA 4.0 117 172 HV Axles EV/EBITDA 4.0 4 8 HV Transmission EV/EBITDA 4.0 3 6 Tata Technologies EV/EBITDA 4.0 21 24 Tata Daewoo EV/EBITDA 4.0 14 16 Total EV 1,481 1,901 Less: Net Debt (Ex FCCB & TMFL) 218 152 Add: Other Investments Tata Motors Finance P/BV 1 37 41 Other Associates/JVs P/BV 0.75 20 41 Tata Sons 40% discount 78 78 Total Equity Value 1,398 1,909 Fair Value (INR/Sh) - Ord Sh Fully Diluted 412 562 Upside (%) -18.3 11.6 Fair Value (INR/Sh) - DVR EV/EBITDA 9.0 335 501 Upside (%) EV/EBITDA 4.0 986 1,173

Source: MOSL

Exhibit 12: Revised Estimates FY17E FY18E

Key Assumptions Rev Old Chg (%) Rev Old Chg (%) Consolidated Net Sales 2,879 2,915 -1.2 3,242 3,281 -1.2EBITDA 410 427 -3.9 488 503 -3.0EBITDA Margins (%) 14.2 14.6 -40bp 15.0 15.3 -30bpNet Profit 135 125 8.0 183 193 -5.3Cons EPS 39.6 36.7 8.0 53.8 56.8 -5.3JLR (IFRS, GBP M) Volumes ('000 units) incl JV 614 616 -0.3 682 678 0.6 EBITDA 3,640 3,760 -3.2 4,259 4,372 -2.6EBITDA Margins (%) 14.5 15.2 -70bp 15.3 16.0 -70bpNet Profit 1,723 1,545 11.5 2,047 2,084 -1.7Standalone Volumes ('000 units) 586 602 -2.7 735 748 -1.7EBITDA 37 42 -12.2 56 60 -7.7EBITDA Margins (%) 7.4 7.4 0bp 9.0 8.7 40bp Net Profit 3.1 9.4 -66.7 18.4 24.7 -25.6Normal. EPS 6.2 3.3 85.6 16.2 19.1 -15.3

Source: Company, MOSL

Tata Motors

27 August 2016 7

Exhibit 13: Valuations trading at historical average, reflecting improving fundamentals

Source: MOSL Source: MOSL

Comparative valuation CMP Rating TP P/E (x) EV/EBITDA (x) RoE (%) RoCE (%)

Auto OEM's (INR)* (INR) FY17E FY18E FY17E FY18E FY17E FY18E FY17E FY18E Bajaj Auto 2,857 Buy 2,944 20.0 16.3 13.9 11.4 31.2 33.0 30.4 32.2 Hero MotoCorp 3,317 Neutral 3,666 18.1 15.5 11.8 9.9 41.5 39.9 40.5 39.1 TVS Motor 303 Buy 323 24.7 18.9 15.0 11.6 27.1 28.7 28.0 30.2 M&M 1,424 Buy 1,724 19.4 14.4 16.0 12.8 15.4 17.8 12.9 15.1 Maruti Suzuki 4,921 Buy 5,506 22.4 17.9 13.0 10.8 20.3 21.5 27.6 28.9 Tata Motors 504 Buy 558 12.7 9.4 4.6 3.7 15.4 17.8 11.2 13.0 Ashok Leyland 88 Buy 118 13.5 10.4 7.5 5.9 29.8 31.0 21.9 25.2 Eicher Motors 22,327 Buy 27,244 36.0 26.6 28.8 23.5 40.9 40.1 26.1 27.9 Auto Ancillaries Bharat Forge 859 Buy 921 31.3 23.3 15.7 12.8 16.9 20.0 11.6 14.5 Exide Industries 175 Buy 205 19.5 16.9 12.4 10.7 15.3 15.5 15.8 16.2 Amara Raja Batteries 902 Buy 1,038 27.0 21.7 15.8 13.0 24.4 24.7 23.1 23.6 BOSCH 23,703 Neutral 26,512 45.1 31.3 34.9 23.6 18.5 22.8 26.3 31.3 # Nos. are on CY basis

10.9 11.4

9.1 9.4

0

8

16

24

32

Aug-

01

Oct

-02

Dec

-03

Feb-

05

Apr-0

6

Jun-

07

Jul-0

8

Sep-

09

Nov

-10

Jan-

12

Mar

-13

Apr-1

4

Jun-

15

Aug-

16

P/E (x) 15 Yrs Avg(x)5 Yrs Avg(x) 10 Yrs Avg(x)

Negative Earnings

Cycle

1.7

2.5

1.8 2.4

0.0

1.5

3.0

4.5

6.0

Aug-

01

Oct

-02

Dec

-03

Feb-

05

Apr-0

6

Jun-

07

Jul-0

8

Sep-

09

Nov

-10

Jan-

12

Mar

-13

Apr-1

4

Jun-

15

Aug-

16

P/B (x) 15 Yrs Avg(x)

5 Yrs Avg(x) 10 Yrs Avg(x)

Tata Motors

27 August 2016 8

Tata Motors| Story in Charts: Structural JLR story meet cyclical recovery in S/A

Expect JLR (incl JV) volume CAGR of ~12% led by strong growth in FY17 on introduction of Jaguar XE and F-Pace

Source: Company, MOSL

Exhibit 14: Margins to remain stable as volume ramps-up

Source: Company, MOSL

Exhibit 15: JLR’s to remain FCF positive despite high capex plans

2,50

0

2,42

9

3,42

2

3,62

7

3,12

9

4,05

7

4,70

4

-1,5

42

-2,6

09

-2,7

36

-2,6

41

-2,9

47

-3,3

38

-3,6

00

958

-180

686 986 182 720 1,104

FY12 FY13 FY14 FY15 FY16 FY17E FY18E

CFO Capex FCF

Source: Company, MOSL

Exhibit 16: S/A business to recover on economic recovery 5

36

445

343

363

424

502

617

11.6

-17.0 -22.9

5.9 16.7 18.5 22.9

FY12 FY13 FY14 FY15 FY16E FY17E FY18E

Revenues (INR b) Growth (%)

Source: Company, MOSL

Exhibit 17: S/A margins to improve on volume recovery

37 19

(5) (8)

27 37 56

7.0

4.2

-1.4

-2.2

6.5 7.4 9.0

FY12 FY13 FY14 FY15 FY16E FY17E FY18E

EBITDA (INR b) EBITDA Margins (%)

Source: Company, MOSL

Exhibit 18: EPS CAGR of 25% over FY16-18E

37.5 31.2 44.1 43.6 36.9 39.6 53.8

28.9

-16.8

41.3

-1.1

-15.5

7.5

35.7

FY12 FY13 FY14 FY15 FY16E FY17E FY18E

EPS (INR) Growth (%)

Source: Company, MOSL

314

372

430

471

544

614

682

29.1

18.3 15.5

9.5

15.6 12.9 11.1

FY12 FY13 FY14 FY15 FY16 FY17E FY18E

JLR volumes (incl JV; '000 units)

1,98

9

2,33

1

3,39

3

4,13

1

3,31

3

3,64

0

4,25

9

14.7 14.8 17.5 18.9

14.9 14.5 15.3

FY12 FY13 FY14 FY15 FY16 FY17E FY18E

EBITDA (GBP m) EBITDA margin (%)

Tata Motors

27 August 2016 9

Key operating metrics

Exhibit 19: Snapshot of Revenue model 000 units FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E JLR Jaguar 53 54 58 79 76 102 151 165

Growth (%) 11.8 2.0 7.0 37.2 -3.5 33.5 47.7 9.7 % of Total JLR Vols 21.8 17.2 15.5 18.4 16.3 20.0 27.2 27.8

Land Rover 191 260 314 351 394 442 463 517 Growth (%) 30.1 36.6 20.7 11.6 12.4 12.2 4.8 11.6 % of Total JLR Vols 78.2 82.8 84.5 81.6 83.7 86.8 83.4 87.0

Total Volumes 244 314 372 430 471 509 555 594 Growth (%) 25.6 29.1 18.3 15.5 9.5 8.2 9.0 7.0

ASP (GBP '000/unit) 41 43 42 45 46 44 45 47 Growth (%) 20.4 6.1 -1.3 6.3 3.0 -6.2 4.0 3.0

Net JLR Sales (GBP b) 10 14 16 19 22 22 25 28 Growth (%) 51.2 36.9 16.8 22.8 12.8 1.6 13.4 10.2

DOMESTIC MH&CVs 214 221 153 122 143 176 199 230

Growth (%) 27.5 3.4 -31.1 -19.7 16.5 23.6 12.7 15.6 LCVs 295 364 429 299 222 205 226 274

Growth (%) 26.2 23.3 17.8 -30.3 -25.8 -7.7 10.6 20.8 Total CVs 509 585 581 421 365 381 425 503

Growth (%) 26.7 14.9 -0.7 -27.5 -13.5 4.6 11.5 18.4 Total PVs 328 338 229 145 138 131 160 232

Growth (%) 23.0 3.1 -32.2 -36.5 -5.3 -5.1 22.9 44.7 Total Volumes 837 923 810 567 502 512 586 735

Growth (%) 25.2 10.3 -12.2 -30.1 -11.4 1.9 14.4 25.6 ASP (INR 000/unit) 574 581 549 605 723 828 857 839 Net S/A Sales (INR b) 480 536 445 343 363 424 502 617

Growth (%) 35.0 11.6 -17.0 -22.9 5.9 16.7 18.5 22.9 Source: Company, MOSL

Tata Motors

27 August 2016 10

Financials and Valuations

Income Statement (Consolidated) (INR Million) Y/E March 2012 2013 2014 2015 2016 2017E 2018E Total Income 1,656,545 1,888,176 2,328,337 2,631,590 2,755,611 2,879,167 3,242,397 Change (%) 35.6 14.0 23.3 13.0 4.7 4.5 12.6 Expenditure 1,419,540 1,622,487 1,954,308 2,210,452 2,353,245 2,468,969 2,754,784 EBITDA 237,005 265,689 374,029 421,138 402,367 410,198 487,614 % of Net Sales 14.3 14.1 16.1 16.0 14.6 14.2 15.0 Depreciation 56,254 75,693 110,782 133,886 170,142 188,347 218,101 EBIT 180,751 189,996 263,248 287,252 232,225 221,851 269,513 Product Dev. Exp. 13,892 20,216 25,652 28,752 34,804 38,183 41,491 Interest 29,822 35,533 47,338 48,615 46,234 35,731 33,400 Other Income 6,618 8,115 8,286 8,987 9,817 7,332 8,566 PBT 135,339 136,335 188,690 217,026 139,809 158,060 203,187 Tax -400 37,710 47,648 76,429 28,726 41,330 46,579 Effective Rate (%) -0.3 27.7 25.3 35.2 20.5 26.1 22.9 Reported PAT 135,739 98,625 141,042 140,597 111,083 116,730 156,608 Change (%) 47.2 -27.3 43.0 -0.3 -21.0 5.1 34.2 % of Net Sales 8.2 5.2 6.1 5.3 4.0 4.1 4.8 Minority Interest -823 -837 -595 -868 -1,059 -992 -1,126Share of profit of associate 249 1,138 -537 134 213 17,556 27,087 Net Profit 135,165 98,926 139,910 139,863 110,238 133,294 182,569 Adj. PAT 119,008 99,560 141,986 140,465 125,170 134,525 182,569 Change (%) 28.3 -16.3 42.6 -1.1 -10.9 7.5 35.7

Balance Sheet (Consolidated) (INR Million) Y/E March 2012 2013 2014 2015 2016 2017E 2018E Share Capital 6,348 6,381 6,438 6,438 6,792 6,792 6,792 Reserves 320,638 369,992 649,597 556,181 801,035 932,248 1,103,792 Net Worth 326,985 376,373 656,035 562,619 807,827 939,040 1,110,584 Loans 471,490 557,223 549,545 692,115 630,999 617,916 599,832 Deferred Tax -23,743 -24,094 -7,748 -13,900 4,397 4,397 4,397 Capital Employed 777,803 913,206 1,202,038 1,245,167 1,452,105 1,571,227 1,725,813

Gross Fixed Assets 897,791 1,205,654 1,329,282 1,582,066 1,891,371 2,392,226 2,720,226 Less: Depreciation 495,125 570,818 688,154 744,241 875,469 1,063,816 1,281,917 Net Fixed Assets 402,667 634,836 641,128 837,825 1,015,902 1,328,410 1,438,309 Capital WIP 159,458 60,000 332,626 286,401 272,604 70,000 70,000 Goodwill 40,937 41,024 49,788 46,970 48,365 48,365 48,365 Investments 89,177 90,577 106,867 153,367 204,661 222,217 249,304 Curr.Assets 711,679 829,538 1,046,103 1,034,685 1,124,179 1,030,237 1,145,728 Inventory 182,160 209,690 272,709 292,723 333,990 323,413 373,098 Sundry Debtors 82,368 109,427 105,742 125,792 129,900 141,986 159,899 Cash & Bank Bal. 182,381 211,127 297,118 321,158 328,800 226,847 268,241 Loans & Advances 249,952 280,739 273,241 256,948 286,983 291,983 296,983 Current Liab. & Prov. 626,116 742,769 974,474 1,114,081 1,213,607 1,128,002 1,225,893 Sundry Creditors 366,863 447,801 573,157 574,073 636,329 654,715 710,662 Other Liabilities 130,835 134,250 199,707 328,305 372,083 252,420 266,498 Net Current Assets 85,564 86,769 71,629 -79,396 -89,428 -97,766 -80,165Appl. of Funds 777,803 913,206 1,202,038 1,245,167 1,452,105 1,571,227 1,725,813 E: MOSL Estimates

Tata Motors

27 August 2016 11

Financials and Valuations Ratios (Consolidated) Y/E March 2012 2013 2014 2015 2016 2017E 2018E Basic (INR) EPS 37.5 31.2 44.1 43.6 36.9 39.6 53.8 EPS Fully Diluted 37.5 31.2 44.1 43.6 36.9 39.6 53.8 Normalized EPS ^ 21.2 11.4 17.8 14.1 5.6 6.2 16.2 EPS Growth (%) 28.9 -16.8 41.3 -1.1 -15.5 7.5 35.7 Cash EPS 55.2 54.9 78.5 85.2 87.0 95.1 118.0 Book Value (Rs/Share) 103.0 118.0 203.8 174.8 237.9 276.5 327.0 DPS 4.0 2.0 2.0 0.0 0.2 3.0 4.0 Payout (Incl. Div. Tax) % 12.4 7.4 5.3 0.0 0.7 9.1 9.0 Valuation (x) Consolidated P/E 11.5 13.7 12.7 9.4 Normalized P/E 35.8 89.4 81.1 31.2 EV/EBITDA 4.4 4.5 4.6 3.7 EV/Sales 0.7 0.7 0.7 0.6 Price to Book Value 2.9 2.1 1.8 1.5 Dividend Yield (%) 0.0 0.0 0.6 0.8 Profitability Ratios (%) RoE 45.9 28.3 27.5 23.1 18.3 15.4 17.8 RoCE 29.1 17.0 19.2 15.7 14.3 11.2 13.0 RoIC 60.2 30.6 38.7 39.2 32.6 19.3 19.0 Turnover Ratios Debtors (Days) 18 21 17 17 17 18 18 Inventory (Days) 40 41 43 41 44 41 42 Creditors (Days) 81 87 90 80 84 83 80 Asset Turnover (x) 2.1 2.1 1.9 2.1 1.9 1.8 1.9 Leverage Ratio Debt/Equity (x) 1.4 1.5 0.8 1.2 0.8 0.7 0.5

Cash Flow Statement (Consolidated) (INR Million) Y/E March 2012 2013 2014 2015 2016 2017E 2018E OP/(Loss) before Tax 135,165 98,926 139,910 139,863 110,238 138,145 182,569 Int/Div. Received 5,376 8,062 6,933 7,777 9,817 7,332 8,566 Depreciation 56,209 75,648 110,736 133,864 131,228 188,347 218,101 Direct Taxes Paid -17,679 -22,231 -43,083 -41,940 -10,430 -41,330 -46,579(Inc)/Dec in WC -22,801 -680 57,744 -36,718 17,674 -93,614 23,793 Other Items 24,401 64,617 88,983 136,570 3,154 992 1,126 CF from Op Activity 180,670 224,343 361,223 339,415 261,681 199,873 387,575 Extra-ordinary Items 8,549 4,342 7,221 20,191 -18,794 4,851 0 CF after EO Items 189,219 228,684 368,444 359,606 242,888 204,724 387,575 (Inc)/Dec in FA+CWIP -137,829 -187,203 -269,252 -315,396 -295,509 -298,250 -328,000(Pur)/Sale of Invest. -72,976 -54,984 -36,611 -37,570 -51,294 -17,556 -27,087CF from Inv Activity -210,804 -242,188 -305,863 -352,966 -346,803 -315,806 -355,087Issue of Shares 1,386 7 1 0 135,788 5,344 5,344 Inc/(Dec) in Debt 113,054 45,082 30,092 122,288 -61,115 -13,084 -18,084Interest Paid -33,737 -46,560 -61,706 -63,070 -46,234 -35,731 -33,400Dividends Paid -15,031 -15,087 -7,220 -7,204 -818 -12,276 -16,368CF from Fin Activity 65,672 -16,558 -38,832 52,014 27,621 -55,747 -62,508Inc/(Dec) in Cash 44,087 -30,061 23,749 58,655 -76,294 -166,830 -30,020Add: Beginning Bal. 104,244 153,550 142,531 152,629 211,283 134,990 -31,840Closing Balance 148,330 123,488 166,280 211,283 134,990 -31,840 -61,860E: MOSL Estimates

Tata Motors

27 August 2016 12

Corporate profile

Exhibit 1: Sensex rebased

Source: MOSL/Bloomberg

Exhibit 2: Shareholding pattern (%)

Jun-16 Mar-16 Jun-15

Promoter 33.0 33.0 34.4

DII 16.8 19.2 16.5

FII 25.0 22.1 41.9

Others 25.2 25.7 7.3

Note: FII Includes depository receipts Source: Capitaline

Exhibit 3: Top holders Holder Name % Holding

Life Insurance Corporation Of India 7.1

Government Of Singapore 1.9

ICICI Prudential Life Insurance Company Ltd 1.7

Abu Dhabi Investment Authority 1.4

Source: Capitaline

Exhibit 4: Top management

Name Designation

Cyrus P Mistry Chairman

Ratan N Tata Chairman Emeritus

Guenter Butschek Managing Director & CEO

Satish B Borwankar Executive Director

H K Sethna Company Secretary

Source: Capitaline

Exhibit 5: Directors Name Name

Falguni Nayar* Nasser Munjee*

Nusli N Wadia* R A Mashelkar*

Ralf Speth Subodh Bhargava*

Vinesh K Jairath* Ravindra Pisharody

*Independent

Exhibit 6: Auditors Name Type

Deloitte Haskins & Sells LLP Statutory

Mani & Co Cost Auditor

Source: Capitaline

Exhibit 7: MOSL forecast v/s consensus EPS (INR)

MOSL forecast

Consensus forecast

Variation (%)

FY17 39.6 46.8 -15.4

FY18 53.8 55.2 -2.5

Source: Bloomberg

Company description Tata Motors is the largest CV manufacturer in India with 55% market share in MHCV and 37% in LCVs. It also manufactures passenger cars and UVs. In FY09, it acquired Jaguar & Land Rover from Ford for USD2.5b.

TATA MOTORS

COMPANIES

SECTOR UPDATES

TATA MOTORS GALLERY

Tata Motors

27 August 2016 14

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