20-F 1 d261790d20f.htm FORM 20-F Form 20-F
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 20-F

 

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2021

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

For the transition period from                to                

Commission file number: 001-32294

 

 

 

TATA MOTORS LIMITED

(Exact name of Registrant as specified in its charter)

N/A

(Translation of Registrant’s name into English)

 

Republic of India  

Bombay House

24, Homi Mody Street

Mumbai 400 001, India

(Jurisdiction of incorporation or organization)   (Address of principal executive offices)

H.K. Sethna

Tel.: +91 22 6665 7219

Facsimile: +91 22 6665 7790

Email: hks@tatamotors.com

Address:

Bombay House

24, Homi Mody Street

Mumbai 400 001, India

(Name, Telephone, Email and/or Facsimile number, and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of Each Exchange On Which Registered

Ordinary Shares, par value Rs.2 per share*   TTM   New York Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

“A” Ordinary Shares, par value Rs.2 per share

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 3,320,307,765 Ordinary Shares and 508,502,896 “A” Ordinary Shares, including 353,715,165 Ordinary Shares represented by 70,738,981 American Depositary Shares (“ADSs”), outstanding as of March 31, 2021. Each ADS represents five (5) Ordinary Shares as of March 31, 2021.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    ☒  Yes    ☐  No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    ☐  Yes    ☒  No

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ☒  Yes    ☐  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    ☒  Yes    ☐  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ☒    Accelerated filer  ☐    Non-accelerated filer  ☐    Emerging growth company  ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards1 provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  ☒

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.

 

U.S. GAAP  ☐

   International Financial Reporting Standards as issued by the International Accounting Standards Board  ☒   

Other  ☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. Item 17  ☐    Item 18  ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ☐  Yes    ☒  No

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes  ☐    No  ☐

 

*

Not for trading, but only in connection with listed American Depositary Shares, each representing five (5) Ordinary Shares.

 

 

 

 

1 

The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 


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In this annual report on Form 20-F, each of the following terms has the meaning ascribed to it below:

 

   

“ADR” means an American Depositary Receipt evidencing one or more ADSs;

 

   

“BSIV” means Bharat Stage IV, a Bharat stage emission standard instituted by the Government of India;

 

   

“BSVI” means Bharat Stage VI, a Bharat stage emission standard instituted by the Government of India;

 

   

“CNG” refers to compressed natural gas;

 

   

“Commercial Vehicles” or “CVs” means vehicles in the commercial vehicle segment, including SCV & Pickups, MHCVs, ILCVs and CV Passenger Vehicles;

 

   

“Companies Act” refers to the Indian Companies Act, 2013, as amended from time to time, unless stated otherwise;

 

   

“Company” refers to Tata Motors Limited;

 

   

“Core auto entities” means investment in equity accounted investees related to the automotive sector of the Company;

 

   

“Crores” refers to ten million Rs;

 

   

“CV Passenger Vehicles” means commercial Passenger Vehicles, which are passenger carriers in the Commercial Vehicle segment;

 

   

“Earnings Before Other Income, Interest and Tax” is a non-IFRS measure and means earnings before share of profit/(loss) of equity accounted investees (net), Loss/(gains) on sale/write-off of assets and others (net), other income/(loss) (net), foreign exchange gains/(loss) (net), interest income, interest expense and Income tax (expense)/credit;

 

   

“Euro”, “EUR” and “€” mean the currency issued by the European Central Bank;

 

   

“Fiscal” means our fiscal year ending on March 31 of that year;

 

   

“Free Cash Flow” is a non-IFRS measure that equals cash flow from operating activities, less payment for property, plants and equipment and intangible assets, add proceeds from sale of property, plant and equipment, less interest paid, add interest received, add dividend from equity accounted investees of core auto entities and less investment in equity accounted investees of core auto entities;

 

   

“GBP” means the British pound, the lawful currency of the United Kingdom;

 

   

“GVW” means gross vehicle weight;

 

   

“IFRS” means the International Financial Reporting Standards and its interpretations as issued by the International Accounting Standards Board;

 

   

“ILCVs” means intermediate and light Commercial Vehicles, which are vehicles that have a GVW between 3.5 metric tons and 12 metric tons;

 

   

“Ind AS” means the Indian Accounting Standards;

 

   

“Indian GAAP” means the accounting principles generally accepted in India;

 

   

“Indian rupees” and “Rs.” mean the lawful currency of India;

 

   

“JLR” means Jaguar Land Rover;

 

   

“Korean won” means the lawful currency of South Korea;

 

   

“Lakhs” refers to one hundred thousand Rs;

 

   

“Liters” means the measurement equivalent to 61.02 cubic inches of volume, or approximately 1.057 U.S. quarts of liquid measure;

 

   

“LPG” refers to liquified petroleum gas;

 

   

“Metric tons” or “tons” is a measurement equal to 1,000 kilograms or approximately 2,200 pounds;

 

   

“MHCVs” means medium and heavy Commercial Vehicles, which are vehicles that have a GVW of over 12 metric tons;

 

   

“Millimeters” or “mm” means the measurement equal to 1/1000 of a meter. A meter is equal to approximately 39.37 inches and a millimeter is equal to approximately 0.039 inch;

 

   

“Passenger Cars” means vehicles that have a seating capacity of up to five persons, including the driver, that are further classified into the following market categories:

 

 

Compact — length between 3,600 mm and 4,000 mm;

 

 

Executive — length between 4,500 mm and 4,700 mm;

 

 

Luxury — length above 5,000 mm;

 

 

Micro — length up to 3,200 mm;

 

 

Mid-size — length between 4,250 mm and 4,500 mm;

 

 

Mini — length between 3,200 mm and 3,600 mm;

 

 

Premium — length between 4,700 mm and 5,000 mm; and

 

 

Super Compact — length between 4,000 mm and 4,250 mm;

 

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“Passenger Vehicles” means Passenger Cars or Utility Vehicles;

 

   

“Ratio of Net Debt to Shareholders’ Equity” is a non-IFRS measure calculated as (total debt less cash and cash equivalents and mutual fund current portion) divided by equity (including non-controlling interest);

 

   

“Revenue” means the total revenue net of excise duty unless stated otherwise;

 

   

“RMB” and “Chinese Renminbi” mean the lawful currency of the People’s Republic of China;

 

   

“Russian Ruble” means the lawful currency of Russia;

 

   

“SCV” means small Commercial Vehicles;

 

   

“SG$” means the Singapore dollar, the lawful currency of Singapore;

 

   

“Shares” means the Ordinary Shares and the “A” Ordinary Shares of Tata Motors Limited, unless stated otherwise;

 

   

“Small Commercial Vehicles & Pickups” or “SCVs & Pick Ups” means vehicles that have a GVW of up to 3.5 tons;

 

   

“SUV” means sports utility vehicle;

 

   

“TML” refers to Tata Motors Limited, the parent company;

 

   

“UK” and “United Kingdom” mean the United Kingdom of Great Britain and Northern Ireland; and

 

   

“Utility Vehicles” or “UVs” means vehicles that have a seating capacity of five to ten persons, including the driver, which includes SUVs, multi-purpose vehicles and vans.

In addition to the terms defined above:

 

   

References to “we”, “our”, “us” and “Tata Motors Group” are to Tata Motors Limited and its consolidated subsidiaries, except as the context otherwise requires;

 

   

References to “Jaguar Land Rover”, “Jaguar Land Rover business”, “Jaguar Land Rover Group” and “JLR” are to Jaguar Land Rover Automotive Plc and its subsidiaries, except as the context otherwise requires;

 

   

For our Jaguar Land Rover business, references to premium cars and luxury performance SUVs refer to a defined list of premium competitor cars and SUVs;

 

   

Unless otherwise stated, comparative and empirical Indian industry data in this annual report on Form 20-F have been derived from published reports of the Society of Indian Automobile Manufacturers (“SIAM”);

 

   

Figures in tables may not add up to totals due to rounding; and

 

   

All references to websites in this annual report on Form 20-F are intended to be inactive textual reference for information only and information contained in or accessible through any such website does not form a part of this annual report on Form 20-F.

Cautionary Note Regarding Forward-looking Statements

This annual report on Form 20-F contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may”, “will”, “should”, “potential”, “intend”, “expect”, “seek”, “anticipate”, “estimate”, “believe”, “could”, “plan”, “project”, “predict”, “continue”, “future”, “forecast”, “target”, “guideline” or other similar words or expressions. Forward-looking statements are not guarantees of performance and are based on certain assumptions, discuss future expectations, describe plans and strategies, contain projections of results of operations or of financial condition or state other forward-looking information. Our ability to predict results or the actual effect of plans or strategies is inherently uncertain, particularly given the economic environment. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements and you should not unduly rely on these statements. These forward-looking statements involve risks, uncertainties and other factors that may cause our actual results in future periods to differ materially from those forward-looking statements.

Information regarding important factors that could cause actual results to differ materially from those in our forward-looking statements appear in a number of places in this annual report on Form 20-F and the documents incorporated by reference into this annual report on Form 20-F, and include, but are not limited to:

 

   

deterioration or uncertainty in global economic conditions, or in the regions in which we operate;

 

   

the magnitude and the duration of economic disruption as a result of the worldwide COVID-19 pandemic;

 

   

write-offs and impairment of tangible and intangible assets;

 

   

disruptions to our supply chains and shortages of essential raw materials;

 

   

increases in commodities and input prices;

 

   

intensifying competition in the automotive industry;

 

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a significant reliance on key markets by TML and JLR;

 

   

our ability to satisfy changing customer demands by offering innovative products in a timely manner and maintaining product competitiveness and quality;

 

   

our ability to effectively implement or manage our growth strategy to deliver competitive business efficiency;

 

   

liquidity risks, including risks related to changes in our credit ratings;

 

   

the level of regulation of our production facilities and our ability to comply with such regulations and address liabilities under environmental, health and safety laws and regulations;

 

   

risks associated with the automobile financing business;

 

   

deterioration in the performance of any of our subsidiaries, joint ventures or affiliates;

 

   

risks associated with product liability, warranties and recalls;

 

   

fluctuations in the exchange rates and interest rates and hedging arrangements;

 

   

changes or uncertainties in respect of LIBOR and SONIA;

 

   

potential changes to our business through mergers, acquisitions and divestments;

 

   

our ability to successfully grow our business through capital investments;

 

   

the evolution of the electric vehicle market and related opportunities;

 

   

climate change-related risks;

 

   

the performance of our distribution channels;

 

   

demand for premium performance cars and all-terrain vehicles;

 

   

changes in retail consumers’ purchasing power, consumer confidence or corporate customers’ financial condition and willingness to invest in our products;

 

   

labor unrest;

 

   

operational risks, including cybersecurity risks;

 

   

the loss of key personnel;

 

   

political instability, wars, terrorism, multinational conflicts, natural disasters, and epidemics;

 

   

the seasonality of our business;

 

   

the terms of our financing arrangements;

 

   

our future pension payment obligations;

 

   

the loss of any of our confidential information;

 

   

the actions of activist shareholders;

 

   

our licensing arrangements with Tata Sons Private Limited to use the “Tata” brand;

 

   

our ability to protect our intellectual property;

 

   

our compliance with the European General Data Protection Regulation;

 

   

the safety of lithium-ion battery cells used on some of our vehicles;

 

   

the effectiveness of our internal control measures;

 

   

the adequacy of our insurance coverage; and

 

   

other factors beyond our control.

All forward-looking statements included herein are based upon information available to us on the date hereof and we are under no duty to update any of the forward-looking statements after the date hereof to conform these statements to actual results.

 

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Non-IFRS Measures

We use the following non-IFRS performance indicators to monitor financial performance:

Earnings Before Other Income, Interest and Tax

Earnings Before Other Income, Interest and Tax is earnings before share of profit/(loss) of equity accounted investees (net), Loss/(gains) on sale/write-off of assets and others (net), other income/(loss) (net), foreign exchange gains/(loss) (net), interest income, interest expense and income tax (expense)/credit. It is monitored by management for the purpose of performance of income earned by our operations. Earnings Before Other Income, Interest and Tax is presented because management believes this represents the earnings earned by the business of the Company. Reconciliation of our consolidated Earnings Before Other Income, Interest and Tax to our consolidated net income is provided in Item 5.A “Operating and Financial Review and Prospects—Operating Results—Overview.”

Free Cash Flow

Free Cash Flow is measured as cash flow from operating activities, less payments for property, plants and equipment and intangible assets, add proceeds from sale of property, plant and equipment, less interest paid, add interest received, add dividend from equity accounted investees of core auto entities and less investment in equity accounted investees of core auto entities. It is monitored by management for the purpose of quantifying ongoing needs for investments in plants and machinery, products and technologies. Free Cash Flow is presented because management believes this provides investors with a relevant measure of cash available to address our debts, pay dividends and fund capital expenditures and other strategic initiatives. In Fiscal 2021, we changed the definition of Free Cash Flow to better align with other OEMs based on external benchmarking. Reconciliation of our Free Cash Flow to cash flow from operating activities is provided in Item 5.A “Operating and Financial Review and Prospects—Operating Results—Overview.”

Ratio of Net Debt to Shareholders’ Equity

Ratio of Net Debt to Shareholders’ Equity is measured as (total debt less cash and cash equivalent and mutual funds—current) divided by equity (including non-controlling interest). It is monitored by management because it helps assess our debt commitments. Ratio of Net Debt to Shareholders’ Equity is presented because management believes it is a relevant financial measure for investors to understand the leverage employed in our operations and of our ability to obtain financing. Calculation of our Ratio of Net Debt to Shareholders’ Equity is provided in Exhibit 7.1 to this annual report on Form 20-F.

The non-IFRS measures used herein should not be considered in isolation and are not measures of our financial performance or liquidity under IFRS. They may not be indicative of our results of operations, and should not be construed as alternatives for any IFRS measures. Additionally, the non-IFRS measures may not be comparable to other similarly titled measures used by other companies.

Exchange Rate Information

For convenience, some of the financial amounts presented in this annual report on Form 20-F have been translated from Indian rupees into U.S. dollars at the rate of Rs.73.11 to US$1.00, based on the rate in the city of Mumbai as published by the Foreign Exchange Dealers’ Association of India on March 31, 2021.

 

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TABLE OF CONTENTS

 

PART I

            1  
 

Item 1.

    

Identity of Directors, Senior Management and Advisers

     1  
   

A.

  

Directors and Senior Management

     1  
   

B.

  

Advisers

     1  
   

C.

  

Auditors

     1  
 

Item 2.

    

Offer Statistics and Expected Timetable

     1  
   

A.

  

Offer Statistics

     1  
   

B.

  

Method and Expected Timetable

     1  
 

Item 3.

    

Key Information

     1  
   

A.

  

Selected Financial Data

     1  
   

B.

  

Capitalization and Indebtedness

     1  
   

C.

  

Reasons for the Offer and Use of Proceeds

     1  
   

D.

  

Risk Factors

     1  
 

Item 4.

    

Information on the Company

     27  
   

A.

  

History and Development of the Company

     27  
   

B.

  

Business Overview

     30  
   

C.

  

Organizational Structure

     66  
   

D.

  

Property, Plants and Equipment

     69  
 

Item 4A.

    

Unresolved Staff Comments

     73  
 

Item 5.

    

Operating and Financial Review and Prospects

     73  
   

A.

  

Operating Results

     73  
   

B.

  

Liquidity and Capital Resources

     91  
   

C.

  

Research and Development, Patents and Licenses

     103  
   

D.

  

Trend Information

     103  
   

E.

  

Off-balance Sheet Arrangements

     103  
   

F.

  

Tabular Disclosure of Contractual Obligations

     104  
   

G.

  

Safe Harbor

     104  
 

Item 6.

    

Directors, Senior Management and Employees

     104  
   

A.

  

Directors and Senior Management

     104  
   

B.

  

Compensation

     108  
   

C.

  

Board Practices

     109  
   

D.

  

Employees

     114  
   

E.

  

Share Ownership

     118  
 

Item 7.

    

Major Shareholders and Related Party Transactions

     119  
   

A.

  

Major Shareholders

     119  
   

B.

  

Related Party Transactions

     121  
   

C.

  

Interests of Experts and Counsel

     122  
 

Item 8.

    

Financial Information

     122  
   

A.

  

Consolidated Statements and Other Financial Information

     122  
   

B.

  

Significant Changes

     123  
 

Item 9.

    

The Offer and Listing

     123  
   

A.

  

Offer and Listing Details

     123  
   

B.

  

Plan of Distribution

     123  
   

C.

  

Markets

     123  
   

D.

  

Selling Shareholders

     123  
   

E.

  

Dilution

     123  
   

F.

  

Expenses of the Issue

     123  
 

Item 10.

    

Additional Information

     124  
   

A.

  

Share Capital

     124  
   

B.

  

Memorandum and Articles of Association

     124  
   

C.

  

Material Contracts

     132  
   

D.

  

Exchange Controls

     133  
   

E.

  

Taxation

     137  

 

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F.

  

Dividends and Paying Agents

     143  
   

G.

  

Statement by Experts

     143  
   

H.

  

Documents on Display

     143  
   

I.

  

Subsidiary Information

     143  
 

Item 11.

    

Quantitative and Qualitative Disclosures about Market Risk

     143  
 

Item 12.

    

Description of Securities Other than Equity Securities

     143  
   

A.

  

Debt Securities

     143  
   

B.

  

Warrants and Rights

     144  
   

C.

  

Other Securities

     144  
   

D.

  

American Depositary Shares

     144  

PART II

            145  
 

Item 13.

    

Defaults, Dividend Arrearages and Delinquencies

     145  
 

Item 14.

    

Material Modifications to the Rights of Security Holders and Use of Proceeds

     145  
 

Item 15.

    

Controls and Procedures

     145  
 

Item 16A.

    

Audit Committee Financial Expert

     146  
 

Item 16B.

    

Code of Ethics

     146  
 

Item 16C.

    

Principal Accountant Fees and Services

     146  
 

Item 16D.

    

Exemptions from the Listing Standards for Audit Committees

     147  
 

Item 16E.

    

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

     147  
 

Item 16F.

    

Change in Registrant’s Certifying Accountant

     147  
  Item 16G.     

Corporate Governance

     147  
 

Item 16H.

    

Mine Safety Disclosure

     149  

PART III

            149  
 

Item 17.

    

Financial Statements

     149  
 

Item 18.

    

Financial Statements

     149  
 

Item 19.

    

Exhibits

     149  

 

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PART I

 

Item 1.

Identity of Directors, Senior Management and Advisers

A. Directors and Senior Management

Not applicable.

B. Advisers

Not applicable.

C. Auditors

Not applicable.

 

Item 2.

Offer Statistics and Expected Timetable

A. Offer Statistics

Not applicable.

B. Method and Expected Timetable

Not applicable.

 

Item 3.

Key Information

A. Selected Financial Data

Please see Item 5.A “Operating and Financial Review and Prospects—Operating Results” for financial information.

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

This section describes the risks that we currently believe may materially affect our business, financial condition and results of operations. The factors below should be considered in connection with any forward-looking statements in this annual report on Form 20-F. See “Cautionary Note Regarding Forward-looking Statements” on page ii of this annual report on Form 20-F for more information. Although we will make reasonable efforts to mitigate or minimize these risks, one or more of a combination of these risks could materially and adversely impact our business, revenues, sales, net assets, financial condition, results of operations, liquidity, capital resources and prospects.

Risks Associated with Our Business and the Automotive Industry

Deterioration or uncertainty in global economic conditions could have a material adverse impact on our business, sales and results of operations.

The automotive industry could be materially affected by the general economic conditions and developments in India and around the world and investors’ reaction to such conditions and developments.

The automotive industry, in general, is cyclical, and economic slowdowns in recent years have affected the manufacturing sector in India, including the automotive and related industries. Deterioration of key economic metrics, such as the growth rate, interest rates and inflation, reduced availability of competitive financing rates for vehicles, implementation of burdensome environmental and tax policies, work stoppages and increase in freight rates and fuel prices could materially and adversely affect our automotive sales and results of operations. Deterioration in key economic metrics in countries where we have sales operations may result in a decrease in demand for our automobiles, which, in turn, cause automobile prices and manufacturing capacity utilization rates to fall.

We are a global organization and are therefore vulnerable to shifts in global trade and economic policies and outlook. Policies that result in countries withdrawing from trade pacts, increasing protectionism and undermining free trade could substantially affect our ability to operate as a global business. Additionally, negative sentiment towards foreign companies among our overseas customers and employees could adversely affect our sales as well as our ability to hire and retain talented people. A negative shift in either policies or sentiment with respect to global trade and foreign businesses could have a material adverse effect on our business, prospects, results of operations and financial condition.

 

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In the event global economic recovery is slower than expected, or if there is any significant financial disruption, this could have a material adverse effect on our cost of funding, portfolio of financing loans, business, prospects, results of operations, financial condition and the trading price of the Company’s Shares and ADSs.

In July 2020, the United States-Mexico-Canada Agreement came into force. Potential governmental actions related to tariffs or international trade agreements have the potential to adversely impact demand for our products, our costs, customers, suppliers and/or the North American economy or world economy or certain sectors thereof and, thus, our business.

Our Jaguar Land Rover business has significant operations in the United Kingdom, North America, continental Europe and China, as well as sales operations in markets across the globe. If automotive demand softens because of lower or negative economic growth in key markets or due to other factors, Jaguar Land Rover’s business, prospects, financial condition and results of operations could be materially and adversely affected as a result. In addition, there is uncertainty as to whether changes to laws and policies governing international trade, tariffs and duties on foreign vehicle imports will be introduced, which could have a material adverse effect on Jaguar Land Rover’s financial condition and results of operations.

We have been, and may in the future be, adversely affected by the COVID-19 pandemic, the duration and economic, governmental and social impact of which is difficult to predict, and which may materially harm our business, prospects, financial condition and results of operations.

The COVID-19 pandemic and associated efforts to contain the spread of the disease have caused significant disruption, volatility and uncertainty in the global economy, including the automotive industry, and it is difficult to predict with certainty the full impact of the COVID-19 pandemic on our business, financial condition and results of operations.

Our operations have been impacted as a result of the COVID-19 pandemic. At various times over the course of Fiscal 2021, the Company and Jaguar Land Rover enacted temporary plant shutdowns and implemented work-from-home protocols for employees who were able to work remotely in various jurisdictions, including India and the United Kingdom, to ensure public safety and to comply with government guidelines in various geographies. These shutdowns have caused and could continue to cause disruptions in our business and have negative effects on our cash flows primarily because our operations generate less revenue during shutdowns while continuing to incur costs. In recent months, there has been a significant resurgence in COVID-19 cases in India. In order to curb the spread of infections, several states have imposed varying levels of travel restrictions, lockdowns of cities and wider provinces, business closures and strict social distancing measures. These new measures have already caused disruption to our manufacturing operations in India. For example, localized lockdowns have temporarily impacted supply chain, while, in certain areas, dealerships have been closed. As a result of the COVID-19 pandemic, our sales volumes for our Indian business decreased by 41% and 63% in April and May 2021, respectively, compared to March 2021 levels. We expect a weaker first quarter Fiscal 2022 for our Indian business and expect sequential recovery during the year as the COVID-19 pandemic subsides and COVID-19 pandemic-related restrictions are gradually eased. While there have been short-term challenges in demand as a result of the COVID-19 pandemic and we anticipate recovery as economy unlocks, our passenger segment (buses) in Commercial Vehicles has been severely impacted with industry sales volumes reducing by more than 75% in Fiscal 2021. There is a risk that this segment may take longer to show signs of recovery, as schools and educational centers may take longer to reopen or return to pre-pandemic attendance levels, and an increasing number of office workplaces are extending work-from-home arrangements or other flexible work arrangements.

In addition, the COVID-19 pandemic is also having an impact on the health and well-being of our employees and some of our employees have lost their lives as a result of the pandemic. This could affect the morale and well-being of our employees and we may be compelled to provide additional support to the families of those people who have lost their lives. For instance, we have continued our policy of making one-time payments representing 20 months of basic salary (i.e., total monthly fixed pay excluding allowances and perquisites) and a monthly allowance representing 50% of the basic salary until superannuation to the families of employees who lost their lives due to COVID-19. The Company has revised this policy in June 2021 and for white collar employees, a monthly allowance of 30% of total fixed payment is being done instead on 50% of the basic salary. For blue collar employees, Tata Motors Limited will be providing education assistance to the children of such employees. These policies has been revised retrospectively w.e.f. April 1, 2020. We also provide medical insurance to the dependants of employees till employee’s date of superannuation. We have initiated vaccination drive for our employees and dependent family members. In addition, we have announced payments to temporary (contractual) workforce during periods of lockdown and, in the case of employees diagnosed with COVID-19, we are granting special leave. While we have been engaging with the Unions and workmen on an ongoing basis and they have been very collaborative during these challenging times, we may face challenges in our industrial relations relating to the employee matters relating to the COVID-19 pandemic and the uncertainties involved.

 

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As of the date of this annual report on Form 20-F, while there have been disruptions as a result of the COVID-19 pandemic and semiconductor shortages, we are managing the situation dynamically and plants are functioning with rigorous and clearly defined health and safety protocols. In addition, as a result of the restrictions imposed by governments in affected countries and negative consumers’ reaction to the COVID-19 pandemic in general, during the course of Fiscal 2021 and, more recently, in India following the surge in COVID-19 cases since March 2021, showroom attendance at our dealers dropped significantly and many dealers temporarily ceased operations, thereby reducing demand for our products. As of the date of this annual report on Form 20-F, over 91% of Jaguar Land Rover retailer sites are either fully or partially open and continue to operate a click and delivery service to enable outgoing sales, while over 30% of Tata Motors retailer sites have reopened.

The supply arrangements for raw materials have been, and may continue to be, impacted as a result of the COVID-19 pandemic. We may be compelled to provide additional support for our suppliers as a result of the COVID-19 pandemic.

Our financial condition and results have also been affected as a result of the COVID-19 pandemic. As part of our mitigating actions, we implemented rigorous cost and capital expenditure control measures for our Indian business and achieved cumulative cash and cost savings of Rs.93,000 million against targets of Rs.60,000 million in Fiscal 2021 (based on analytically derived unaudited estimates comprising savings of Rs. 26,000 million in investment spending, Rs. 45,000 million in working capital and Rs. 22,000 million in cost and profits against targets of Rs. 30,000 million, Rs. 15,000 million and Rs. 15,000 million, respectively). We continue to monitor the evolving COVID-19 pandemic situation in India and undertake necessary steps for the rationalisation of Capital expenditure and implementation of further cash improvement measures. Tata Motors Limited’s total product and other investment spending is expected to be in the range of Rs. 35,000 million in Fiscal 2022. JLR’s focus has been on conserving cash and prioritizing capital expenditure on key products. As part of Jaguar Land Rover’s Project Charge and Charge+ programs, GBP2.5 billion of cost and cash efficiencies (based on analytically derived unaudited estimates comprising of GBP0.4 billion in working capital, GBP1.0 billion in investment and GBP1.1 billion in cost and profits) were achieved in Fiscal 2021, leading to cumulative savings of GBP6 billion (based on analytically derived unaudited estimates comprising of GBP1.0 billion in working capital, GBP2.9 billion in investment and GBP2.1 billion in cost and profits) over the duration of the Charge and Charge + programs from Fiscal 2019 to Fiscal 2021. Capital expenditure guidance for JLR in Fiscal 2022 is around GBP2.5 billion with the refocus transformation program announced under the Reimagine strategy expected to continue to maintain the financial discipline successfully deployed previously under Project Charge and Charge+. See Item 4.B “Information on the Company—Business Overview—Our Strategy—Jaguar Land Rover’s Reimagine strategy” for more information.

Further, the COVID-19 pandemic and the resulting business disruptions in several jurisdictions where we operate had and may continue to have a material adverse impact on our operations, liquidity, business, financial conditions and/or credit ratings (see Item 5.B “Operating and Financial Review and Prospects—Liquidity and Capital Resources—Principal Sources of Funding Liquidity” for further information). Any future impact on our business may take some time to materialize and certain levels of disruption are expected for Fiscal 2022.

Even after the COVID-19 pandemic subsides, we may continue to face uncertainties regarding the potential impact of variants of COVID-19 and sustainability of any economic recovery in the jurisdictions in which we operate, as well as experience an adverse impact to our business as a result of its global economic impact, including any recession that has occurred or may occur. Specifically, difficult macroeconomic conditions, such as decreases in per capita income and level of disposable income, increased and prolonged unemployment or a decline in consumer confidence as a result of the COVID-19 pandemic, could have a continuing adverse effect on demand for our products, as well as limit or significantly reduce points of access to such products.

Write-offs and impairment of tangible and intangible assets may have a material adverse effect on our results of operations.

Designing, manufacturing and selling vehicles is capital intensive and requires substantial investments in tangible and intangible assets such as research and development, product design and engineering technology. We review the value of our tangible and intangible assets to assess, on an annual basis or trigger events basis, whether the carrying amount for an asset is less than the recoverable amount for that asset. Such reviews are based on underlying cash-generating units (“CGUs”) (such as Commercial Vehicles, Passenger Vehicles, Jaguar Land Rover and Vehicle Financing), either based on value in use (“VIU”) or fair value less cost of disposal of an asset. As a result of shifting focus to the Reimagine strategy announced by our Jaguar Land Rover business in February 2021 a total of GBP1,486 million (Rs.149,943 million) was recorded in the fourth quarter of Fiscal 2021 comprising of non-cash write-downs of GBP952 million (Rs.96,061 million) for previously planned products (capitalized as property, plant and equipment and intangible assets) that will not be completed and GBP534 million (Rs.53,882 million) of other restructuring costs. See Item 4.B “Information on the Company—Business Overview—Our Strategy—Jaguar Land Rover’s Reimagine strategy” for more information. We may bear further impairment losses in the future if the carrying amount of tangible and intangible assets exceeds the recoverable amount, which could have a material adverse effect on our business, prospects, financial condition and results of operations.

 

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Disruptions to our supply chains and shortages of essential raw materials may adversely affect our production and results of operations.

We rely on third parties to source raw materials, parts and components used in the manufacture of our products. At the local level, we rely on smaller enterprises where the risk of insolvency is greater. In addition, for some parts and components, we are dependent on a single source. Our ability to procure supplies in a cost-effective and timely manner or at all is subject to various factors, some of which are not within our control. Furthermore, there is a risk that manufacturing capacity does not meet the sales demand, thereby compromising our business performance. Given the time frames and investments required for any adjustment to the supply chain, there is no near-term remedy for such a risk. While we manage our supply chain as part of our supplier management process, any significant problems or shortages of essential raw materials in the future could adversely affect our results of operations.

The ongoing COVID-19 pandemic may lead to further disruptions in the supply chains in India and globally. Our suppliers of critical components are located across the world and some of them have declared provisions related to force majeure under relevant contracts. Thus, we expect disruptions, at uncertain frequencies, in operations at our global and Indian tier 1, 2 and 3 suppliers, leading to inconsistent supplies.

In response to the COVID-19 pandemic, various national, state, and local governments where we and our suppliers operate issued decrees prohibiting certain businesses from continuing to operate and certain workers from reporting to work. Those decrees have resulted in supply chain disruptions and higher absenteeism in our facilities or our suppliers’ factories. It remains unclear how long these decrees will remain in place, whether decrees will be re-imposed, what additional decrees may be instituted, and the impact they may have on our company and our suppliers.

We may be compelled to provide additional support for our suppliers as a result of the COVID-19 pandemic. We are working closely with our suppliers to monitor the risks by, among other matters, defining inventory maintenance norms, building safety stocks, exploring localization options and exploring alternative sources.

Deterioration in automobile demand and lack of access to sufficient financial arrangements for our supply chain could impair the timely availability of components to our business. In addition, if one or more of the other global automotive manufacturers were to become insolvent, this would have an adverse impact on the supply chains and may further adversely affect our results of operations. Jaguar Land Rover is also exposed to supply chain risks relating to lithium-ion cells, which are critical for its electric vehicle production. Any disruption in the supply of battery cells from such suppliers could disrupt production of our vehicles and delay the rollout of our strategic initiatives, including the Reimagine strategy, which envisions launch of the all-electric Land Rover model in 2024 (see Item 4.B “Information on the Company—Business Overview—Our Strategy—Jaguar Land Rover’s Reimagine strategy” for more information). The severity of this risk is likely to increase as we and other manufacturers expand the production of electric vehicles and the demand for such vehicles increases.

Additionally, many major automotive companies have been experiencing a shortage of semiconductors, used in the production of automobiles, charging stations and other components of electric vehicles. Jaguar Land Rover, like other automotive manufacturers, is currently experiencing COVID-19 pandemic-related supply chain disruptions, including as a result of the global availability of semiconductors, which is having an impact on its production schedules and ability to meet global demand for some of its vehicles. As a result, Jaguar Land Rover has adjusted production schedules for certain vehicles from April 26, 2021, and the manufacturing facilities at Castle Bromwich and Halewood are operating a limited period of non-production until semiconductor supply pressures ease. A prolonged worldwide semiconductor shortage could also impact the production at other plants. Any prolonged shortages in the semiconductor industry could affect Jaguar Land Rover’s business, in particular in the rollout of Jaguar Land Rover’s Reimagine strategic initiative for expansion into electric vehicles which use roughly four to six times the amount of semiconductors used in the average vehicle today. For our Indian business, while the impact on production is relatively muted at present, however, in the event of a prolonged semiconductor shortage, our Indian production could be affected, which would materially affect our business, financial condition and results of operations. Various mitigation steps such as close engagement with semiconductor suppliers, evaluating alternate designs, aligning production and making changes in product configurations are being deployed.

We have also entered into agreements for the purchase of components from certain suppliers. If we procure lower quantities than committed, we may have to record provisions towards such contracts, thereby impacting our financial condition and results of operations.

 

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Increases in commodities and input prices may have a material adverse effect on our results of operations.

We purchase a wide range of raw materials to enable our production operations. In Fiscal 2021 and Fiscal 2020, the consumption of raw materials, components aggregates and purchase of products for sale (including changes in inventory) constituted 63.8% and 64.4%, respectively, of our revenues. Prices of commodity items used in manufacturing automobiles, including steel, aluminum, copper, zinc, rubber, platinum, palladium and rhodium, have become increasingly volatile in recent years. Prices of commodity items such as steel, non-ferrous metals, precious metals, rubber and petroleum products have generally risen in recent years and may significantly rise in the future.

The COVID-19 pandemic has had a significant impact on the supply of precious metals as certain countries where such precious metals are mined had prolonged lockdown. Thereafter increased demand for personal mobility has created supply side constraint for these metals.

In addition, we are exposed to the risk of contraction in the supply, and a corresponding increase in the price of rare earth metals we use in the production of vehicle electronics. Rare earth metal prices and supply remain uncertain. China, which is currently the largest producer of rare earths in the world, has, in the past, limited the export of rare earths from time to time.

If we are unable to find substitutes for such raw materials or pass price increases on to customers by raising prices, or to safeguard the supply of scarce raw materials, our vehicle production, business and results from operations could be materially affected.

We are also exposed to supply chain risks relating to semiconductors and lithium-ion cells which are critical for our electric vehicle production. Any disruption in the supply of auto chips, battery charging systems or battery cells from such suppliers could disrupt production of our vehicles. The severity of this risk is likely to increase as we and other manufacturers increase electric vehicle production.

While we continue to pursue cost-reduction initiatives, an increase in commodity prices and the prices of input materials could severely impact our profitability to the extent such increase cannot be absorbed by the market through price increases and/or could also have a negative impact on demand. For example, in recent months, there has been significant increase in the price of raw materials, especially steel. In addition, because of intense price competition and fixed costs base, we may not be able to adequately address changes in commodity prices even if they are foreseeable.

We manage these risks through the use of fixed supply contracts with tenor up to 12 months and the use of financial derivatives pursuant to a defined hedging policy, where possible (see “—Exchange rate and interest rate fluctuations and hedging arrangements could materially and adversely affect our financial condition and results of operations”). However, these arrangements may not adequately protect us against these risks.

Intensifying competition could materially and adversely affect our business, prospects, financial condition and results of operations.

The global automotive industry is highly competitive, and competition is likely to further intensify, particularly in the premium automotive categories, including from new industry entrants. Some of our competitors based in the European Union may gain a competitive advantage that would enable them to benefit from their access to the European Union single market. There is no assurance that we will be able to compete successfully in the global automotive industry in the future

We also face strong competition in the Indian market from domestic and foreign automobile manufacturers. Improving infrastructure and growth prospects in India, compared to those of other mature markets, have attracted a number of international companies to India, either through joint ventures with local partners or through independently owned operations in India. International competitors may bring with them international experience, global scale, advanced technology and significant financial resources. Consequently, domestic competition is likely to further intensify in the future. We have seen increased competition for our Commercial Vehicles business for several years which has placed some pressure on our market share of the segment. If our share of this market segment is substantially impacted, our business, prospects, financial condition and results of operation may be materially and adversely affected. There is no assurance that we will be able to implement our future strategies in a way that will mitigate the effects of increased competition in the Indian automotive industry.

In addition, if our competitors consolidate or enter into other strategic partnerships or joint ventures, they may be able to achieve greater economies of scale. Some of our competitors have formed such strategic alliances in recent years. If our competitors are able to benefit from the cost savings offered by consolidation or strategic partnerships, our competitiveness could be adversely affected. Further, our growth strategy relies on the expansion of our operations in less mature markets abroad, where we may face significant competition and higher than expected barriers to entry.

 

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A significant reliance on key markets by both TML and Jaguar Land Rover increases the risk of a negative impact from reduced customer demand in those countries.

We rely on certain key markets, including the United Kingdom, China, North America, India and continental Europe, from which we derive a substantial portion of our revenues. A decline in demand for our vehicles in these major markets may significantly impair our business, financial condition and results of operations. For example, adverse public perceptions towards diesel-powered vehicles, resulting from emissions scandals and tax increases on diesel vehicles, have precipitated a sharp fall in diesel vehicle sales, primarily in the United Kingdom and the European Union. In addition, our strategy, which includes new product launches and expansion into growing markets, may not be sufficient to mitigate a decrease in demand for our products in mature markets in the future, which could have a significant adverse impact on our financial performance.

Our future success depends on our ability to satisfy changing customer demands by offering innovative products in a timely manner and maintaining product competitiveness and quality.

New technologies, climate change concerns, increases in fuel prices and certain government regulations have resulted in changes in customer preferences and have encouraged customers to look beyond standard purchasing factors (such as price, design, performance, brand image and features). Customer preferences in certain more mature markets have trended towards smaller and more fuel-efficient or electric and environmentally friendly vehicles. Such consumer preferences could materially affect our ability to sell premium Passenger Cars and large or medium-sized all-terrain vehicles at current or target volume levels, and could have a material adverse effect on our general business activity, net assets, financial position and results of operations.

A shift in consumer demand from SUVs toward compact and mid-size Passenger Cars, whether in response to higher fuel prices or other factors, could adversely affect our profitability. Conversely, if the trend in consumer preferences for SUVs holds, we could face increased competition from other carmakers as they adapt to the market and introduce their own SUV models, which could materially and adversely impact our business, financial condition or results of operations. Our operations may also be significantly affected if we fail to develop, or experience delays in our planned rollout of, fuel-efficient and electric vehicles and certain technologies that reflect changing customer preferences and meet the specific requirements of government regulations. Our competitors may gain significant advantages if they are able to offer products satisfying customer needs or government regulations earlier than we are able to, which could adversely affect our business, prospects, financial condition and results of operations.

Further, there is no assurance that our new models will meet our sales expectations, in which case we may be unable to realize the intended economic benefits of our investments, which would materially affect our business, results of operations and financial condition. In addition, there is a risk that our quality standards can be maintained only by incurring substantial costs for monitoring and quality assurance. A decrease in the quality of our vehicles (or public perception of such a decrease) could damage our image and reputation as a premium automobile manufacturer and materially affect our business, prospects, financial condition and results of operations. Furthermore, non-traditional market participants and/or unexpected disruptive innovations may disrupt the established business model of the industry by introducing new technologies, distribution models and methods of transportation.

There is also a risk that the capital invested on researching and developing new technologies, including autonomous, connected and electrification technologies, or the capital invested in mobility solutions to overcome and address future travel and transport challenges, will, to a considerable extent, have been spent in vain, because the technologies developed or the products derived therefrom are unsuccessful in the market or exhibit failures that are impracticable or too costly to remedy or because competitors have developed better or less expensive products. It is possible that we could then be compelled to make new investments in researching and developing other technologies to maintain our existing market share or to win back the market share lost to competitors.

In addition, product development cycles can be lengthy, and there is no assurance that new designs, including electric and hydrogen propelled vehicles will lead to revenues from vehicle sales, or that we will be able to accurately forecast demand for our vehicles, potentially leading to inefficient use of our production capacity. Additionally, our high proportion of fixed costs, due to our significant investment in property, plants and equipment, further exacerbates the risks associated with incorrectly assessing demand for our vehicles.

If we are unable to effectively implement or manage our growth strategy and strategy to deliver competitive business efficiency, our business, prospects, financial condition and results of operations could be materially and adversely affected.

As part of our growth strategy, we may open new manufacturing, research or engineering facilities, expand existing facilities, add additional product lines or expand our businesses into new geographical markets that feature higher growth potential than many of the more mature automotive markets in developed countries.

 

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While Tata Motors Limited has undertaken robust turnaround actions, its future strategy focuses on accelerating the turnaround and achieving a sustainable transformation by emphasizing strong product development, sales enhancement, reducing costs and achieving bottom line improvement. There are several key actions in progress, including further developing design language, rationalizing supply base and building connected supply chain for better efficiencies, seeking best opportunities to make technology affordable, introducing new features for benefit of customers, driving manufacturing efficiencies, building a strong performance-oriented culture and using data analytics and leveraging on new technologies In February 2021, Jaguar Land Rover also announced the shift in focus to the Reimagine strategy including the introduction of the first all-electric Land Rover vehicle in 2024 followed by a further five Land Rover models with a full battery electric option by 2026. At the same time, Jaguar will emerge as a pure-electric only brand from 2025. The Reimagine strategy also targets the production of more sustainable and fully electric luxury vehicles including the ambitious goal of having a fully electric fleet of luxury vehicles by the end of the decade and 100% of sales from pure battery electric vehicles by 2036, as well as striving toward achieving net zero carbon emissions across its supply chain, among other environmentally driven strategies by 2039 (see Item 4.B “Information on the Company—Business Overview—Our Strategy—Jaguar Land Rover’s Reimagine strategy” for more information). Expanding into electric vehicles with the goal of completely phasing out Jaguar Land Rover’s pure internal combustion engine line of vehicles within the next ten years involves many risks, including rapidly changing consumer preferences and technological advances. The technology surrounding the engines, batteries, and charging times of electric vehicles remains in its initial stages, and as such, it may not grow in the way that we have predicted for our strategic initiatives to be successful. For example, Jaguar Land Rover may not be able to develop sufficiently efficient batteries before its competitors or may not be able to develop sufficiently efficient batteries at all. As with most new technological advances, Jaguar Land Rover may also face competition with dueling software and hardware technologies in electric vehicles, which could lead to the dominance of one product in the market causing the extinction of the other. If Jaguar Land Rover is unable to develop competitive models of electric vehicles or fails to meet its projected timeline, its business, prospects, financial condition and results of operations could be adversely affected. Moreover, rapid technological growth and shifts in consumer demand for the latest product could lead to electric vehicles being replaced by the next class of technologically advanced vehicles sooner than anticipated. If electric vehicles do not become the market standard, or are quickly phased out, Jaguar Land Rover may not recoup costs associated with developing an all-electric fleet of Jaguar Land Rover vehicles.

Additionally, we face a range of risks generally inherent in our business strategies that could adversely affect our ability to achieve these objectives, including, but not limited to: the potential disruption of our business; the uncertainty that we may not be able to meet or anticipate consumer demand; the uncertainty that a new business will achieve anticipated operating results; the difficulty of managing the operations of a larger company; the difficulty of competing for growth opportunities with companies that have greater financial resources than we have; and other similar operational and business risks. More specifically, our international businesses face a range of risks and challenges, including, but not limited to: language barriers, cultural differences, inherent difficulties and delays in contract enforcement and the collection of receivables under the legal systems of foreign countries, the risk of non-tariff barriers, regulatory and legal requirements, environmental permits and other similar types of governmental consents, liquidity, trade financing or cash management facilities, export and import restrictions, multiple tax regimes, foreign investment restrictions, foreign exchange controls and restrictions on repatriation of funds, other restrictions on foreign trade or investment sanctions imposed by the United States, the United Nations or other governments or authorities, the burden of complying with a wide variety of foreign laws and regulations and other similar operational and business risks.

If we are unable to manage risks related to our expansion and growth in new geographical markets and fail to establish a strong presence in high growth markets, our business, prospects, financial condition and results of operations could be adversely affected.

We are exposed to liquidity risks, including risks related to changes in our credit rating, which could adversely affect the value of our debt securities, finance costs and our ability to obtain future financing.

Our main sources of liquidity are cash generated from operations, existing notes, external debt in the form of factoring discount facilities and other revolving credit facilities. However, conditions in credit markets could deteriorate (including as a result of higher oil prices, excessive public debt, significant defaults, the COVID-19 pandemic or for any other reasons) and lower consumer demand may adversely affect both consumer demand and the cost and availability of finance for our business and operations. See Item 5.B “Operating and Financial Review and Prospects—Liquidity and Capital Resources—Principal Sources of Funding Liquidity—Loan Covenants” for more information.

We are also subject to various types of restrictions or impediments on the ability of our companies in certain countries to transfer cash across our companies through loans or dividends. These restrictions or impediments are caused by exchange controls, withholding taxes on dividends and distributions and other similar restrictions in the markets in which we operate. The transfer of cash is also subject to certain restrictions on cash pooling, intercompany loan arrangements or interim dividends in certain jurisdictions.

Any credit ratings assigned to us or our debt securities may not reflect the potential impact of all risks related to structural, market, additional risk factors discussed and other factors that may affect the value of our debt securities. Credit rating agencies continually review the ratings they have assigned and their ratings may be subject to revision, suspension or withdrawal by the rating agency at any time. A downgrade in our credit rating may negatively affect our ability to obtain future financing to fund our operations and capital needs, which may affect our liquidity. It may also increase our financing costs by increasing the interest rates of our outstanding debt or the interest rates at which we are able to refinance existing debt, incur additional debt or may require us to prepay part of the outstanding debt. A credit rating is not a recommendation to buy, sell or hold securities.

 

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Our production facilities are highly regulated and we may incur significant costs to comply with, or address liabilities under, environmental, health and safety laws and regulations applicable to them.

Our production facilities are subject to a wide range of increasingly strict environmental, health and safety requirements. These requirements address, among other things, air emissions, wastewater discharges, releases into the environment, human exposure to hazardous materials, the storage, treatment, transportation and disposal of wastes and hazardous materials, the investigation and clean-up of contamination, process safety and the maintenance of health and safety conditions in the workplace. Many of our operations require permits and controls to monitor or reduce pollution. We have incurred, and will continue to incur, substantial ongoing capital and operating expenditures to ensure compliance with current and future environmental, health and safety laws and regulations or their more stringent enforcement. Violations of these laws and regulations could result in the imposition of significant fines and penalties, the suspension, revocation or non-renewal of our permits, production delays or limitations, imposition of terms of imprisonment, or the closure of our plants. Other environmental, health and safety laws and regulations could impose restrictions or onerous conditions on the availability or the use of raw materials we need for our manufacturing process. Violations of such laws and regulations may occur, among other ways, from errors in monitoring emissions of hazardous or toxic substances from our vehicles or production sites into the environment, such as our use of incorrect methodologies or defective or inappropriate measuring equipment, errors in manually capturing results, or other mistaken or unauthorized acts of our employees, suppliers or agents.

Our manufacturing units must ensure compliance with various environmental statutes, including, in India, the Water (Prevention and Control of Pollution) Act 1974, the Air (Prevention and Control of Pollution) Act 1981, the Environment Protection Act 1986 and the Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016, as well as the rules and regulations implemented under such legislation. The Corporate Average Fuel Economy (“CAFE”) standards applicable to M1 category vehicles required us to demonstrate CAFE compliance for our passenger vehicles, commercial vehicles and electric vehicles M1 models. Any non-compliance could lead to penalties, product recalls and/or other punitive measures. Through the use of the CAFE calculator, we regularly monitor production volumes and process to ensure that organizational level CAFE compliance (which will require us to produce enough fuel-efficient models to compensate for those models having higher CO2 emissions in g/km) is established at all times during the year. In addition, to support our compliance obligations, our overall product portfolio needs to be enhanced with the incorporation of electric and hybrid vehicles as well as the inclusion of environmental-friendly technological features in existing and forthcoming models.

In 2016, the Indian Ministry of Environment, Forests & Climate Change (“MoEFCC”) re-vamped several national level legislations governing waste management, including the Plastic Waste Management Rules 2016, the Bio-Medical Waste (BMW) Management Rules 2016, e-waste Management Rules 2016 and the Construction and Demolition (C&D) Waste Management Rules 2016. All our plants have analyzed these new regulations for their applicability and aligned their compliance practices accordingly.

Our business and manufacturing processes result in the emission of greenhouse gases such as carbon dioxide. We expect legal requirements to reduce greenhouse gases to become increasingly more stringent and costly to address over time. For example, the European Union Emissions Trading Scheme (“EU ETS”), a European Union-wide system in which allowances to emit greenhouse gases are issued and traded, is now in Phase IV and currently applies to three manufacturing facilities in the United Kingdom, and to our Slovakia manufacturing facility. The free allocation of EU ETS carbon allowances significantly reduces in Phase 4 of the scheme (from start of 2021) and, as a result, we will be required to purchase an increased number of allowances, potentially at substantial cost. This forecast is subject to evaluation by the United Kingdom post-Brexit as it begins to design its own carbon market. In any event, there will be a cost to purchase credits in Slovakia and that will be covered following EU ETS permit application and issue.

In the United Kingdom, the Climate Change Agreement (“CCA”) covers our three vehicle manufacturing plants and one of our Special Operations facilities. Under the CCA, we are required to deliver a 15% reduction in energy use per vehicle by 2020 compared to the 2008 baseline. In addition, in the United Kingdom we are required to comply with the Streamlined Energy and Carbon Reporting Scheme (“SECR”) which replaced reporting under the previous regime in 2020 and is compulsory for operations of entities in the United Kingdom.

The Best Available Techniques Reference Document (“BREF”) for Jaguar Land Rovers paint shops has been under review and in 2019 changes were proposed, including the lowering of permissible emissions to 30g/m2. Although the United Kingdom has adopted all EU legislation, including any EU regulation, as it had effect in EU law immediately before Brexit, there can be no assurance that it will not deviate from the EU standards in the future. In any event, our paint shop in Slovakia will need to meet this requirement.

 

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Many of our sites have an extended history of industrial activity. We may be required to investigate and remediate contamination at those sites, as well as at properties we formerly operated, regardless of whether we caused the contamination or the activity causing the contamination was legal at the time it occurred. For example, some of our buildings at our Solihull plant and other plants in the United Kingdom are undergoing an asbestos removal program in connection with ongoing refurbishment and rebuilding. In our overseas facilities prior to purchase, we undertook studies that informed us of the presence of contamination or otherwise in the ground prior to development. In Brazil, our manufacturing site is adjacent to a facility (the “Itatiaia West” site), where organic solvent contamination of the ground had previously occurred. We have purchased the Itatiaia West site and are currently progressing relevant permits for operation and developing plans for further remediation of the organic solvent contamination. The Itatiaia West site is listed on the Environmental Regulators site (Instituto Estadual do Ambiente) as contaminated. Some of these historical issues are being addressed in conjunction with our site development works whilst others are subject to ongoing treatment regimes.

In connection with contaminated properties, as well as our operations generally, we also could be subject to claims by government authorities, individuals and other third parties seeking damages for alleged personal injury or property damage or damage to natural resources resulting from hazardous substance contamination or exposure caused by our operations, facilities or products. The discovery of previously unknown contamination, or the imposition of new obligations to investigate or remediate contamination at our facilities, could result in substantial unanticipated costs. We could be required to establish or substantially increase financial reserves for such obligations or liabilities and, if we fail to accurately predict the amount or timing of such costs, the related adverse impact on our business, prospects, financial condition or results of operations could be material.

We are subject to risks associated with the automobile financing business.

The sale of our Commercial Vehicles and Passenger Vehicles is heavily dependent on funding availability for our customers. In recent years, rising delinquencies and early defaults have contributed to a reduction in automobile financing, which, in turn, has had an adverse effect on funding availability for potential customers. This reduction in available financing may continue in the future and have a material adverse effect on our business, prospects, financial condition and results of operations.

Default by our customers or inability to repay installments as due could materially and adversely affect our business, prospects, financial condition, results of operations and cash flows. In addition, any downgrade in our credit ratings may increase our borrowing costs and restrict our access to the debt markets. Over time, and particularly in the event of any credit rating downgrade, market volatility, market disruption, regulatory changes or otherwise, we may need to reduce the amount of financing receivables we originate, which could severely disrupt our ability to support the sale of our vehicles.

The transportation and logistics sector was facing significant headwinds even before the COVID-19 pandemic, due to sluggish growth in freight availability and rates. This was exacerbated on account of business disruptions due to lockdowns and other COVID-19 pandemic-related measures introduced by local and national governments. During Fiscal 2021, the Government of India and Reserve Bank of India (the “RBI”) has announced several relief measures to ease the financial system stress resulting from the COVID-19 pandemic outbreak in India which include:

 

   

a moratorium of six months for dues falling between March 1, 2020, to August 31, 2020;

 

   

asset classification standstill benefit to overdue accounts where moratorium has been granted;

 

   

one-time restructuring allowed for eligible borrower accounts of Micro, Small & Medium Enterprises without downgrade in asset classification.

However, such regulatory measures are temporary in nature and intended as a one-time relief, and there remains considerable uncertainty around the impact of the COVID-19 pandemic, especially due to recent resurgence of COVID-19 cases in India. This uncertainty is reflected in the Company’s assessment of impairment loss allowance on its loans that are subject to a number of management judgements and estimates. We held adequate provision for impairment loss allowance on our loans based on the historical experience, collection efficiencies, internal assessment and other emerging forward-looking factors on account of the pandemic as well as management judgement regarding qualitative factors, including economic uncertainty, observable changes in portfolio performance, and other relevant factors. However, the actual impact may vary due to prevailing uncertainties caused by the pandemic. We continue to closely monitor macroeconomic factors affecting the operations of the Company.

 

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Jaguar Land Rover has consumer finance arrangements in place with Black Horse Limited (part of the Lloyds Banking Group) in the United Kingdom, FCA Bank S.p.A. (a joint venture between Fiat Auto and Crédit Agricole) in major European markets and Chase Auto Finance in the United States and have similar arrangements with local providers in a number of other key markets. Any reduction in the supply of available consumer financing for the purchase of new vehicles or an increase in the cost thereof would make it more difficult for some of its customers to purchase its vehicles, which could put Jaguar Land Rover under commercial pressure to offer new (or expand existing) retail or dealer incentives to maintain demand for its vehicles, thereby materially and adversely affecting our sales and results of operations. For example, during the global financial crisis, several providers of customer finance reduced their supply of consumer financing for the purchase of new vehicles. Additionally, base interest rates in developed economies are low. As interest rates rise generally, market rates for new vehicle financing are expected to rise as well, which may make our vehicles less affordable to retail consumers or steer consumers to less expensive vehicles that tend to be less profitable for us, adversely affecting our business, prospects, financial condition and results of operations. Additionally, if consumer interest rates increase substantially or if financial service providers tighten lending standards or restrict their lending to certain classes of credit, consumers may not desire to or be able to obtain financing to purchase or lease our vehicles. An increase in interest rates due to tightening monetary policy or for any other reason would result in increased costs for us to the extent we decided to absorb the impact of such increase. As a result, a substantial increase in consumer interest rates or tightening of lending standards could have a material adverse effect on our business, prospects, financial condition and results of operations.

Furthermore, Jaguar Land Rover offers residual value guarantees on the purchase of certain leases in some markets. The value of these guarantees is dependent on used car valuations in those markets at the end of the lease, which is subject to change. Consequently, we may be adversely affected by movements in used car valuations in these markets.

Deterioration in the performance of any of our subsidiaries, joint ventures or affiliates could materially and adversely affect our results of operations and financial condition.

We have made and may continue to make capital commitments to our subsidiaries, joint ventures and affiliates. If the business or operations of any of these subsidiaries, joint ventures and affiliates deteriorate, the value of our investments may decline substantially. We are also subject to risks associated with joint ventures and affiliates wherein we retain only partial or joint control.

We entered into a joint venture with Chery Automobile Company Ltd. (“Chery”) in China to develop, manufacture and sell certain Jaguar Land Rover vehicles and at least one own-branded vehicle in China (the “China Joint Venture”). Additionally, in March 2018, Jaguar Land Rover announced its strategic partnership with Waymo LLC (“Waymo”) to develop the world’s first premium self-driving electric vehicle. In June 2019, Jaguar Land Rover announced a collaboration with BMW to develop the next-generation Electric Drive Units to support the advancement of electrification technologies. We may also decide to collaborate with other companies in order to develop future technologies and initiatives, including but not limited to the dedicated BEV Jaguar architecture in the near future. Joint ventures and strategic partnership projects, like our China Joint Venture, partnership with Waymo and collaboration with BMW, may be developed pursuant to agreements over which we only have partial or joint control.

If the business or operations of any of these subsidiaries, joint ventures and affiliates deteriorate, the value of our investments may decline substantially and may impact our overall financial position and liquidity. If there is a significant change in these relationships (for example, if a co-owner changes or relationships deteriorate), our success in the joint venture may be materially adversely affected.

We are also subject to risks associated with joint ventures and affiliates wherein we retain only partial or joint control. If other shareholders of a joint venture, who may have different business or investment strategies than we do, or with whom we may have a disagreement or dispute, have the ability to block business, financial or management decisions, or our investment in the project, or otherwise implement initiatives that may be contrary to our interests, our future results and financial condition may be materially affected.

We are subject to risks associated with product liability, warranties and recalls.

We are subject to risks and costs associated with product liability, warranties and recalls in connection with performance, compliance or safety-related issues affecting our vehicles. From time to time, we may be subject to investigations by governmental authorities relating to safety and other compliance issues with our vehicles. In particular, as our vehicles become more technologically advanced, we are subject to risks related to their software and operation, including our advanced driver assistance systems automation. We may be required to expend considerable resources in connection with product recalls and these resources typically include the cost of the part being replaced and the labor required to remove and replace the defective part.

In addition, product recalls can cause our consumers to question the safety or reliability of our vehicles, which may harm our reputation. Any harm to our reputation may result in a substantial loss of customers. For example, we commenced remediatory action in connection with the Takata Corporation’s passenger airbag safety recall announced in May 2015 in the United States by the National Highway Traffic System Administration (the “NHTSA”). Following the initial provision of GBP67.4 million, the provision held at the end of Fiscal 2021 with respect to the recall is GBP29 million.

 

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Furthermore, we may also be subject to class actions or other large-scale lawsuits pertaining to product liability or other matters in various jurisdictions in which we have a significant presence. The use of shared components in vehicle production increases this risk because individual components are deployed in a number of different models across our brands. Any costs incurred or lost sales caused by product liability, warranties and recalls could materially adversely affect our business and reputation.

Exchange rate and interest rate fluctuations and hedging arrangements could materially and adversely affect our financial condition and results of operations.

Our operations are subject to risks arising from fluctuations in exchange rates with reference to countries in which we operate. We import capital equipment, raw materials and components from, manufacture vehicles in, and sell vehicles into, various countries, and therefore, our revenues and costs have significant exposure to the relative movements of the GBP, the U.S. dollar, the Euro, the Russian Ruble, the Chinese Renminbi, the Singapore dollar, the Japanese yen, the Australian dollar, the South African rand, the Thai baht, the Korean won and the Indian rupee. In addition, a prolonged strengthening of the British pound may negatively impact Jaguar Land Rover by diminishing the British pound value of its overseas sales. Moreover, although a trade agreement between the UK and the European Union was agreed in December 2020 and tariffs have, to date, been avoided, the Brexit has continued to generate customs and other administrative frictions that may persist and ultimately impact the UK economy, thereby causing further volatility in the value of the British pound, which could affect our Jaguar Land Rover business.

A significant proportion of Jaguar Land Rover’s input materials and components and capital equipment are sourced overseas, in particular from Europe, and therefore it has costs in, and significant exposure to the movement of, the Euro (specifically a strengthening of the Euro) and certain other currencies relative to the GBP (Jaguar Land Rover’s reporting currency), which may result in decreased profits to the extent these are not fully mitigated by non-GBP sales.

Moreover, we have outstanding foreign currency-denominated debt. We have experienced and could in the future experience foreign exchange losses on obligations denominated in foreign currencies in respect of our borrowings and foreign currency assets and liabilities due to currency fluctuations. We are exposed to changes in interest rates, as we have both interest-bearing assets (including cash balances) and interest-bearing liabilities, certain of which bear interest at variable rates (including Jaguar Land Rover’s $1 billion term loan facility, the UKEF & commercial loan facilities and the United Kingdom fleet financing facility), whereas the existing notes bear interest at fixed rates. Although we engage in managing our interest and foreign exchange exposure through use of financial hedging instruments, such as forward contracts, swap agreements and option contracts, higher interest rates and a weakening of the Indian rupee against major foreign currencies could significantly increase our cost of borrowing. Please see note 39(d)(i) – (b) to our consolidated financial statements included elsewhere in this annual report on Form 20-F for further detail on our exposure to fluctuations in interest rates.

Appropriate hedging lines for the type of risk exposures we are subject to may not be available at a reasonable cost, particularly during volatile rate movements, or at all. Moreover, there are risks associated with the use of such hedging instruments. While hedging instruments may mitigate our exposure to fluctuations in currency exchange rates to a certain extent, we potentially forego benefits that might result from market fluctuations in currency exposures. These hedging transactions can also result in substantial losses, including, without limitation, when a counterparty does not perform its obligations under the applicable hedging arrangement, there are currency fluctuations, the arrangement is imperfect or ineffective, or our internal hedging policies and procedures are not followed or do not work as planned.

In addition, because our potential obligations under the financial hedging instruments are marked to market, we may experience quarterly and annual volatility in our operating results and cash flows attributable to our financial hedging activities.

Any of the above may have a material adverse effect on our financial condition, results of operations and liquidity.

Changes or uncertainty in respect of LIBOR and/or SONIA may affect some our financing arrangements.

Some of our financing arrangements are, or may in the future be, linked to LIBOR and/or SONIA (as defined below). LIBOR has been the subject of recent national, international and other regulatory guidance and proposals for reform. As a result, GBP LIBOR will cease to exist from January 1, 2022, while the U.S. Dollar LIBOR will cease to exist from July 1, 2023. On November 29, 2017, the Bank of England and the United Kingdom Financial Conduct Authority (the “FCA”) announced that the market working group on Sterling Risk-Free Rates would have an extended mandate to catalyze a broad transition from LIBOR to the Sterling Over Night Index Average rate (“SONIA”) across sterling bond, loan and derivatives markets so that SONIA is established as the primary sterling interest rate benchmark by the end of 2021. On April 23, 2018, the Bank of England took over administration of SONIA and issued a series of reforms as part of its implementation as a replacement to LIBOR. From April 2018, the Bank of England has been setting the interest rate benchmark using SONIA, meaning that banks are no longer compelled by the FCA to submit LIBOR rates beyond 2021. On March 5, 2021, the FCA issued an announcement on the future cessation and loss of representativeness of the LIBOR benchmarks, and announced March 5, 2021, as the spread adjustment fixing date for all LIBOR tenors across all currencies. These reforms and other pressures will cause LIBOR to disappear entirely following its phase-out period and have created disincentives for market participants to continue to administer LIBOR or may have other consequences which cannot be predicted.

 

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Any of these reforms or pressures described above or any other changes to a relevant interest rate benchmark (including SONIA or any alternative or successor benchmark rate) could affect the level of the published rate, including to cause it to be higher, lower and/or more volatile than it would otherwise be. With the discontinuation of LIBOR the rate of interest applicable to our financing arrangements that are linked to LIBOR may be determined by applicable contractual fall-back provisions, although such provisions have not been tested and may not operate as intended. Additionally, SONIA and/or any other alternative or successor benchmark rates are, or will be for a period of time, largely untested, and the use of SONIA and/or such alternative or successor benchmark rates may have adverse consequences that impact our financing arrangements.

More generally, any of the above matters could affect the amounts available to us to meet our obligations under our financing arrangements and/or could have a material adverse effect on the value or liquidity of, and the amounts payable under, our financing arrangements. Changes in the manner of administration of LIBOR (or any alternative or successor benchmark rates, including SONIA) could result in adjustment to the conditions applicable to some of our financing arrangements or other consequences as relevant to those financing arrangements. While we may seek to amend the agreements related to our financing arrangements linked to LIBOR (or any alternative or successor benchmark rates, including SONIA), we may not be able to amend such agreements before any of the risks disclosed hereby materialize or at all. No assurance can be provided that any other relevant benchmark rate will continue to exist.

Potential changes to our business through mergers, acquisitions and divestments may have a material adverse effect on our future results and financial condition

We believe that our acquisitions provide us opportunities to grow significantly in the global automobile markets including premium brands and products and provide us with access to technology, additional capabilities and potential synergies. We regularly examine a range of corporate opportunities, including suitable mergers, joint ventures, acquisitions and divestments, with a view to determining whether those opportunities will enhance our strategic position and financial performance. However, the scale, scope and nature of the integration, management or separation required in connection with such transactions present significant challenges, and we may be unable to integrate, manage or separate the relevant subsidiaries, divisions and facilities effectively within our expected schedule. A transaction may not meet our expectations and the realization of the anticipated benefits may be blocked, delayed or reduced as a result of numerous factors, some of which are outside our control.

These corporate opportunities may involve risks, including unforeseen contingent risks or latent business liabilities that may only become apparent after the transaction is completed. Integration or separation of an acquired or divested business can be complex and costly, sometimes including combining or separating relevant accounting and data processing systems, and management controls, as well as managing relevant relationships with employees, customers, regulators, counterparties, suppliers and other business partners. Integration or separation efforts could also create inconsistencies in standards, controls, procedures and policies, as well as diverting management attention and resources. Additionally, there can be no assurance that employees, customers, counterparties, suppliers and other business partners of newly acquired or retained businesses will remain post-acquisition or post-divestment, and the loss of employees, customers, counterparties, suppliers and other business partners may adversely affect our operations or results.

If we are unable to manage any of the associated risks successfully, our business, prospects, financial condition and results of operations could be materially and adversely affected.

Moreover, there are risks relating to the completion of any particular transaction occurring, including counterparty and settlement risk, or the non-satisfaction of any completion conditions (for example, relevant regulatory or third party approvals). We acquired the Jaguar Land Rover business from the Ford Motor Company (“Ford”) in June 2008, and since then Jaguar Land Rover has become a significant part of our business, accounting for 78% of our total revenues in Fiscal 2021. As a result of the acquisition, we are responsible for, among other things, the obligations and liabilities associated with the legacy business of Jaguar Land Rover. There can be no assurance that any legacy issues at Jaguar Land Rover or any other acquisition we have undertaken in the past or will undertake in the future will not have a material adverse effect on our business, financial condition and results of operations, as well as our reputation and prospects.

 

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Our strategy to grow the business through capital investments may not be successful or as successful as we expect.

Our strategic priorities to grow our business include investing in new models and modular architectures and in autonomous, connected, electric as well as shared mobility services. Specifically, with the launch of the Reimagine strategy in February 2021, Jaguar Land Rover is committed to investing significant resources in electric battery technology and vehicles, in order to achieve its goal of net zero carbon emissions across its supply chain, products and operations by 2039 (see Item 4.B “Information on the Company—Business Overview—Our Strategy—Jaguar Land Rover’s Reimagine strategy” for more information). Jaguar Land Rover’s annual total product and other investment spending was GBP2.3 billion in Fiscal 2021 and is expected to be around GBP2.5 billion in Fiscal 2022 and it is planning to launch the new Range Rover and Range Rover Sport on the new modular longitudinal architecture (“MLA”) platform. Tata Motors Limited’s total product and other investment spending was Rs. 25,860 million for Fiscal 2021 and is expected to be in the range of Rs. 35,000 million in Fiscal 2022. Tata Motors Limited continues to monitor the evolving COVID-19 pandemic situation in India due to the second wave in the country and will undertake necessary steps for the rationalization of capital expenditures, dynamically managing capital expenditure and implementation of further cash improvement measures. For Fiscal 2022, on a consolidated basis, we expect to invest over Rs.289,000 million in property, plants and equipment and product development. We aim to fund total product and other investment spending with cash flows from operating activities supported by debt capital markets activities and bank funding, as required.

The targets described above represent our current strategic objectives and do not constitute capital spending and earnings projections or forecasts. These targets are based on a range of expectations and assumptions regarding, among other things, our present and future business strategies, volume growth, cost efficiencies, capital spending program and the environment in which we operate, which may prove to be inaccurate. While we do not undertake to update our targets, we may change our targets from time to time. Actual results may differ materially from our targets. Accordingly, there can be no assurance that we will achieve any of our targets, whether in the short-, medium- or long-term. The occurrence of one or more of the risks described in this “Risk Factors” section, many of which are beyond our control and could have an immediate impact on our earnings and/or the probability of which may be exacerbated in the medium- to long-term, could materially affect our ability to realize the targets described above. In particular, our capital spending target could be affected by investment needs arising from, among other factors, electrification, emissions compliance, driver assistance, connectivity and mobility trends. Our ability to achieve our targets may also be materially impaired by negative geopolitical and macroeconomic factors (see “—Deterioration or uncertainty in global economic conditions could have material adverse impact on our business, sales and results of operation”), the competitive nature of our industry, industry trends, including market and competitive forces (such as higher incentives), new or the expansion of existing regulatory constraints, reduced customer demand for our vehicles, significant increases in our cost base, unexpected delays or failure in implementing or realizing the benefits of our investments and the impact of our new capitalization policy.

The electric vehicle market and related opportunities may not evolve as anticipated.

There is a global trend, particularly in developed markets, towards increased use of electric vehicles (including hybrids) and policies supporting vehicle electrification. The UK government has recently announced that the phase-out date for the sale of new petrol and diesel cars and vans has been brought forward to 2030 from the previous date of 2035, while the governments of other countries including Norway and the Netherlands have announced goals of banning new petrol and diesel cars. The Indian Government has also been encouraging adoption of electric vehicles and is working closely with the industry to address challenges and accelerate the adoption of electric vehicles in India. As we consider our strategy, we may over time increase our focus on the production of electric vehicles, make more investments in this area and position ourselves as a leading producer of electric vehicles. Sales of electric vehicles are hard to predict as consumer demand may fail to shift in favor of electric vehicles and this market segment may remain small relative to the overall market for years to come. Consumers may remain or become reluctant to adopt electric vehicles due to the lack of fully developed charging infrastructure, long charging times or increased costs of purchase.

In March 2018, Jaguar Land Rover announced its strategic long-term partnership with Waymo to design, engineer and produce Jaguar I-PACE vehicles for Waymo’s autonomous vehicle mobility service. However, there can be no assurance that the partnership will be successful in achieving its commercial objective or that Waymo will purchase the number of vehicles contemplated by our partnership or that our next-generation Electric Drive Units will be successful. In June 2019, Jaguar Land Rover announced a collaboration with BMW to develop next-generation Electric Drive Units to support the advancement of electrification technologies. As with our partnership with Waymo, there can be no assurance that the partnership will be successful in achieving its commercial objective. If the value proposition of electric vehicles fails to fully materialize, this could have a material adverse effect on our business, prospects, financial condition and results of operations. In February 2021, our Jaguar Land Rover business announced a change in direction under the Reimagine strategy whereby Jaguar would become a pure electric (100% Battery Electric Vehicle “BEV”) automotive brand from 2025. First Land Rover BEV product will be launched in 2024 and further five Land Rover models offering BEV options will be launched by 2026 (total of six Land Rover models offering a BEV option). Furthermore, approximately 60% of Jaguar Land Rover sales are expected to be pure BEV’s by 2030 rising to 100% by 2036. There can be no assurance that the milestones set in Jaguar Land Rover’s Reimagine strategy can be met on time, if at all, or that we will be successful in meeting consumer demands with our new and/or improved products (see Item 4.B “Information on the Company—Business Overview—Our Strategy—Jaguar Land Rover’s Reimagine strategy” for more information). If we are unable to meet our BEV development goals, this could have a material adverse effect on our business, prospects, financial condition and results of operations.

 

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We are exposed to a broad range of climate-related risks arising from both the physical and non-physical impacts of climate change and related risks, which may materially affect our results of operations and the markets in which we operate.

Over the past few years, the global market for automobiles, particularly in established markets, has been characterized by increasing demand for more environmentally friendly vehicles and technologies. In light of the public discourse on climate change and volatile fuel prices, we face more stringent government regulations, including the imposition of speed limits and higher taxes on SUVs or premium automobiles. Several jurisdictions, such as Norway, Germany, the United Kingdom, France, the Netherlands, India and China, have announced their intention to substantially reduce or eliminate the sale of conventionally fueled vehicles in their markets in the coming decades.

The emissions levels of diesel technologies have also become the focus of legislators in the United States and European Union, and some of our competitors have announced programs to retrofit diesel vehicles with software that will allow them to reduce emissions. Such actions by our competitors may require us to undertake increased research and development spending. There is a risk that these research and development activities, including retrofit software upgrades, will not achieve their planned objectives or that competitors or joint ventures set up by competitors will develop better solutions and will be able to manufacture the resulting products more rapidly, in larger quantities, with a higher quality and/or at a lower cost.

Coupled with increased consumer preferences for more environmentally friendly and electric vehicles, failure to achieve our planned objectives such as execution of Jaguar Land Rover’s Reimagine strategy or delays in developing fuel-efficient products could materially affect our ability to sell premium Passenger Cars and large or medium-sized all-terrain vehicles at current or targeted volumes and could have a material adverse effect on our general business activity, net assets, financial position and results of operations. There is a risk that our competitors will develop better solutions and manufacture the resulting products more rapidly, in larger quantities, with a higher quality and/or at a lower cost.

In addition, our manufacturing operations and sales may be subject to potential physical impacts of climate change, including changes in weather patterns and an increased potential for extreme weather events, which could affect the manufacturing and distribution of our products, as well as the cost and availability of raw materials and components. Moreover, the increased use of car sharing services (e.g., Zipcar and DriveNow) and other innovative mobility initiatives that facilitate access to alternative modes of transport, and the increased reliance on public transportation in certain places, may reduce peoples’ dependency on private automobiles. Furthermore, non-traditional market participants and/or unexpected disruptive innovations may disrupt the established business model of the industry by introducing new technologies, distribution models and methods of transportation. A shift in consumer preferences away from private automobiles would have a material adverse effect on our general business activity and on our business, prospects, financial condition and results of operations.

Sustainability is being brought to the center of our business strategy. There has been increased focus from various stakeholders towards sustainable business practices. As a responsible business and being part of the Tata Group, Tata Motors Limited is committed to significantly reduce its GHG emissions to ultimately achieve net zero emissions. We are working towards transitioning to improved fuel efficiency of ICE vehicles across commercial and passenger vehicles, increasing share of EVs in the product mix, significant reduction in energy consumption & increased use of renewable energy in Operations, along with Greening of the Supply Chain With its Reimagine strategy in place, Jaguar Land Rover’s aim is to achieve net zero carbon emissions across its supply chain, products and operations by 2039. If we are unable to achieve these objectives, our reputation, business and results of operations may be adversely affected.

Underperformance of our distribution channels may adversely affect our sales and results of operations.

Our products are sold and serviced through a network of authorized dealers and service centers across India and through a network of distributors and local dealers in international markets. Any underperformance by or a deterioration in the financial condition of our dealers or distributors could materially and adversely affect our sales and results of operations. In order to optimize market performance, sales channels must be aligned to the buying habits of our customers, including through traditional showrooms but by also embracing increasingly more innovative sales channels such as virtual showrooms and online purchasing.

The COVID-19 pandemic enforced lockdowns across key regions have adversely affected the financial performance of our dealers in Fiscal 2021 and may continue to affect them in the near future.

If dealers or importers encounter financial difficulties and our products and services cannot be sold or can be sold only in limited numbers, the sales of such dealers and importers may be adversely affected. Additionally, if we cannot replace the affected dealers or importers with other franchises, the financial difficulties experienced by such dealers or importers could have an indirect effect on our vehicle deliveries.

Consequently, we could be compelled to provide additional support for dealers and importers and, under certain circumstances, may even take over their obligations to customers, which would adversely affect our financial position and results of operations in the short-term.

 

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Furthermore, as part of our global activities, we may engage with third-party dealers and distributors, whom we do not control, but who could nevertheless take actions that may have a material adverse impact on our reputation and business. We cannot assure you that we will not be held liable for any activities undertaken by such third parties.

We are more vulnerable to reduced demand for premium performance cars and all-terrain vehicles than automobile manufacturers with a more diversified product range.

Jaguar Land Rover operates in the premium Passenger Cars and all-terrain vehicles segments, and provides a more limited range of models than some of its competitors. Accordingly, Jaguar Land Rover’s financial performance is linked to market conditions and consumer demand in those market segments. Any downturn or reduction in the demand for premium Passenger Cars and all-terrain vehicles, or any reduced demand for Jaguar Land Rover’s most popular models in the geographic markets in which it operates, could have a material adverse effect on our performance and earnings.

A decline in retail customers’ purchasing power, consumer confidence or corporate customers’ financial condition and willingness to invest could materially and adversely affect our business.

Demand for vehicles for personal use generally depends on consumers’ net purchasing power, their confidence in future economic developments and changes in fashion and trends, while demand for vehicles for commercial use by corporate customers (including fleet customers) primarily depends on the customers’ financial condition, their willingness to invest and available financing. The economic slowdown caused by the COVID-19 pandemic is also likely to affect consumer sentiment and demand in the short-term. A decrease in potential customers’ disposable income or financial flexibility, reductions in the availability of consumer financing or used car valuations or an increase in the cost of financing may have a negative impact on demand for our products. A weak macroeconomic environment, combined with restrictive lending and a low level of consumer sentiment generally, may reduce consumers’ net purchasing power and lead existing and potential customers to refrain from purchasing new vehicles, defer a purchase further or purchase a smaller model with less equipment at a lower price. See “—Deterioration or uncertainty in global economic conditions could have a material adverse impact on our business, sales and results of operations.” for more information. A deteriorating macroeconomic environment may disproportionately reduce demand for luxury vehicles. It also could lead to reluctance by corporate customers to invest in vehicles for commercial use and/or to lease vehicles, resulting in a postponement of fleet renewal contracts.

In recent years, the automotive industry has increasingly offered customers and dealers price reductions on vehicles and services to stimulate demand for vehicles, which has led to increased price cost of sales pressures and sharpened competition within the industry. Any of the above may have a material adverse effect on our revenue, financial condition and results of operations.

We may be adversely affected by labor unrest.

All of our permanent employees in India, other than officers and managers, and most of our permanent employees in our automotive business in South Korea and the United Kingdom, including certain officers and managers, are members of labor unions and are covered by our wage agreements, where applicable, with those labor unions.

In general, we consider our labor relations with all of our employees to be good. However, in the future we may be subject to labor unrest, which may delay or disrupt our operations in the affected regions, including impacting the acquisition of raw materials and parts, the manufacture, sales and distribution of products and the provision of services. If work stoppages or lock-outs at our facilities or at the facilities of our major vendors occur or continue for a long period of time, our business, prospects, financial condition and results of operations may be materially and adversely affected. For example, during Fiscal 2018, we faced two standalone incidents of labor unrest in India, one at our Jamshedpur plant and the other at our Sanand plant. Although these particular issues were amicably resolved, there is no assurance that additional labor issues could not occur, or that any future labor issues will be amicably resolved.

In addition, Jaguar Land Rover engages in biannual negotiations in relation to wage agreements, covering approximately 16,000 of its unionized employees and a new labor agreement with the trade unions is currently under negotiations. There is a risk, however, that future negotiation could escalate into industrial action ranging from “work to rule” to a strike before a settlement is ultimately reached.

 

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We are exposed to operational risks, including cybersecurity risks, in connection with our use of information technology.

We are exposed to the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. This includes, among other things, losses that are caused by a lack of controls within internal procedures, violation of internal policies by employees, disruption or malfunction of information technology (“IT”) systems, computer networks and telecommunications systems, mechanical or equipment failures, human error, natural disasters, security breaches or malicious acts by third parties (including, for example, hackers), whether affecting our systems or affecting those of third party providers. We are generally exposed to risks in the field of information technology, since unauthorized access to or misuse of data processed on our IT systems, human errors associated therewith or technological failures of any kind could disrupt our operations, including the manufacturing, design and engineering processes. In particular, as vehicles become more technologically advanced and connected to the internet, our vehicles may become more susceptible to unauthorized access to their systems. As a business with complex manufacturing, research, procurement, sales and marketing and financing operations, we are exposed to a variety of operational risks and, if the protection measures put in place prove insufficient (especially given the harsher sanctions imposed under the new General Data Protection Regulation (Regulation (EU) 2016/679) (the “GDPR”)), our results of operations and financial condition could be materially adversely affected. In addition, we would likely experience negative press and reputational impacts. Cybersecurity incidents could lead to loss of productivity, negative impact on our reputation, and, in extreme cases, material financial loss due to business disruptions.

Our business and prospects could suffer if we lose one or more key personnel or if we are unable to attract and retain our employees.

Our business and future growth depend largely on the skills of our workforce, including executives. officers and automotive designers and engineers. Autonomous driving, connected technologies, electrification and shared mobility trends are redefining conventional Auto business, creating tremendous disruption, and digital innovations are driving new business models. Our business requires an engaged workforce with core capabilities in new and emerging skill areas and a collaborative and innovative culture for our transformation to be successful. If we fail to develop new and flexible skills and capabilities within our workforce, or we fail to hire appropriate talent, our business will lose the ability to remain flexible in a dynamic automotive industry, which is key to delivering innovative products and services. The loss of the services of one or more key personnel could impair our ability to implement our business strategy. Any prolonged inability to continue to attract, retain or motivate our workforce could materially and adversely affect our business, financial condition, results of operations and prospects.

We may be adversely impacted by political instability, wars, terrorism, multinational conflicts, natural disasters and epidemics.

Our products are exported to a number of geographical markets, and we plan to further expand our international operations in the future. Consequently, we are subject to various risks associated with conducting our business both within and outside our domestic market and our operations in markets abroad may be subject to political instability, wars, terrorism, civil disturbances, regional or multinational conflicts, natural disasters and extreme weather, fuel shortages and epidemics and pandemics (such as the ongoing COVID-19 pandemic). Any disruption of the operations of our manufacturing, design, engineering, sales, corporate and other facilities could materially and adversely affect our business, prospects, financial condition and results of operations. In addition, conducting business internationally, especially in emerging markets, exposes us to additional risks, including adverse changes in economic and government policies, unpredictable shifts in regulation, inconsistent application of existing laws and regulations, unclear regulatory and taxation systems and divergent commercial and employment practices and procedures. If any of these events were to occur, there can be no assurance that we would be able to shift our manufacturing, design, engineering, sales, corporate and other operations to alternate sites in a timely manner, or at all. Any deterioration in international relations, especially between India and its neighboring countries, may result in investor concern regarding regional stability. Any significant or prolonged disruption or delay in our operations related to these risks could materially and adversely affect our business, prospects, financial condition and results of operations. See “—We have been, and may in the future be, adversely affected by the COVID-19 pandemic, the duration and economic, governmental and social impact of which is difficult to predict, which may materially harm our business, prospects, financial condition and results of operations”.

Terrorist attacks, civil disturbances, regional conflicts and other acts of violence, particularly in India, may disrupt or otherwise adversely affect the markets in which we operate, our business and our profitability. India has from time to time experienced social and civil unrest and hostilities and adverse social, economic or political events, including terrorist attacks and local civil disturbances, riots and armed conflict with neighboring countries. Events of this nature in the future could influence the Indian economy and could have a material adverse effect on our business, as well as the market for securities of Indian companies, including the Company’s Shares and ADSs. Such incidents could also create a greater perception that investment in Indian companies involves a higher degree of risk and could have a material adverse effect on our business, prospects, results of operations and financial condition, and also the market price of the Company’s Shares and ADSs.

 

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Our business is seasonal in nature and a substantial decrease in our sales during certain quarters could have a material adverse impact on our financial performance.

The sales volumes and prices for our vehicles are influenced in part by the cyclicality and seasonality of demand.

In the Indian market, demand for our vehicles generally peaks between January and March each year, although there is a general decrease in demand during February in the lead-up to the release of the Indian annual fiscal budget. Demand is generally leaner between April and July and picks up again in the festival season from September to November, with a decline in December as customers defer purchases to the following year.

Our Jaguar Land Rover business is impacted by the biannual registration of vehicles in the United Kingdom where the vehicle registration number changes every March and September, which leads to an increase in sales during these months, and, in turn, impacts the resale value of vehicles. Most other markets, such as the United States, are influenced by the introduction of new-model-year products, which typically occurs in the autumn of each year. Furthermore, in the United States, there is some seasonality in the purchasing pattern of vehicles in the northern states for Jaguar, where there is a concentration of vehicle sales in the spring and summer months and for Land Rover, where the trend for purchasing 4x4 vehicles is concentrated in the autumn and winter months. Markets in China tend to experience higher demand for vehicles around the Lunar New Year holiday, the National Day holiday and the Golden Week holiday in October. In addition, demand in Western European automotive markets tends to be softer during the summer and winter holidays. Jaguar Land Rover’s cash flows are impacted by the seasonal shutdown of four of their manufacturing plants in the United Kingdom (including the Engine Manufacturing Center (“EMC”) at Wolverhampton) during the Easter, summer and winter holidays.

Restrictive covenants in our financing agreements could limit our operations and financial flexibility and materially and adversely impact our financial condition, results of operations and prospects.

Some of our financing agreements and debt arrangements set limits on and/or require us to, among other matters, obtain lender consent before pledging assets as security. In addition, certain financial covenants may limit our ability to borrow additional funds or to incur additional liens. In the past, we have been able to obtain required lender consent for such activities. However, there can be no assurance that we will be able to obtain such consents in the future. On June 30, 2020, we notified one of our Indian lenders in respect of our Rs.27,000 million loan facility that the Company had failed to maintain one of the financial ratios under the terms of the loan facility. The Company received confirmation from the lender that it has approved an increase in such threshold and has given waiver of the Company’s failure to maintain the relevant financial ratio for Fiscal 2021 and Fiscal 2022. Further, the Company has received confirmation from another lender on its Rs.30,000 million-loan facility, that it has given a waiver of the Company’s failure to maintain this ratio before March 31, 2023. If our liquidity needs or growth plans require such consents and such consents are not obtained in the future, we may be forced to forego or alter our plans, which could materially and adversely affect our business, prospects, financial condition and results of operations.

In addition, in the event we breach these covenants, the outstanding amounts due under such financing agreements could become due and payable immediately and/or result in increased costs. A default under one of these financing agreements may also result in cross-defaults under other financing agreements and the outstanding amounts under such other financing agreements becoming due and payable immediately. Defaults under one or more of our financing agreements could have a material adverse effect on our business, prospects, financial condition and results of operations.

Future pension obligations may prove more costly than currently anticipated and the market value of assets in our pension plans could decline.

We provide post-retirement and pension benefits to our employees, including defined benefit plans. Our pension liabilities are generally funded. However, lower returns on pension fund assets, changes in market conditions, interest rates or inflation rates, and adverse changes in other critical actuarial assumptions, may impact our pension liabilities or assets and consequently increase funding requirements. Further, any changes in government regulations, may adversely impact the pension benefits payable to the employees, which could materially decrease our net income and cash flows.

The Indian Parliament has approved the Code on Social Security, 2020 (the “Code”), which would impact the contributions by the company towards Provident Fund and Gratuity. The Ministry of Labour and Employment has released draft rules for the Code on Social Security, 2020, on November 13, 2020, and has invited suggestions from stakeholders, which are under active consideration by the Ministry. The Company will assess the impact and its evaluation once the subject rules are notified and will give appropriate impact in its financial statements in the period in which the Code becomes effective and the related rules to determine the financial impact are published.

 

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Jaguar Land Rover provides post-retirement and pension benefits to its employees, some of which are defined benefit plans. As part of Jaguar Land Rover’s strategic business review process, Jaguar Land Rover closed its defined benefit pension plans to new joiners as of April 19, 2010. All new Jaguar Land Rover employees in its United Kingdom operations from April 19, 2010, have joined a new defined contribution pension plan. Under the arrangements with the trustees of the defined benefit pension schemes, an actuarial valuation of the assets and liabilities of the schemes is undertaken every three years in order to determine cash funding rates. As a result of the April 2018 valuation process, a funding deficit of GBP554 million was disclosed and we agreed to a schedule of contributions with the trustee which, together with the expected investment performance of the assets of the schemes, is expected to eliminate the deficit by 2028. Cash contributions towards the deficit will be GBP60 million each year until Fiscal 2024 followed by GBP25 million each year until the fiscal year ending March 31, 2028. In addition, Jaguar Land Rover will make up payments deferred (from April 2020 to June 2020) due to the COVID-19 pandemic over Fiscal 2022. The revised schedule of contributions also reflects the reduced ongoing cost of benefit accrual of approximately 22% for Fiscal 2020 and approximately 21% for Fiscal 2021 and Fiscal 2022 following changes implemented on April 5, 2017 (compared to a previous rate of approximately 31%). The 2021 statutory valuation process has started and is expected to be completed by June 30, 2022. As of March 31, 2021, on an accounting basis, Jaguar Land Rover’s United Kingdom defined benefit pension deficit was GBP387 million, compared to a surplus of GBP380 million as of March 31, 2020. This change was primarily driven by an increase in pension liabilities as a result of lower discount rates and higher inflation rate assumptions applied, compared to the prior year.

We may be materially and adversely affected by the divulgence of confidential information.

Although we have implemented policies and procedures to protect confidential information, such as key contractual provisions, future projects, financial information and customer records, such information may be divulged as a result of internal leaks, hacking, other threats from cyberspace or other factors. If confidential information is divulged, we could be subject to claims by affected parties, regulatory penalties, negative publicity and loss of proprietary information, all of which could have an adverse and material impact on our reputation, business, financial condition, results of operations and cash flows.

Our business could be negatively affected by the actions of activist shareholders.

Certain shareholders of the Company may from time to time advance shareholder proposals or otherwise attempt to effect changes at the Company, influence elections of the directors of the Company (“Directors”) or acquire control over our business. Our success depends on the ability of our current management team to operate and manage effectively. Campaigns by shareholders to effect changes at publicly listed companies are sometimes led by investors seeking to increase short-term shareholder value by advocating corporate actions such as financial restructuring, increased borrowing, special dividends, stock repurchases or even sales of assets or the entire company, or by voting against proposals put forward by the board of directors of the Company (the “Board”) and our management. If faced with actions by activist shareholders, we may not be able to respond effectively to such actions, which could be disruptive to our business.

We rely on licensing arrangements with Tata Sons Private Limited to use the “Tata” brand. Any improper use of the associated trademarks by our licensor or any other third parties could materially and adversely affect our business, financial condition and results of operations.

Our rights to our trade names and trademarks are a crucial factor in marketing our products. Establishment of the “TATA” word mark and logo mark in and outside India is material to our operations. We have licensed the use of the “TATA” brand from our Promoter, Tata Sons Private Limited (“Tata Sons”). If Tata Sons, or any of its subsidiaries or affiliated entities, or any third party uses the trade name “TATA” in ways that adversely affect such trade name or trademark, our reputation could be affected, which, in turn, could have a material adverse effect on our business, prospects, financial condition and results of operations.

Inability to protect or preserve our intellectual property could materially and adversely affect our business, financial condition and results of operations.

We own or otherwise have rights in respect of a number of patents and trademarks relating to the products we manufacture. In connection with the design and engineering of new vehicles and the enhancement of existing models, we seek to regularly develop new technical designs and innovations. We also use technical designs that are the intellectual property of third parties with such third parties’ consent. These patents, trademarks and licenses, have been of value in the growth of our business and may continue to be of value in the future. Although we do not regard any of our businesses as being dependent upon any single patent or related group of patents, any material inability to protect such intellectual property generally, or the illegal breach of some or a significant amount of our intellectual property rights, may have a materially adverse effect on our operations, business and/or financial condition. We may also be affected by restrictions on the use of intellectual property rights held by third parties, and we may be held liable for the infringement of the intellectual property rights of others in our products. Moreover, intellectual property laws of some foreign countries may not protect our intellectual property rights to the same extent as U.S. or United Kingdom laws.

 

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We may incur significant costs to comply with, or face civil and criminal liability for infringements of, the European General Data Protection Regulation.

The European Union’s GDPR came into force in 2018. The GDPR is a uniform framework setting out the principles for legitimate data processing. The new regime may impose a substantially higher compliance burden on us and limit our rights to process personal data, lead to cost intensive administration processes, oblige us to provide the personal data that we record to customers in a form that would require additional administrative processes or require substantial changes in our IT environment. Additionally, there are much greater sanctions in case of violations of the GDPR requirements compared to the previous regime. These sanctions depend on the nature of the infringed provision and may consist of civil liabilities and criminal sanctions. Our failure to implement and comply with the GDPR could significantly affect our reputation and relationships with our customers and suppliers, and civil and criminal liabilities for the infringement of data protection rules could have a significant negative effect on our financial position.

Some of our vehicles make use of lithium-ion battery cells, which have been observed in some non-automotive applications to catch fire or vent smoke and flames, and such events have raised concerns, and future events may lead to additional concerns, about the safety of the batteries used in automotive applications.

The battery packs that we use, and expect to continue to use, in our electric vehicles make use of lithium-ion cells. On rare occasions, lithium-ion cells can rapidly release the energy they contain in a manner that can ignite nearby materials as well as other lithium-ion cells.

In addition, we store a significant number of lithium ion cells at various warehouses and at some of our manufacturing facilities.

While we have designed our battery packs to passively contain any single cell’s release of energy without spreading to neighbouring cells, there can be no assurance that a field or testing failure of our vehicles will not occur. Furthermore, while we have implemented safety procedures related to the handling of the cells at our manufacturing plants, there can be no assurance that a safety issue or fire related to the cells will not occur. Any such incidents may cause serious damage or injury may disrupt the operation of our facilities. In addition, any field or testing vehicle failure, even if such incident does not involve our vehicles, could subject us to lawsuits, product recalls, redesign efforts or negative publicity, all of which could have a material impact on our business, prospects, financial condition and operating results.

Any failures or weaknesses in our internal controls could materially and adversely affect our financial condition and results of operations.

As discussed in Item 15 “Controls and Procedures,” in connection with our assessment of internal control over financial reporting for Fiscal 2020, we concluded that there was a material weakness pertaining to the design of controls to validate the accuracy parameters used to prepare information used in the operation of various process level and management review controls. We believe that this material weakness has been remediated in Fiscal 2021. Although we have instituted remedial measures to address the material weakness identified and continually review and evaluate our internal control systems to allow management to report on the sufficiency of our internal controls, we cannot assure you that we will not discover additional weaknesses in our internal controls over financial reporting. Further, the Company’s management continually improves, simplifies and rationalizes the Company’s internal control framework where possible within the constraints of existing IT systems. However, any additional weaknesses or failure to adequately remediate the existing weakness could materially and adversely affect our financial condition or results of operations and/or our ability to accurately report our financial condition and results of operations in a timely and reliable manner.

Our insurance coverage may not be adequate to protect us against all potential losses to which we may be subject, which may have a material adverse effect on our business, financial condition and results of operations.

While we believe that the insurance coverage we maintain adequately covers the normal risks associated with the operation of our business, there is a risk that certain claims under our insurance policies may not be honored fully or timely, or would result in insufficient insurance coverage or significantly higher insurance premiums in the future. Such matters could materially affect our business, prospects financial condition and results of operations.

 

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Political and Regulatory Risks

New or changing laws, regulations and government policies regarding increased fuel economy, reduced greenhouse gas and other emissions, vehicle safety and taxes, tariffs or fiscal policies may have a significant impact on our business.

We are subject to extensive governmental regulations regarding vehicle emission levels, noise, safety and levels of pollutants generated by our production facilities. We expect the number and extent of legal and regulatory requirements and our related costs of compliance to continue to increase significantly in the future. In Europe and the United States, for example, governmental regulation is primarily driven by concerns about the environment (including greenhouse gas emissions), fuel economy, energy security and vehicle safety. In particular, the increasingly stringent regulatory environment in our industry, particularly with respect to vehicle emission regulations, is leading to heightened regulatory scrutiny and more investigations into vehicle manufacturers. We may also be subject to randomized testing and similar inquiries by regulatory authorities with a focus on emissions and environmental performance. In China, increasingly stringent tailpipe emissions and other regulations have been introduced by the Chinese government in the short-to-medium-term future to reduce greenhouse gas emissions and improve air quality standards. Requirements to optimize vehicles in line with these governmental actions could significantly affect our plans for global product development and may result in substantial costs, including significant fines and penalties in cases of non-compliance. These requirements may also result in limiting the types and amounts of vehicles we sell and where we sell them, which may affect our revenue.

To comply with current and future environmental norms, we may have to incur additional capital expenditures and research and development expenditures to upgrade products and manufacturing facilities, install new emission controls or reduction technologies and purchase or otherwise obtain allowances to emit greenhouse gases, which may have an impact on our cost of production. If we are unable to develop commercially viable technologies or otherwise attain compliance within the time frames set by new standards, we could face significant civil penalties or be forced to restrict product offerings drastically to remain in compliance. For example, in the United States, manufacturers are subject to substantial civil penalties if they fail to meet federal CAFE standards. Please see Item 4.B “Information on the Company—Business Overview—Governmental Regulations—Environmental, fiscal and other governmental regulations around the world—Greenhouse gas/CO2/fuel economy legislation” for additional detail on these standards. These penalties are calculated at US$5.50 for each tenth of a mile below the required fuel-efficiency level for each vehicle sold in a model year in the U.S. market up to and including the 2021 model year vehicles. Beginning with the 2022 model year vehicles, the rate is expected to increase to $14.00, to be followed by index-linked annual increases thereafter. Since 2010, Jaguar Land Rover has paid total penalties of US$46 million for its failure to meet CAFE standards. In addition, as at March 31, 2021, a provision of GBP75 million was held to face the possible fine from European and United Kingdom regulators for failing to meet emission reduction targets. Further, post-Brexit, United Kingdom emissions will be calculated separately from European emissions as a result of which there is a possibility of increased penalties. Since 2011, Jaguar Land Rover has purchased approximately US$109 million in credits from third party original equipment manufacturers (“OEMs”) to offset its NHTSA, EPA and California Air Resources Board (“CARB”) penalties. Additionally, Jaguar Land Rover expects to buy approximately US$12 million in credits in Fiscal 2021 from third party OEMs to offset its expected NHTSA and EPA penalties for model year 2019 vehicles. Jaguar Land Rover could incur a substantial increase in these penalties, including as a result of increases in CAFE civil penalties to adjust for inflation. Additionally, Jaguar Land Rover expects to continue incurring approximately GBP12 million in Fiscal 2021 for credit purchases in China and we expect those annual costs to rise going forward, primarily as a result of increasing costs of “new energy vehicle credits”. Jaguar Land Rover’s Reimagine strategy aims to expand their pure battery electric offering from 2024, which supports JLR’s aim to reach fleet CO2 compliance with consideration for global measures to support net zero ambitions as well as forecast stringent CO2 / Greenhouse gas (“GHG”) regulations including the proposed ban on the sale of vehicles powered solely by internal combustion engine from 2030 allowing continuation of Plug-in Hybrid Electric (PHEV) vehicles, and the total ban of all internal combustion engines including PHEV from 2035 in the United Kingdom and similar initiatives by other governments. See Item 4.B “Information on the Company—Business Overview—Our Strategy—Jaguar Land Rover’s Reimagine strategy” for more information.

Moreover, safety and environmental standards may at times impose conflicting imperatives, which would pose engineering challenges and, among other things, increase our costs. While we are pursuing the development and implementation of various technologies in order to meet the required standards in the various countries in which we sell our vehicles, the costs of compliance with these standards could be significant to our operations and may materially and adversely affect our business, prospects, financial condition and results of operations.

In India, the 2019 amendments to the Motor Vehicle Act addresses vehicle recalls, road safety, traffic management and accident insurance, among other matters. The Act imposes civil and criminal liability on manufacturers selling vehicles in contravention of the standards specified in the Act, or required by the government to recall their vehicles.

 

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Commencing July 1, 2017, the Government of India, in conjunction with the state governments, effected comprehensive changes to the Indian taxation regime, which, among other matters, introduced a comprehensive national goods and services tax (“GST”) regime to subsume a large number of central government and state government taxes into one unified tax structure. It is a dual GST with central government and state government simultaneously levying it on the common base. The tax is called Central GST, if levied by the central government; state union territory GST, in instances where the state or union territory levies the tax; and integrated GST, in instances where the GST is levied on the interstate supply of goods and services. While both the central and state governments have publicly announced that all committed incentives will be protected following the implementation of the GST, given the limited availability of information or alignment of industrial policy of various state government to cover GST or to protect the quantum of incentive available to industries in the pre-GST regime, we are unable to provide any assurance as to this or any other aspect of the tax regime, or guarantee that the implementation of GST will not materially or adversely affect our business, prospects, financial condition and results of operations.

Imposition of any additional taxes and levies designed to limit the use of automobiles and changes in corporate and other taxation policies, as well as changes in export and other incentives given by various governments or import or tariff policies, could adversely affect the demand for our vehicles and our results of operations.

In addition, the United Kingdom announced that, from April 2020, a 2% digital services tax could be imposed on the United Kingdom revenue of digital services businesses (such as social media networks, search engines and online marketplaces). In particular, the digital service tax applies to businesses if their worldwide revenue from digital activities is more than GBP500 million and more than GBP25 million of this revenue is derived from United Kingdom users. As a response to this proposal, the United States Treasury indicated that such digital services tax could have a discriminatory effect on U.S. multinational digital companies and warned that the United States could take retaliatory actions, such as in the form of a tax on United Kingdom car exports to the United States, should the new digital services tax be imposed. Moreover, any countermeasures to such additional tariffs by regional or global trading partners, including the European Union and China, could slow down global economic growth and decrease global demand for automobiles and automobile components. Furthermore, in recent years, Brazil has increased import duty on foreign vehicles, along with related exemptions provided certain criteria are met.

Regulations in the areas of investments, taxes and levies may also have a materially adverse impact on Indian securities, including the Company’s Shares and ADSs. For more information, see Item 4.B “Information on the Company—Business Overview—Governmental Regulations” of this annual report on Form 20-F.

Any future potential or real unexpected change in law could have a material adverse effect on our business prospects, results of operations and financial condition.

We may be affected by competition laws in India and any adverse application or interpretation of the Competition Act could adversely affect our business.

The Indian Competition Act, 2002 (the “Competition Act”) oversees practices having an appreciable adverse effect on competition (“AAEC”) in a given relevant market in India. Under the Competition Act, any formal or informal arrangement, understanding or action in concert, which causes or is likely to cause an AAEC, is considered void and results in imposition of substantial penalties. All agreements entered into by us could be within the purview of the Competition Act. Furthermore, any agreement among competitors which directly or indirectly involves determination of purchase or sale prices, limits or controls production, sharing the market by way of geographical area or number of subscribers in the relevant market or directly or indirectly results in bid-rigging or collusive bidding is presumed to have an AAEC in the relevant market in India and is considered void. The Competition Act also prohibits abuse of a dominant position by any enterprise.

In 2011, the Government of India brought into force the combination regulation (merger control) provisions under the Competition Act. These provisions require acquisitions of shares, voting rights, assets or control or mergers or amalgamations that cross the prescribed asset- and turnover-based thresholds to be mandatorily notified to and pre-approved by the Competition Commission of India (the “CCI”). Additionally, in 2011, the CCI issued the Competition Commission of India (Procedure for Transaction of Business Relating to Combinations) Regulations, 2011 (as amended), which set out the mechanism for the implementation of the merger control regime in India. CCI has extraterritorial powers and can investigate any agreements, abusive conduct or combination occurring outside India if such agreement, conduct or combination has an AAEC in India.

In 2011, complaints were filed with the CCI against certain automakers on the ground that the genuine spare parts of automobiles manufactured by the OEMs were not made freely available in the open market in India and, accordingly, anti-competitive practices were carried out by the OEMs for being indulged in anti-competitive practices. The CCI ordered an investigation on the matter, and subsequently, the director general of the CCI expanded the scope of investigation to other car manufacturers operating in India, including TML.

 

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In 2014, the CCI held that the automobile manufacturers, including TML, had engaged in anti-competitive practices and imposed a penalty of 2% of their total turnover in India. TML was ordered to pay a penalty of Rs.13,465million within a period of 60 days of the receipt of order. TML challenged the order of the CCI in the Delhi High Court on constitutional issues. In 2019, the High Court allowed the petitions, partly by striking down Section 22(3) of the Competition Act. Also in 2019, the Supreme Court extended the relief that was granted by Delhi High Court during the pendency of the matter before it. As of the date of this annual report on Form 20-F, the matter remains to be listed for further proceedings in due course.

In another matter, two of our ex-dealers filed information with the CCI alleging that TML engaged in anti-competitive practices by colluding with its finance subsidiaries (TMFL and TMFSL) and abused its dominance in the market. In May 2021, the CCI issued an order directing the director general of the CCI to initiate an investigation against TML, but did not otherwise make any final or binding observations or determinations (including with respect to any possible penalties or fines) with regard to the allegations. As of the date of this annual report on Form 20-F, we have not received any notice or query from the director general of the CCI. See Item 4.B “Information on the Company—Business Overview—Governmental Regulations—Legal Proceedings” for more information. As of the date of this annual report on Form 20-F, we are preparing internally to respond to the queries as soon as raised by the director general of the CCI.

Our business, prospects, financial condition and results of operations would be materially and adversely affected by the application or interpretation of any provision of the Competition Act, or any enforcement proceedings initiated by the CCI, or any adverse publicity that may be generated due to scrutiny or prosecution by the CCI or if any prohibition or substantial penalties are levied under the Competition Act.

Compliance with new or changing corporate governance and public disclosure requirements adds uncertainty to our compliance policies and increases our costs of compliance.

We are subject to a complex and continuously changing regime of laws, rules, regulations and standards relating to accounting, corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and U.S. Securities and Exchange Commission (the “SEC”) regulations, Securities and Exchange Board of India (the “SEBI”) regulations, New York Stock Exchange (the “NYSE”) listing rules, and the Companies Act, as well as Indian stock market listing regulations. New or changed laws, rules, regulations and standards may lack specificity and be subject to varying interpretations. Under applicable Indian laws, for example, remuneration packages may, in certain circumstances, require shareholders’ approval. New guidance and revisions may be provided by regulatory and governing bodies, which could result in continuing uncertainty and higher costs of compliance. We are committed to maintaining high standards of corporate governance and public disclosure. However, our efforts to comply with evolving regulations have resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of management resources and time. In addition, there can be no guarantee that we will always succeed in complying with all applicable laws, regulations and standards.

The Companies Act has effected significant changes to the existing Indian company law framework, such as in the provisions related to the issue of capital, disclosures in offering documents, corporate governance, accounting policies and audit matters, related party transactions, class action suits against companies by shareholders or depositors, prohibitions on loans to directors and insider trading, including restrictions on derivative transactions concerning a company’s securities by directors and key managerial personnel. The Companies Act may subject us to higher compliance requirements, increase our compliance costs and divert management’s attention. We are also required to spend, in each financial year, at least 2% of our average net profits during the three immediately preceding financial years, calculated for Tata Motors Limited on a standalone basis under Ind AS, toward corporate social responsibility activities. Furthermore, the Companies Act imposes greater monetary and other liability on the Company and its Directors for any non-compliance. Due to limited relevant jurisprudence, in the event that our interpretation of the Companies Act differs from, or contradicts with, any judicial pronouncements or clarifications issued by the Government of India in the future, we may face regulatory actions or be required to undertake remedial steps. In addition, some of the provisions of the Companies Act overlap with other existing laws and regulations (such as corporate governance provisions and insider trading regulations issued by SEBI). SEBI promulgated the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the “Listing Regulations”), which are applicable to all Indian companies with listed securities. Pursuant to the Listing Regulations, the Company is required to establish and maintain a vigilance mechanism for Directors and employees to report their concerns about unethical behavior, actual or suspected fraud or violation of the Company’s code of conduct (the “Tata Code of Conduct”) or ethics policy under our whistleblower policy (the “Whistleblower Policy”), to implement increased disclosure requirements for price sensitive information and to conduct detailed director familiarization programs and comprehensive disclosures thereof, in accordance with the Listing Regulations. While we have been able to comply with such requirements to date, we cannot assure you that we will be able to maintain compliance with such requirements in the future. Furthermore, the Company cannot currently determine the impact of certain provisions of the Companies Act and the revised SEBI corporate governance standards. Any increase in our compliance requirements or associated costs may have a material and adverse effect on our business, prospects, financial condition and results of operations.

 

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We are subject to risks associated with legal proceedings and governmental investigations, including potential adverse publicity as a result thereof.

We are and may be involved from time to time in civil, labor, administrative or tax proceedings arising in the ordinary course of business. It is not possible to predict the potential for, or the ultimate outcomes of, such proceedings, some of which may be unfavorable to us. In such cases, we may incur costs and any mitigating measures (including provisions taken on our balance sheet) adopted to protect against the impact of such costs may not be adequate or sufficient. In addition, adverse publicity surrounding legal proceedings, government investigations or allegations may also harm our reputation and brands.

Furthermore, any regulatory action taken or penalties imposed by regulatory authorities may have significant adverse financial and reputational consequences on our business and have a material adverse effect on our results of operations and financial condition.

In any of the geographical markets in which we operate, we could be subject to additional tax liabilities.

Evaluating and estimating our provision and accruals for our taxes requires significant judgement. We operate in multiple geographical markets and our operations in each market are susceptible to additional tax assessments and audits. Our collaborations with business partners are similarly susceptible to such tax assessments. Authorities may engage in additional reviews, inquiries and audits that disrupt our operations or challenge our conclusions regarding tax matters. Any resulting tax assessment may be accompanied by a penalty (including revocation of a benefit or exemption from tax) or additional fee for failing to make the initial payment.

Our tax rates may be affected by earnings estimation errors, losses in jurisdictions that do not grant a related tax benefit, changes in currency rates, acquisitions, investments, or changes in laws, regulations, or practices. Additionally, government fiscal or political pressures may increase the likelihood of adverse or aggressive interpretations of tax laws or regulations or the imposition of arbitrary or onerous taxes, interest charges and penalties. Tax assessments may be levied even where we consider our practices to be in compliance with tax laws and regulations. Should we challenge such taxes or believe them to be without merit, we may nonetheless be required to pay them. These amounts may be materially different from our expected tax assessments and could additionally result in expropriation of assets, attachment of additional securities, liens, imposition of royalties or new taxes and requirements for local ownership or beneficiation.

We may have to comply with more stringent foreign investment regulations in India in the event of an increase in shareholding of non-residents or if we are considered as engaged in a sector in which foreign investment is restricted.

Indian companies that are owned or controlled by non-resident persons are subject to investment restrictions specified in the Consolidated Foreign Direct Investment Policy (“Consolidated FDI Policy”). Under the Consolidated FDI Policy issued in 2017, an Indian company is considered to be “owned” by non-resident persons if more than 50% of its equity interest is beneficially owned by non-resident persons. The non-resident equity shareholding in the Company may, in the near future, exceed 50%, thereby resulting in the Company being considered as being “owned” by non-resident entities under the Consolidated FDI Policy. In such an event, any investment by the Company in existing subsidiaries, associates or joint ventures and new subsidiaries, associates or joint ventures will be considered as indirect foreign investment and shall be subject to various requirements specified under the Consolidated FDI Policy, including sectoral limits, approval requirements and pricing guidelines, as may be applicable.

Furthermore, as part of our automotive business, we supply, and have in the past supplied, vehicles to Indian military and paramilitary forces and in the course of such activities have obtained an industrial license from the Department of Industrial Policy. The Consolidated FDI policy applies different foreign investment restrictions to companies based upon the sector in which they operate. While we believe we are an automobile company by virtue of the significance of our automobile operations, in the event that foreign investment regulations applicable to the defense sector (including under the Consolidated FDI Policy) are made applicable to us, we may face more stringent foreign investment restrictions and other compliance requirements compared to those applicable to us presently, which, in turn, could materially affect our business, prospects, financial condition and results of operations.

We require certain approvals or licenses in the ordinary course of business, and the failure to obtain or retain them in a timely manner, or at all, could materially and adversely affect our operations.

We require certain statutory and regulatory permits, licenses and approvals to carry out our business operations. Our ability to obtain such permits, licenses and approvals depends, among other matters, on the information we provide as part of the application processes, as well as the internal review and consideration processes of the various issuing agencies. While we make every effort to obtain the necessary permits, licenses or approvals, and their renewals, we cannot assure you that we will receive them in a timely manner, or at all.

In addition, there is a risk that any approvals, licenses, registrations and permits issued to us would be suspended or revoked in the event of non-compliance or alleged non-compliance by us with any terms or conditions thereof, or pursuant to any regulatory action.

 

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Any of the above could materially and adversely affect our business, prospects, financial condition and results of operations.

Risks Associated with Investments in an Indian Company

Political changes in the Government of India could delay and/or affect the further liberalization of the Indian economy and materially and adversely affect economic conditions in India, generally, and our business, in particular.

Our business could be significantly influenced by economic policies adopted by the Government of India. Since 1991, successive governments have pursued policies of economic liberalization and financial sector reforms. The Government of India has at various times announced its general intention to continue India’s current economic and financial liberalization and deregulation policies. However, protests against such policies, which have occurred in the past, could slow the pace of liberalization and deregulation. The rate of economic liberalization could change, and specific laws and policies affecting foreign investment, currency exchange rates and other matters affecting investment in India could change as well.

Any significant change in the Government of India’s economic liberalization and deregulation policies could disrupt business and economic conditions in India generally, and could have a material adverse effect on our business, prospects, financial condition and results of operations.

Any downgrading of India’s debt rating by a domestic or international rating agency could negatively impact our business.

Any adverse revisions to India’s credit ratings for domestic and international debt by rating agencies could adversely impact our ability to raise additional financing, as well as the interest rates and other commercial terms at which such additional financing is available. This could have a material adverse effect on our financial results, business prospects, ability to obtain financing for capital expenditures and the price of the Company’s Shares and ADSs.

We may be materially and adversely affected by Reserve Bank of India policies and actions.

The Indian stock exchanges are vulnerable to fluctuations based on changes in monetary policy formulated by the RBI. We can make no assurance about future market reactions to RBI announcements and their impact on the price of the Company’s Shares and ADSs. Furthermore, our business could be significantly impacted were the RBI to make major alterations to monetary or fiscal policy. Certain changes, including changes to interest rates, could negatively affect our sales and consequently our Revenue, which could have a material adverse effect on our business, prospects, financial condition and results of operations. While the RBI has initiated several relief measures over the course of 2020, such as providing moratorium on loans, relaxing provisioning norms towards certain loans and taking other measures to enhance liquidity for non-banking financial companies (“NBFCs”), there remains considerable uncertainty around the COVID-19 pandemic and further relief measures and policy actions that may be needed to assist economic recovery.

Rights of shareholders under Indian law may be more limited than under the laws of other jurisdictions.

The memorandum and articles of association of the Company (the “Articles of Association”) and Indian law govern the Company’s corporate affairs. Legal principles relating to these matters and the validity of corporate procedures, directors’ fiduciary duties and liabilities, and shareholders’ rights may differ from those that would apply to a company incorporated in another jurisdiction. Shareholders’ rights under Indian law may not be as extensive as shareholders’ rights under the laws of other countries or jurisdictions, including the United States. You may also have more difficulty in asserting your rights as a shareholder of the Company than you would as a shareholder of a corporation organized in another jurisdiction.

The market value of your investment may fluctuate due to the volatility of the Indian securities market.

Stock exchanges in India, including BSE Limited (the “BSE”) have, in the past, experienced substantial fluctuations in the prices of their listed securities. Such fluctuations, if they continue or recur, could affect the market price and liquidity of the securities of Indian companies, including the Company’s Shares and, in turn, the Company’s ADSs. These problems have included temporary exchange closures, broker defaults, settlement delays and strikes by brokers. Volatility in other stock exchanges, including, but not limited to, those in the United Kingdom and China, may affect the prices of securities in India, including the Company’s Shares, which may in turn affect the price of the Company’s ADSs. In addition, the governing bodies of the stock exchanges in India have from time to time imposed restrictions on trading in certain securities, limitations on price movements and margin requirements. Furthermore, from time to time, disputes have occurred between listed companies and stock exchanges and other regulatory bodies, which in some cases may have had a negative effect on market sentiment.

There may be a differing level of regulation and monitoring of the Indian securities markets and the activities of investors, brokers and other participants, compared to the United States. For example, while SEBI has prescribed regulations and guidelines in relation to disclosure requirements, insider dealing and other matters relevant to the Indian securities market, there may still be less publicly available information about Indian companies than for United States domestic companies.

 

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Investors may have difficulty enforcing judgments against us or our management.

The Company is a public limited company incorporated in India. The majority of the Company’s Directors and executive officers are residents of India and substantially all of the assets of those persons and a substantial portion of the Company’s assets are located in India. As a result, it may not be possible for you to effect service of process within the United States upon those persons or it may be difficult to effect service of process within the United States on the Company. In addition, you may be unable to enforce judgments obtained in courts of the United States against those persons outside the jurisdiction of their residence, including judgments predicated solely upon U.S. federal securities laws. Moreover, it is unlikely that a court in India would award damages on the same basis as a foreign court if an action were brought in India or enforce foreign judgments if it viewed the amount of damages as excessive or inconsistent with public policy.

Section 44A of the Indian Code of Civil Procedure, 1908, as amended (the “Civil Code”) provides that where a foreign judgment has been rendered by a superior court (within the meaning of the section) in any country or territory outside of India which the Government of India has by notification declared to be a reciprocating territory, such foreign judgment may be enforced in India by proceedings in execution as if the judgment had been rendered by an appropriate court in India. However, the enforceability of such judgments is subject to the exceptions set forth in Section 13 of the Civil Code.

Section 44A of the Civil Code is applicable only to monetary decrees not being in the nature of amounts payable in respect of taxes or other charges of a similar nature or in respect of fines or other penalties and does not include arbitration awards.

If a judgment of a foreign court is not enforceable under Section 44A of the Civil Code as described above, it may be enforced in India only by a suit filed upon the judgment, subject to Section 13 of the Civil Code and not by proceedings in execution. Accordingly, as the United States has not been declared by the Government of India to be a reciprocating territory for the purposes of Section 44A, a judgment rendered by a court in the United States may not be enforced in India except by way of a suit filed upon the judgment.

The suit must be brought in India within three years from the date of the judgment in the same manner as any other suit filed to enforce a civil liability in India. Generally, there are considerable delays in the resolution of suits by Indian courts.

A party seeking to enforce a foreign judgment in India is required to obtain prior approval from the RBI, under the Foreign Exchange Management Act, 1999 (“FEMA”) to repatriate any amount recovered pursuant to such enforcement. Any judgment in a foreign currency would be converted into Indian rupees on the date of judgment and not on the date of payment.

Risks Associated with the Company’s Shares and ADSs

Fluctuations in the exchange rate between the Indian rupee and the U.S. dollar may have a material adverse effect on the market value of the Company’s ADSs and Shares, independent of our operating results.

The exchange rate between the Indian rupee and the U.S. dollar has been volatile in the past and may materially fluctuate in the future. Fluctuations in the exchange rate between the Indian rupee and the U.S. dollar may affect, among others things, the U.S. dollar-equivalents of the price of the Company’s Shares in Indian rupees as quoted on stock exchanges in India and, as a result, the market price of the ADSs. Such fluctuations may also affect the U.S. dollar-equivalent of any cash dividends in Indian rupees received on the Shares represented by the ADSs and the U.S. dollar-equivalent of the proceeds in Indian rupee of a sale of Shares in India.

Holders of ADSs have fewer rights than shareholders and must act through the depositary to exercise those rights.

Although ADS holders have a right to receive any dividends declared in respect of the Shares underlying the ADSs, they cannot exercise voting or other direct rights as a shareholder with respect to the Shares underlying the ADSs. Citibank, N.A. as depository (the “depositary”) is the registered shareholder of the deposited Shares underlying the Company’s ADSs, and only the depositary may exercise the rights of shareholders in connection with the deposited Shares. The depositary will notify ADS holders of upcoming votes and arrange to deliver our voting materials to ADS holders only if requested by the Company. The depositary will try, insofar as practicable, subject to Indian laws and the provisions of the Articles of Association, to vote or have its agents vote the deposited securities as instructed by the ADS holders. If the depositary receives voting instructions in time from an ADS holder which fails to specify the manner in which the depositary is to vote the Shares underlying such ADS holder’s ADSs, such ADS holder will be deemed to have instructed the depositary to vote in favor of the items set forth in such voting instructions. If the depositary does not receive timely instructions from an ADS holder, such ADS holder shall be deemed to have instructed the depositary to give a discretionary proxy to a person designated by us, subject to the conditions set forth in the deposit agreement. If requested by the Company, the depositary is required to represent all Shares underlying ADSs, regardless of whether timely instructions have been received from such ADS holders, for the sole purpose of establishing a quorum at a meeting of shareholders.

 

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In addition, in your capacity as an ADS holder, you will not be able to examine the Company’s accounting books and records, or exercise appraisal rights. Registered holders of the Company’s Shares withdrawn from the depositary arrangements will be entitled to vote and exercise other direct shareholder rights in accordance with Indian law. However, a holder may not know about a meeting sufficiently in advance to withdraw the underlying Shares in time. Furthermore, an ADS holder may not receive voting materials if the Company does not instruct the depositary to distribute such materials, or may not receive such voting materials in time to instruct the depositary to vote.

ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deem it advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement (as defined below), or for any other reason.

For further details on the terms and conditions of the Company’s ADSs and the rights and obligations of the Company’s ADS holders, please see the amended and restated deposit agreement, dated as of September 27, 2004, among the Company, Citibank, N.A., as depository, and all holders and beneficial owners of ADSs issued thereunder, as amended and supplemented by Amendment No. 1, dated as of December 16, 2009, hereinafter referred to as the “deposit agreement,” which is incorporated by reference into this annual report on Form 20-F.

Moreover, pursuant to Indian regulations, the Company is required to offer its shareholders preemptive rights to subscribe for a proportionate number of Shares to maintain their existing ownership percentages prior to the issue of new Shares. These rights may be waived by a resolution passed by at least 75% of the shareholders of the Company present and voting at a general meeting. ADS holders may be unable to exercise preemptive rights for subscribing to these new Shares unless a registration statement under the Securities Act is effective or an exemption from the registration requirements is available to us. The Company’s decision to file a registration statement would be based on the costs, timing, potential liabilities and the perceived benefits associated with any such registration statement and the Company does not commit that it would file such a registration statement. If any issue of securities is made to the shareholders of the Company in the future, such securities may also be issued to the depository, which may sell such securities in the Indian securities market for the benefit of the holders of ADSs. There can be no assurance as to the value, if any, the depositary would receive upon the sale of such rights or securities. To the extent that ADS holders are unable to exercise preemptive rights, their proportionate ownership interest in our company would be reduced.

The Government of India’s regulation of foreign ownership could materially reduce the price of the ADSs.

Foreign ownership of Indian securities is regulated and is partially restricted. In addition, there are restrictions on the deposit of Shares into the Company’s ADS facilities. ADSs issued by companies in certain emerging markets, including India, may trade at a discount to the market price of the underlying shares, in part because of the restrictions on foreign ownership of the underlying shares and in part because ADSs are sometimes perceived to offer less liquidity than underlying Shares that can be traded freely in local markets by both local and international investors. See Item 10.D “Additional Information—Exchange Controls.”

There are restrictions on daily movements in the price of the Shares, which may constrain a shareholder’s ability to sell, or the price at which a shareholder can sell, Shares at a particular point in time.

The Shares are subject to a daily circuit breaker imposed by stock exchanges in India on publicly listed companies that includes the Company, which does not allow transactions causing volatility in the price of the Shares above a certain threshold. This circuit breaker operates independently from the index-based market-wide circuit breakers generally imposed by SEBI on Indian stock exchanges. The percentage limit on the Company’s circuit breaker is set by the stock exchanges in India based on the historical volatility in the price and trading volume of the Company’s Shares. This circuit breaker effectively acts to limit the upward and downward movements in the price of the Company’s Shares. As a result of this circuit breaker, the Company cannot make any assurance regarding the ability of the shareholders of the Company to sell their Shares or the price at which such shareholders may be able to sell their Shares.

With effect from April 1, 2018, any gain realized on the sale of the Shares will be subject to capital gains tax in India See Item 10.E “Additional Information—Taxation—Taxation of Capital Gains and Losses—Indian Taxation—Capital Gains” of this annual report on Form 20-F for further information on the application of capital gains tax in India to the shareholders of the Company and ADS holders of the Company.

 

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Item 4.

Information on the Company

A. History and Development of the Company

The Company was incorporated on September 1, 1945, as a public limited company under the Indian Companies Act VII of 1913 as Tata Locomotive and Engineering Company Limited, and it received a certificate of commencement of business on November 20, 1945. The Company’s name was changed to Tata Engineering and Locomotive Company Limited on September 24, 1960, and to Tata Motors Limited on July 29, 2003. Tata Motors Limited is incorporated and domiciled in India. We commenced operations as a steam locomotive manufacturer, but this business was discontinued in 1971. Since 1954, we have been manufacturing automotive vehicles. The automotive vehicle business commenced with the manufacture of Commercial Vehicles under financial and technical collaboration with Daimler-Benz AG (now Daimler AG) of Germany. This agreement ended in 1969. We produced only Commercial Vehicles until 1991; thereafter we started producing Passenger Vehicles as well. Together with its consolidated subsidiaries, the Company forms the Tata Motors Group.

In March 2004, we acquired Daewoo Commercial Vehicle Co. Ltd. (now known as Tata Daewoo Commercial Vehicle Co. Ltd. (“TDCV”)). TDCV is engaged in the business of manufacturing heavy, medium and light vehicles such as cargo, trucks, dump trucks, tractor trailers and special purpose vehicle mixers.

In September 2004, the Company became the first company from India’s automotive sector to be listed on the NYSE. The Company’s ADSs are traded on the NYSE under the symbol “TTM”. The Company’s Ordinary Shares and “A” Ordinary Shares are traded on the BSE under the codes 500570 and 570001, respectively, and the National Stock Exchange of India Ltd. (the “NSE”) under the symbols “TATAMOTORS” and “TATAMTRDVR”, respectively.

In June 2008, we acquired the Jaguar Land Rover business from Ford. Jaguar Land Rover is a global automotive business, which designs, manufactures and sells Jaguar luxury sedans, sports cars and luxury performance SUVs and Land Rover premium all-terrain vehicles, as well as related parts, accessories and merchandise. The Jaguar Land Rover business has internationally recognized brands, a product portfolio of award-winning luxury performance cars, luxury performance SUVs and premium all-terrain vehicles, brand-specific global distribution networks and research and development capabilities. As a part of our acquisition of the Jaguar Land Rover business, we acquired three major manufacturing facilities located in Halewood, Solihull and Castle Bromwich and two advanced design and engineering facilities located at Whitley and Gaydon, all in the United Kingdom, together with national sales companies in several countries.

We are one of the leading global automobile manufacturers in the world, providing integrated and smart e-mobility solutions to customers in over 125 countries. With an employee base of over 75,000, our top-of-the-line manufacturing facilities are located across India, the United Kingdom, the United States, Italy and South Korea. We are the only OEM in India that offers an extensive range of mobility solutions for our automotives, covering cars, Utility Vehicles, trucks, and buses. We have a strong global network of 118 subsidiaries, equity accounted associates and joint ventures, including the Jaguar Land Rover in the United Kingdom and the Tata Daewoo in South Korea. We offer a broad portfolio of automotive products, ranging from sub-1 ton to 55 ton GVW trucks (including pickup trucks) to small, medium, and large buses and coaches to Passenger Cars, premium luxury cars and SUVs.

We operate six principal automotive manufacturing facilities in India, including at: (i) Jamshedpur in the state of Jharkhand, (ii) Pune in the state of Maharashtra, (iii) Lucknow in the state of Uttar Pradesh, (iv) Pantnagar in the state of Uttarakhand, (v) Sanand in the state of Gujarat and (vi) Dharwad in the state of Karnataka. We also operate four principal automotive manufacturing facilities in the United Kingdom through our Jaguar Land Rover business, including at: (i) Solihull in the West Midlands (ii) Castle Bromwich, also in the West Midlands, (iii) Halewood in Liverpool and (iv) the engine manufacturing center at Wolverhampton in the West Midlands. In Fiscal 2015, Jaguar Land Rover opened its inaugural overseas manufacturing facility in China, the China Joint Venture. In June 2016, Jaguar Land Rover opened a new manufacturing plant in Itatiaia, Brazil, with an annual production capacity of 24,000 units. Jaguar Land Rover now produces the I-PACE battery electric vehicle and the new Jaguar E-PACE in Graz, Austria under its manufacturing partnership with Magna Steyr. Furthermore, Jaguar Land Rover’s 150,000 units per annum manufacturing plant in Nitra, Slovakia opened in October 2018 and is currently producing the Land Rover Discovery and the all-new Land Rover Defender.

 

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We expanded our international operations through mergers and acquisitions, and in India we have made strategic alliances involving non-Indian companies in recent years, including, but not limited to, the following:

 

   

We have a joint venture agreement with FCA Italy Spa (“FCA”) (previously known as Fiat Group Automobiles S.p.A., Italy), which is part of the Stellantis N.V. Group. Together with the FCA, we operate a facility located at Ranjangaon in Maharashtra to manufacture Passenger Cars, engines and transmissions for the Indian and overseas markets. Established in April 2008, the plant currently manufactures the Fiat Linea, Fiat Punto, Tata Indica, Jeep, Nexon, Tata Bolt and Tata Zest vehicles, as well as components for such vehicles, such as engines and transmissions. During May 2012, both joint venture partners decided to re-align their Indian joint venture. Accordingly, in March 2013, we and Fiat Group signed a restructuring framework agreement (the “RFA”), which provides, among other matters:

 

     

a joint arrangement to manufacture and assemble Fiat-branded products, Tata products and any new products (including for third parties) in accordance with the terms and conditions settled in the RFA, with current third-party orders to continue in accordance with the prior terms; and

 

     

the distribution company, owned by FCA, is responsible for distribution of the Fiat vehicles and parts from April 1, 2013.

 

   

In December 2006, we entered into a joint venture agreement with Thonburi Automotive Assembly Plant Co. Ltd. (the “Thonburi Group”) to manufacture pickup trucks in Thailand. As of March 31, 2021, we own 97.21% of the joint venture, while the Thonburi Group owns the remaining 2.79%. The joint venture, which began vehicle production in March 2008, enabled us to access the Thailand market, which is a major market for pickup trucks, as well as other potential markets in the ASEAN region. On July 31, 2018, the Company decided to cease its current manufacturing operations of Tata Motors Thailand Ltd and shall continue to address the Thailand market with a revamped product portfolio, suitable to local market needs, delivered through a CBU distribution model.

 

   

In October 2010, TML acquired an 80% equity interest in Trilix Srl. (“Trilix”), a design and engineering company, in line with our objective to enhance our styling and design capabilities to meet global standards. With effect from December 6, 2018, TML increased its equity interest in Trilix to 100%. Trilix offers design and engineering services in the automotive sector, including styling, architecture, packaging, surfacing, macro and micro-feasibility studies and detailed engineering development.

 

   

Jaguar Land Rover opened a manufacturing plant for the China Joint Venture in Changshu, China in October 2014 and began manufacturing the Range Rover Evoque shortly thereafter. Manufacture of the Land Rover Discovery Sport commenced in the third quarter of Fiscal 2016 followed by the long wheel base Jaguar XFL in the first half of Fiscal 2017 that went on sale in September 2016 and subsequently the long wheel base XEL that went on sale in December 2017. Total phase one investment in the joint venture was approximately RMB10.9 billion, which contributed toward the establishment of the manufacturing plant, research and development center and engine production facility. Jaguar Land Rover committed to invest RMB3.5 billion of equity capital in the China Joint Venture, representing 50% of the share capital and voting rights of the joint venture company. Investment to support phase two, which will add additional manufacturing capacity, may be supported by further capital injections from Jaguar Land Rover and Chery. In July 2017, the China Joint Venture opened an engine manufacturing facility to produce the Jaguar Land Rover 2.0-Liter petrol Ingenium engine for installation into vehicles produced locally at the joint venture plant in Changshu.

 

   

In July 2015, Jaguar Land Rover agreed to a manufacturing partnership with Magna Steyr, an operating unit of Magna International Inc, to build the all-electric Jaguar I-PACE and the Jaguar E-PACE in Graz, Austria.

 

   

In December 2015, Jaguar Land Rover concluded an agreement with the Government of the Slovak Republic for the development of a new manufacturing plant in western Slovakia with the first cars expected to be produced in 2018. The facility represents an investment of GBP1 billion and initial annual capacity of up to 150,000 units. The plant opened in October 2018 and currently produces the Land Rover Discovery and the all-new Land Rover Defender.

 

   

On March 30, 2017, the Board approved a scheme of merger and arrangement between TML and TML Drivelines Limited, a wholly-owned subsidiary of TML. The merger was completed on April 30, 2018. The merger had no impact on our consolidated financial statements.

 

   

On May 23, 2018, the Board approved the sale of TML’s shareholding in its wholly-owned subsidiary, TAL Manufacturing Solutions Limited, to Tata Advanced Systems Ltd., a Tata group company. The divestment of TAL Manufacturing Solutions Limited was closed on March 29, 2019, and TML has received Rs.5,334 million, and has acquired the non-aerospace business of TAL Manufacturing Solutions Limited for Rs.1 million. The acquisition of the non-aerospace business had no impact on our consolidated financial statements.

 

   

Brabo Robotics and Automation Limited (“BRAL”) was incorporated on July 17, 2019, as a-wholly-owned subsidiary of Tata Motors Limited with an operating plan to take over the robotics and factory automation (“RAB”) division of TML as a going concern. The RAB business of TAL Manufacturing Solutions Limited was transferred to TML with effect from April 30, 2019. In Fiscal 2021, we decided to shut down the operations of BRAL.

 

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During the Fiscal 2021, as a part of TMLs internal restructuring process, TML has transferred the outsourcing business with effect from October 1, 2020, to TML Business Services Limited (“TMLBSL”), a wholly-owned subsidiary of TML. This had no impact on our consolidated financial statements.

Please see Item 4.B “Information on the Company—Business Overview—Our Strategy—Capital and Product Development Expenditures” and Item 5.B “Operating and Financial Review and Prospect—Liquidity and Capital Resources—Capital Expenditures” of this annual report on Form 20-F for details on our principal capital expenditures.

Through our subsidiary and associate companies, we are engaged in providing engineering and automotive solutions, construction equipment manufacturing, automotive vehicle components manufacturing and supply chain activities, machine tools and factory automation solutions, high-precision tooling and plastic and electronic components for automotive and computer applications, and automotive retailing and service operations. Tata Technologies Limited (“TTL”) is engaged in providing specialized engineering and design services, product life cycle management (“PLM”) and product-centric IT services to leading global manufacturers. TTL’s customers are among the world’s premier automotive, aerospace, industrial heavy machinery and consumer durables manufacturers. As of March 31, 2021, we held 74.42% stake in TTL, and TTL had 11 subsidiaries and one joint venture.

TML Distribution Company Limited (“TDCL”), TML’s wholly-owned subsidiary, was incorporated on March 28, 2008. TDCL provides distribution and logistics support for distribution of our products throughout India. TDCL commenced its operations in Fiscal 2009.

TML’s subsidiary, Tata Motors Finance Limited (“TMFL”), was incorporated on June 1, 2006, with the objective of becoming a preferred financing provider for our dealers’ customers by capturing customer spending over the vehicle life cycle relating to vehicles sold by us. In India, TMFL is registered with the RBI as a systemically important non-deposit taking NBFC and is classified as an asset finance company under the RBI’s regulations on NBFCs. In Fiscal 2015, TMFL acquired 100% shareholding of Rajasthan Leasing Private Ltd., which subsequently changed its name to Tata Motors Finance Solutions Private Ltd., an NBFC registered with the RBI. On June 4, 2015, Tata Motors Finance Solutions Private Ltd. was converted into a public limited company, named Tata Motors Finance Solutions Limited (“TMFSL”). TMFSL focuses on the used vehicle financing business and financing to dealers and vendors within the TML ecosystem. On March 31, 2016, TMFL acquired 100% shareholding in Sheba, a wholly-owned subsidiary of TML and an NBFC-registered entity with the RBI, as a part of restructuring and consolidation of financial services companies under TMFL. Pursuant to restructuring arrangements, TMFL transferred its new vehicle finance business to Sheba on January 31, 2017. During Fiscal 2018, TMFL changed its name to TMF Holdings Limited (“TMFHL”) and Sheba changed its name to TMFL. During Fiscal 2019, TMFHL had acquired 26% of the share capital of Loginomic Tech Solutions Pvt. Limited, a technology-based freight aggregator.

TML’s wholly-owned subsidiary, Tata Motors Insurance Broking and Advisory Services Limited (“TMIBASL”), is a licensed composite insurance broker with the Insurance Regulatory and Development Authority of India that services customers across the country with its expertise in insurance brokerage and consultancy services. TMIBASL commenced business in Fiscal 2008 and provides end-to-end insurance solutions in direct insurance and reinsurance businesses. With the fast-evolving global risk trends, TMIBASL focuses its expertise and efforts to effectively deliver a wide range of products and services for its clients.

In May 2018, the Board approved the sale of TML’s defense business to Tata Advanced Systems Limited, a Tata group company. TML will receive an upfront consideration of Rs.1,000 million and a deferred consideration of 3% of the revenue generated from certain projects for up to 15 years, starting in Fiscal 2020, subject to a maximum deferred consideration of Rs.17,500 million. The scheme of arrangement in respect of the above (“Scheme”) has been approved by the shareholders at the National Company Law Tribunal (“NCLT”) convened shareholders meeting held on July 30, 2019, and sanctioned by the Honorable NCLT, Mumbai bench and the Honorable NCLT Hyderabad bench vide its orders dated December 12, 2019, and December 20, 2019, respectively. As per Clause 21 of the Scheme, the Scheme would be effective on receipt of necessary approvals from authorities, including the Ministry of Defense. After obtaining all necessary approvals, we sold the business on April 1, 2021.

On July 31, 2020, pursuant to the provisions of Sections 230 to 232 and other applicable provisions of Companies Act, 2013 and subject to the requisite regulatory approvals, the Board approved a scheme of arrangement between the Company and TML Business Analytics Services Limited (“TMLBASL”) and their respective shareholders, inter alia, for the transfer of the Company’s Passenger Vehicles business, including the electric vehicle business as a going concern, on a slump sale basis as defined under Section 2(42C) of the Income-tax Act 1961, to TMLBASL. Pursuant to such scheme, the Board also approved the reduction of the Company’s share capital without extinguishing or reducing its liability on any of its Shares by writing down a portion of its securities premium account amounting to Rs111,736 million, with a corresponding adjustment to the accumulated losses of the Company. Upon such scheme becoming effective, the name of TMLBASL shall be changed to “Tata Motors Passenger Vehicles Limited”. The Scheme of Arrangement has been filed with National Company Law Tribunal for approval.

As of March 31, 2021, our operations included 103 consolidated subsidiaries, two joint operations, four joint ventures and 24 equity accounted associates including their subsidiaries, in respect of which we exercise significant influence. As of March 31, 2021, we had approximately 75,278 permanent employees, including approximately 49,024 permanent employees at our consolidated subsidiaries and joint operations.

 

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Tata Incorporated serves as the Company’s authorized U.S. representative. The address of Tata Incorporated is 101 Park Avenue, New York, NY 10178, the United States of America.

The Company’s registered office is located at Bombay House, 24, Homi Mody Street, Mumbai 400 001, India. The Company’s telephone number is +91-22-6665-8282 and the Company’s website address is www.tatamotors.com. The Company’s website does not constitute a part of this annual report on Form 20-F. The SEC maintains a website www.sec.gov that contains reports, proxy statements and other information regarding registrants, including Tata Motors Limited, that file electronically with the SEC.

Over the last three years, from March 31, 2018, to March 31, 2021, the holdings of the Company’s largest shareholder, Tata Sons, along with its subsidiaries and joint venture, have increased from 36.46% to 46.33%. Please see Item 7.A “Major Shareholders and Related Party Transactions—Major Shareholders” for further details of recent changes in major shareholders’ shareholding in the Company.

B. Business Overview

We primarily operate in the automotive segment. Our automotive segment includes all activities relating to the development, design, manufacture, assembly and sale of vehicles, including financing thereof, as well as sale of related parts and accessories. The acquisition of the Jaguar Land Rover business has enabled us to enter the premium car market in developed markets, such as the United Kingdom, the United States, Europe and China, as well as several emerging markets, such as Russia, Brazil and South Africa, amongst others. Going forward, we expect to focus on profitable growth opportunities in our global automotive business, through new products and market expansion. Within our automotive operations, we continue to focus on integration and synergy through sharing of resources, platforms, facilities for product development and manufacturing, sourcing strategy and mutual sharing of best practices.

The reportable segments are as follows:

 

   

Automotive operations: Our automotive segment consists of the following four reportable sub-segments:

 

     

Tata Commercial Vehicles”: Includes Commercial Vehicles (SCV & Pickups, Medium and Heavy Commercial Vehicles and Intermediate Light Commercial Vehicle and CV Passenger Vehicles) manufactured under the Tata and Daewoo brands (and excludes vehicles manufactured under the Jaguar Land Rover brand);

 

     

Tata Passenger Vehicles”: Includes Passenger Vehicles and Utility Vehicles manufactured under the Tata and Fiat brands (and excludes vehicles manufactured under the Jaguar Land Rover brand);

 

     

Jaguar Land Rover: Includes vehicles manufactured under the Jaguar Land Rover brand (and excludes vehicles manufactured under the Tata, Fiat, Daewoo and other brands); and

 

     

Vehicle Financing”: Includes financing of TML and Jaguar Land Rover new vehicles, pre-owned vehicles including other OEMs brands and corporate lending to our channel partners,

 

   

Other operations: Other operations consist of IT services, machine tools, and factory automation solutions.

We believe that this structure improves speed, agility and simplicity within our business units, and enables strong functional leadership, improved decision-making, quicker responses to changing market conditions and clear accountability.

We produce a wide range of automotive products, including:

 

   

Passenger Vehicles: Our range of Tata-branded Passenger Cars includes the Tiago (compact) and the Altroz (premium) in the hatchback category, and the Tigor and the Tigor EV (mid-sized) in the sedan category. We have expanded our Passenger Car range with several variants and fuel options designed to suit various customer preferences. Our Jaguar Land Rover operations have an established presence in the premium Passenger Car market under the Jaguar brand name. There are six car lines currently manufactured under the Jaguar brand name, including the F-TYPE two-seater sports coupe and convertible, the XF sedan (including the long wheel base XFL at the China Joint Venture), the XE sports saloon (including the long wheel base XEL at the China Joint Venture), the F-PACE Jaguar’s luxury performance SUV, the Jaguar E-PACE compact SUV (manufactured in Graz, Austria under its manufacturing partnership with Magna Steyr and also manufactured at the China Joint Venture plant), and the Jaguar I-PACE (an all-electric performance SUV and Jaguar’s first battery electric vehicle manufactured in Graz, Austria under its manufacturing partnership with Magna Steyr).

 

   

Utility Vehicles: We manufacture a range of Tata brand Utility Vehicles, including the Harrier, the Nexon, the Nexon (EV), Safari. There are seven car lines under the Land Rover brand, comprising the Range Rover, which recently marked its 50th anniversary, Range Rover Sport, Range Rover Evoque, the Land Rover Discovery, Land Rover Discovery Sport, Range Rover Velar and the Defender.

 

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SCVs & Pick Ups: We manufacture a variety of small Commercial Vehicles and pickup trucks (less than 3.5 ton). This includes the Tata Ace, India’s first indigenously developed mini-truck, with a 0.75 ton payload with different fuel options (including the newly launched Petrol variant), the Tata Intra with different payload options and the Tata Yodha pickup range with single cab and double cab variants and 4X2 and 4X4 options.

 

   

MHCVs and ILCVs: We manufacture a variety of MHCVs and ILCVs, which include trucks, tractors, tippers, multi-axle vehicles and pickups with GVWs (including payload) of between 3.5 tons and 55 tons. We also provide fully built solutions for special applications like garbage compactors, containers, tankers, reefers, and diesel bowser, to customers and various government organizations including solutions related to national defense. In addition, through TDCV, we manufacture a wide array of trucks ranging from 215 horsepower to 560 horsepower, including dump trucks, tractor-trailers, mixers and cargo vehicles. Our signature product is the Prima range of trucks, which are sold in India and South Korea as well as exported to a number of countries in South Asia, the Middle East and Africa. The SIGNA range of new MHCV trucks launched in 2016 has been extended to several additional tractor and tipper variants. Similarly, the newest addition to this portfolio - the Ultra range- now spans across multiple tonnage points starting from 5-ton Light Commercial Vehicles (“LCV”) to 30-ton tractors.

 

   

CV Passenger Vehicles: We manufacture a variety of passenger carriers including buses. Our products include Magic Express, including an electric variant, a passenger variant for commercial transportation developed on the Tata Ace platform; and the Winger. We also offer a range of buses, which includes the Semi Deluxe Starbus Ultra Contract Bus and the new Starbus Ultra. Our range of buses is intended for a variety of uses, including as intercity coaches (with both air-conditioned and non-air-conditioned luxury variants), as school transportation and as ambulances. We also offer a range of electric buses in different configurations for every application.

Our Strategy

We intend to further strengthen our position in the Indian automobile industry by investing in new products and solutions that exceed customer expectations, improving customer experiences across all our touchpoints, making rigorous cost improvements across our product range, and optimizing our manufacturing and distribution strategy. We have pursued a strategy of increasing our presence in the global automotive markets and enhancing our product range and capabilities through strategic acquisitions and alliances. Building on the success of our “Turnaround” action plan, we have worked towards “Turnaround 2.0”. Turnaround 2.0 aims at “Winning Decisively” in the Commercial Vehicle business, “Winning Sustainably” in the Passenger Vehicle business, “Winning Proactively” in the Electric Vehicles business and embedding “Turnaround” into our corporate culture. We aim to achieve consistent, competitive, cash accretive growth and to position ourselves as a major international automotive company, offering the widest range of products across product segments and applications.

Jaguar Land Rover’s Reimagine Strategy

Jaguar Land Rover is committed to achieving sustainable, profitable growth with positive cash flows in the medium- to long-term with the strong focus on cost reduction and affordability of capital investments, supported most recently by Project Charge and Project Charge +.

In February 2021, our Jaguar Land Rover business announced a change in direction under its new Reimagine strategy. The Reimagine strategy aims to release the full potential of its brands by leapfrogging forward in technology, placing quality and sustainability at the heart of everything it does. At the core of this is the rapid electrification of both Jaguar and Land Rover. Over the next five years, Land Rover intends to welcome six all-electric variants, with the first scheduled to arrive in 2024. In this timeframe, Jaguar is expected to have undergone a complete renaissance, emerging as a pure electric luxury brand by 2025. By the end of the decade, full-BEV powertrains are expected to represent 60% of Jaguar Land Rover’s sales, rising to 100% by 2036. Key elements of Jaguar Land Rover’s Reimagine strategy involve:

 

   

Quality and efficiency. To enable this accelerated shift in electrification, Jaguar Land Rover plans to establish new benchmark standards in quality and efficiency for the luxury sector and central to this is its new architecture strategy. Jaguar Land Rover plans to migrate from six different architectures today, to just three by the end of the decade, using the flexible modular longitudinal architecture, which is expected to deliver electrified internal combustion engines (e.g., plug-in hybrids and mild-hybrids) initially, but also allows for full battery-electric capability in the future. Jaguar Land Rover also plans to create a radical new market position; one that is aspirational and technologically engaging for the discerning modern luxury customer.

 

   

Technology. Data is the backbone of every vehicle Jaguar Land Rover creates, in the quality of its manufacturing, its supply chain and the support and services it provides to its customers. Jaguar Land Rover has frictionless access to some of the world’s leading players in technology, software and clean energy that will allow us to accelerate the ingredients for modern luxury by design, including advanced driver assistance systems, autonomous capability, connected services and electric vehicle infrastructure. At the heart of every Jaguar Land Rover vehicle will be the next generation of its domain based electrical vehicle architecture—EVA continuum—developed along with Tata Consultancy Services. This delivers ‘always on, always connected, always up-to-date’, software-over-the-air and the ability for Level 2, 2+ and Level 4 autonomous travel. As part of this focus, annual commitments of approximately GBP2.5 billion will include investments in electrification technologies and the development of connected services, to enhance the journey and experiences of customers, alongside data-centric technologies that will further improve the ownership ecosystem.

 

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Refocus to a more agile operation. Through the Reimagine strategy, Jaguar Land Rover aims to right-size, reorganize and repurpose its footprint to become a more agile business. Solihull is planned to become the manufacturing base for the MLA-Flex architecture and the new Jaguar portfolio. Halewood is planned to welcome the new electrified modular architecture and Jaguar Land Rover aims to continue to enhance the strategic benefits of its plants in Slovakia and China. Castle Bromwich will continue to make its existing models to the end of their life and will then be repurposed to benefit from Jaguar Land Rover’s plans to realize efficiencies in its Midlands property portfolio. The value creation expected to be achieved by simplifying Jaguar Land Rover’s manufacturing and architecture strategy aims to improve the utilization of Jaguar Land Rover facilities and overall efficiency. Beyond manufacturing, Jaguar Land Rover is driving transformation through its recently launched Refocus program, which brings together existing and additional activity from across the organization to deliver value and efficiencies. The Jaguar Land Rover global engineering center at Gaydon is planned to become the consolidated home to all its management functions, for frictionless cooperation and agile decision-making, while substantially reducing and rationalizing its other non-manufacturing infrastructure.

 

   

A clear vision toward 2039. Jaguar Land Rover strives to achieve a net zero carbon position, by 2039. To this end, Jaguar Land Rover continues to explore hydrogen fuel-cell technology and aims to also create a new benchmark in environmental and societal impact for the luxury car sector, accelerating pioneering innovations in materiality, engineering, manufacturing, services and circular economy investments. Through the Reimagine strategy, Jaguar Land Rover targets zero tailpipe emissions by 2036 and aims to become a Net Zero Carbon business by 2039, including in its supply chain, products and global operations.

 

   

Structured to succeed. The Reimagine strategy targets the transformation of Jaguar Land Rover, with a value creation approach, delivering quality and profit-over-volume. Jaguar Land Rover aims to become a more agile business, with a simplified manufacturing operation. It will deliver a new benchmark in environmental, societal and community impact for a luxury business, creating the world’s most desirable luxury vehicles, against a canvas of true sustainability.

 

   

Refocus. Refocus is the operational transformation program that drives Jaguar Land Rover’s Reimagine strategy, targeting the delivery of 3% incremental EBIT margin by Fiscal 2026. Refocus brings together existing initiatives (amongst them, Project Charge+ and Project Accelerate) with new activity, into one clear program of priorities that will drive greater value creation. Jaguar Land Rover existing initiatives, such as Project Charge, have already generated cash savings and Refocus intends to build quickly on these solid foundations, continuing the most successful aspects and reorganizing them for faster results. The Refocus program consists of six separate pillars: quality; program delivery and performance; delivered cost per car; end-to-end supply chain; customer and market performance; and maintaining attention to Jaguar Land Rover’s business in China.

Continued Focus on New Product Development

To meet the fast evolving business needs and expectations of customers, each and every BSVI product has been conceptualized and developed to deliver on the key purchasing criteria of our customers, including best-in-class operating economics, comfort and convenience, and enhanced connectivity to assist our customers in better management of their fleet and transportation businesses utilizing our connected vehicle platform.

We recognize that our customers’ expectations are fast evolving due to the changing business scenario. To meet these changing expectations, we introduced our future-ready product portfolio for our Commercial Vehicles business, developed with an aim to ‘redefine transportation’. The entire range of our Commercial vehicles, from sub-1 tonne to 55-tonne gross vehicle/combination weight (“GVW/GCW”), is powered by efficient drivetrains, features a futuristic “Premium Tough” design language and is engineered to cater to a wide variety of dynamic market demands. It offers reduced Total Cost of Ownership (“TCO”) to all users—fleet operators, mid-size transport operators and small transporters, with higher-than-before vehicle performance through value-enhanced features, synchronized service intervals and improved overall vehicle efficiency. With customized transport solutions to address industry-specific applications available in each commercial vehicle segment—M&HCV, I&LCV, SCV & PU, as well as passenger commercial vehicles—Tata Motors offers the widest array of vehicles in the country for customers to select as per their specific requirement. The “Power of 6” value proposition, which guided the design and development of this range institutes significant advances across the key areas relevant for each segment; like lower TCO, improved earning potential, enhanced comfort, connectivity and performance, amongst other attributes. Tata Motors has upgraded every vehicle from bumper to bumper, while also introducing technological and performance upgrades that generate higher revenue and profits through higher fluid efficiency, excellent driving comfort and world-class connectivity features. Some of these key features include higher power output, superior gear shifts, multiple driving modes, improved ergonomics and crash-tested cabins for the safety of the driver.

 

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Our Passenger Vehicles (“PV”) offerings include the NEW FOREVER range that exemplifies the IMPACT 2.0 design language across cars and utility vehicles and is developed using pioneering technologies that are sustainable. With the launch of Tata Safari, we have almost achieved 60% market coverage across various segments, with strong positions in the growing segments.

Our recent product launches, key features and anticipated product launches include the following:

 

   

The all-new M&HCV BSVI range, which comes with three powerful and reliable Cummins and Turbotronn engines with six power nodes and is available with a choice of three upgraded cabins: the Ultra, Signa and Prima. A number of value enhancers and features such as gearshift advisor, FE switch, additional storage space, wider sleeping berths, T&T steering, three-way adjustable seats, engine brake, Hill Start Assist, Reverse Parking Assistance and LED tail-lights have been introduced for the comfort, convenience, safety and productivity of the driver. The customers also have a choice to select CX and LX value feature packs. Many industry-first products like Signa 4825.TK (India’s First 16 Wheel 16T Tipper), Signa 3118.T (India’s first 10 wheels 31T Truck) and Signa 5525.S 10X2 Tractor were introduced in Fiscal 2021 to improve the cost of operations and profitability of customers. Other introductions included Signa 3521 and Ultra 2821. Fleet Edge, TATA Motors connected vehicle platform and Uptime Guarantee were also launched in our Value-added services under the Gamut of Sampoorna Seva. The entire range of MHCV was well-accepted for superior performance and fuel efficiency, leading to a gain of 70bps in Market Share gain and 300 bps in Net Promoter Score in Fiscal 2021.

 

   

The I&LCV BSVI range, which offers better fuel economy, improved low-end torque, enhanced gradability and extended service intervals, providing the industry’s most competitive TCO (Total Cost of ownership) for its customers. We introduced an all-new 3.3-litre diesel engine, at two power and torque nodes of 125-155hp and 390-450Nm respectively. During Fiscal 2021, we also introduced the Ultra T.7, which was designed specifically for urban transportation, with its all-new sleek Ultra cabin. We also extended our CNG range to the 16T segment with the launch of LPT 1512g Cargo and LPT 1512 Sleeper Cabin for e-commerce and developed Fuel Bowser & Reefer Applications, addressing the sharply growing demand in these specific segments.

 

   

The new Small Commercial Vehicles and Pick-up BSVI range featuring the popular Ace, Intra and Yodha now have an increased payload of up to 750kg, 1300kg and 1700 kg, respectively. Tata Ace was introduced in multiple fuel options of Diesel, gasoline and CNG. In Pickups, we introduced BSVI variants of TATA Intra V10, V30 and V30 Cx. Yodha 1700 was launched with increased payload, and improved power, pickup and cabin comfort. Tata Motors’ BS6 range of SCV cargo and pickup vehicles offer best-in-class TCO through improved fuel efficiencies. While Ace got a new digital instrument cluster, added storage space and a USB port, the Intra V30, was upgraded with the largest loading deck in its class, power steering, gear shift advisor and ECO mode.

 

   

In Fiscal 2021, we also launched the BSVI range of Buses with 4SPCR, 3.3L Cummins, 5L 3.8 SGI & 5.7 SGI CNG Engines offering improved total cost of ownership, comfort & convenience, low NVH, improved ergonomics, and a host of other safety features such as improved visibility, reverse parking assistance and connectivity. We continued to drive the Government electrification agenda and delivered 9m Electric buses to various state transport undertakings (AJL and BEST). TATA Motors now has more than 350 electric buses running on Indian roads with a cumulative running of over 10 million kilometers. In the International Business, 407 & 909 Bus models were delivered in Bangladesh. Understanding the criticality of the pandemic and the need for Ambulances; we introduced TATA Winger & Magic Ambulance. A multi-stretcher heavy-duty medical emergency service vehicle, spacious enough to handle multiple patients requiring critical care was also launched in form of Tata LP410. The Magic Express patient transport ambulance is designed to support medical and health-related services on interior Indian roads, resulting in speedy movement of patients requiring emergency care.

 

   

In the passenger vehicles business, we launched exciting new variants across its product portfolio, including Tata Altroz I-turbo, Tiago XTA, Harrier XT and Nexon XM-S.

 

   

In addition, we also launched the iconic flagship SUV—the all-new Safari in February 2021. The new Safari, available in six- and seven-seater options, offers a Kryotec 2L Turbocharged 170PS Diesel Engine, segment leading ride and handling, improved interiors and top-of-the-line safety, technology and connectivity features.

We also plan to continue to build on recent successful product launches for Jaguar Land Rover Business, such as the all-new Land Rover Defender. The recently released 2021 model refreshes and upgrades across the model range including the expansion of electrification to include eight plug-in hybrid electric vehicles, 11 mild hybrid models and all-electric Jaguar I-PACE Some notable Jaguar Land Rover product launches during the year include:

 

   

Plug-in hybrid versions of the Range Rover Evoque and the Land Rover Discovery Sport supported by a new 1.5-litre 3-cylinder Ingenium petrol engine.

 

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Refreshed Jaguar F-PACE with exterior updates, all-new interior, improved infotainment and the choice of in-line 4-cylinder and 6-cylinder engines including plug-in hybrid electric and mild hybrid electric technology.

 

   

Refreshed Jaguar E-PACE with exterior updates, all-new interior, improved infotainment and the choice of in-line 4-cylinder 2.0-litre engine with mild Hybrid technology or 1.5-litre engine supporting a plug-in hybrid model.

 

   

2021-model year Land Rover Discovery, including a mild hybrid option, with improved interior and infotainment.

 

   

2021 model year Range Rover Velar with advanced new infotainment technology and elegant new design features and the choice of both plug-in hybrid and mild hybrid variants.

 

   

Recently announced plug-in hybrid and mild hybrid variants of the all-new Land Rover Defender and a new Defender Hard Top which is a commercial version available with a range of Ingenium diesel engines and a practical, durable load area.

We have plans to expand the range of our product base further, supported by our strong brand recognition in India, understanding of local consumer preferences, in-house engineering capabilities and extensive distribution network. Facing growing competition, changing technologies and evolving customer expectations, we understand the importance of bringing new platforms to address market gaps and further enhance our existing range of vehicles to ensure customer satisfaction. Our capital expenditures totaled Rs.178,199 million, Rs.302,945 million and Rs.342,236 million during Fiscal 2021, Fiscal 2020 and Fiscal 2019, respectively, and we currently plan to invest approximately of Rs.289,000 million in Fiscal 2022 in capacity, new products and technologies.

Jaguar Land Rover continues to invest in enhancing its technological strengths through in-house research and development activities, including the development of its engineering and design centers which centralize Jaguar Land Rover’s capabilities in product design and engineering. In September 2019, Jaguar Land Rover unveiled new facilities at its Gaydon site in Warwickshire, which was the largest automotive creation and development center in the UK. Jaguar Land Rover also participates in advanced research consortia that bring together leading manufacturers, suppliers or academic specialists in the United Kingdom and are supported by funding from the UK Government’s Technology Strategy Board. In addition, Jaguar Land Rover’s InMotion Ventures business unit invests in future transport and mobility solutions and focuses on developing innovative mobility solutions to overcome and address future travel and transport challenges.

Leveraging Our Capabilities

We have manufacturing facilities across five locations in India, which deliver mobility solutions to four product lines with products ranging from 0.5 tons to 55 tons. These state-of-the-art facilities cater to not only the domestic and international market but also defense markets. To date, over a history of 75 years, we have manufactured more than 10 million Commercial Vehicles. In Fiscal 2021, we have delivered more than 0.26 million vehicles while driving our operating costs towards benchmark levels through various initiatives and levers. We also endeavor to make our operations sustainable in terms of safety and health, corporate responsibility, and environment with stringent targets in these areas enabled by various initiatives and guided by strong governance committees.

Our product portfolio of Tata-brand vehicles includes the Tiago, Altroz, Tigor, Tigor (EV), Nexon, Nexon (EV), Harrier and Safari which enable us to compete in various Passenger Vehicle market categories, catering to almost 60% of the market categories. We also offer alternative fuel vehicles. We also intend to expand our sales reach and volumes in rural areas, where an increase in wealth has resulted in a declining difference between urban and rural automobile purchase volumes.

We believe that the foundation of our growth over the last five decades has been a deep understanding of economic conditions and customer needs, and the ability to translate this understanding into desirable products though research and development. In India, our engineering research center (the “ERC”), established in 1966, has enabled us to successfully design, develop and produce our own range of vehicles. Jaguar Land Rover’s research and development operations are built around state-of-the-art engineering facilities, extensive test tracks, testing centers, design hubs and a virtual innovation center. The ERC in India and Jaguar Land Rover engineering and development operations in the United Kingdom have identified areas to leverage the facilities and resources to enhance the product development process and achieve economies of scale. Furthermore, the Company has a wholly-owned subsidiary, Tata Motors European Technical Centre PLC (“TMETC”), in the United Kingdom, which is engaged in automobile research and engineering.

We believe that our in-house research and development capabilities, including those of our subsidiaries Jaguar Land Rover, TDCV and Trilix in Italy, TMETC in the United Kingdom and our joint ventures with Marcopolo S.A. of Brazil in India, with Thonburi in Thailand and Tata Africa Holdings (SA) (Proprietary) Ltd. in South Africa, will enable us to expand our product range and extend our geographical reach. We continually strive to achieve synergy wherever possible with our subsidiaries and joint ventures.

 

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We have continued modernizing our facilities to meet demand for our vehicles. Our Jamshedpur plant, which manufactures our entire range MHCVs, including the Prima, both for civilian and defense uses, was our first plant, set up in 1945 to manufacture steam locomotives. It led our entry into Commercial Vehicles in 1954. The Jamshedpur plant has been modernized over the years and in Fiscal 2015, we celebrated 60 years of truck manufacturing at our first manufacturing and engineering facility in Jamshedpur.

Jaguar Land Rover invests in the development of new and refreshed products for new and existing segments by introducing new powertrains and technologies, including CO2 reduction and electrification that satisfy both customer preferences and regulatory requirements. Jaguar Land Rover expects investment spending of up approximately GBP2.5 billion in Fiscal 2022, split approximately evenly between research and development and tangible fixed assets such as facilities, tools and equipment as well as other investments.

In October 2014, Jaguar Land Rover opened its EMC at Wolverhampton, in the West Midlands. The plant currently manufactures Jaguar Land Rover’s own in-house 2.0-Liter diesel and gasoline engines, which are now available across the majority of models as well as the 6-cylinder 3.0-litre Ingenium gasoline and diesel engines. Jaguar Land Rover’s in-house engines have been engineered to ensure maximum manufacturing efficiency, flexibility to increase the number of engine variants and consistently high quality. In July 2017, the China Joint Venture opened its engine manufacturing facility, which produces Jaguar Land Rover’s own in-house 2.0-Liter petrol Ingenium engine for installation into vehicles produced locally at the joint venture plant in Changshu.

The Jaguar E-PACE and the all-electric Jaguar I-PACE battery electric vehicle are produced under the manufacturing partnership with Magna Steyr, in Graz, Austria. Jaguar Land Rover’s manufacturing facility in Nitra, Slovakia, with annual capacity of 150,000 units, opened in October 2018 and is currently producing the Land Rover Discovery and the all-new Land Rover Defender, which started in January 2020. In June 2016, Jaguar Land Rover opened its first wholly-owned international manufacturing plant in Brazil.

For Fiscal 2022, on a consolidated basis, we expect to invest over Rs.289,000 million in property, plants and equipment and product development.

Continuing Focus on High Quality and Enhancing Customer Satisfaction

We place strong emphasis on customer comfort, and had launched Sampoorna Seva in 2018, which is a comprehensive package that addresses all after-sales needs of our customers. We continued to extend our presence with Tata Motors’ extensive dealership and service network of over 2600+ touch points with a service facility at every 62km across the country, manned by trained specialists and backed by Tata Genuine Parts. Tata Motors also extends various vehicle care programs, fleet management solutions, annual maintenance packages and resale for commercial vehicles under the Sampoorna Seva 2.0 initiative. Additionally, Tata Alert offers 24×7 roadside assistance for all vehicles under warranty while Tata Kavach ensures that all accidental vehicles insured under Tata Insurance are repaired within 15 days.

In 2021, TML CVBU won the Customer Obsession Award for the third consecutive year from the Confederation of Indian Industry (an apex body for all industries in India), while also receiving a special award for “digital journey”.

Our various efforts to improve customer satisfaction levels continued to be reflected in numerous recognitions we received. In a recent Net Promoter Score Brand Health Track survey conducted by Millward Brown Market Research Services India Pvt. Ltd., TML Commercial Vehicles scored at 68, an increase of 3 points from 65 in the last survey which is an improvement of 11 points from 57 in Fiscal 2018. During Fiscal 2021, our efforts towards customer-centricity, product innovation, digital innovation and environment were recognized by various industry associations, and we were awarded several recognitions, including:

 

   

CV Manufacturer of the Year for the third consecutive year, along with six other segmental awards at the prestigious Apollo CV awards 2021;

 

   

Two Golden Peacock awards, for DigiVOR and the 9x9 electric bus;

 

   

CII Customer Obsession award for the third consecutive year;

 

   

Tata InnoVista award for modular Intra vehicle platform;

 

   

World Innovation Congress award for Digi VOR;

 

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First Prize in national energy conservation by the Ministry of Power and Bureau of Energy Efficiency for Jamshedpur Plant; and

 

   

Six awards at the Business Leader of the Year awards for E-Dukaan, performance monitoring, Faculty of Management Studies (University of Delhi), spare finance, customer experience, and spare marketing.

One of our principal goals is to achieve international quality standards for our products and services. We have established a comprehensive purchasing and quality control system that is designed to consistently deliver quality products and superior service. We also have a program for assisting vendors from whom we purchase raw materials or components to maintain quality. Each vendor is reviewed on a quarterly basis on parameters of quality, cost and delivery, and preference is given to vendors with TS 16949 certification. Through close coordination supported by our IT systems, we monitor quality performance in the field and implement corrections on an ongoing basis to improve the performance of our products, thereby improving customer satisfaction. We believe our extensive sales and service network has also enabled us to provide quality and timely customer service. We are encouraging focused initiatives at both sales and service touch points to enhance customer experience and strive to be the best in class, and we believe that the reach of our sales, service and maintenance network provides us with a significant advantage over our competitors.

 

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In our Passenger Vehicle segment, we received a strong response and accolades with more than 15 awards during the year, including the following:

 

No.

  

Media

  

Category

  

Product

1.    Indian Car of the Year Awards    Indian Car of the Year    Tata Altroz
      Green Car Award    Nexon EV
2.    Motor Octane Awards    Best Indian Car    Tata Altroz
3.    Autocar India Awards    Best Design & Styling    Tata Altroz
      Green Car of the Year Award    Nexon EV
4.    Car India Awards    Green Car of the Year Award    Nexon EV
5.    Car & Bike Awards    EV of the Year    Nexon EV
      Premium Hatchback of the year    Tata Altroz
      Safety Tech of the year    Tata Altroz
6.    Motor Vikatan Awards    Entry level Hatchback of the year    Tata Tiago
      EV of the year    Nexon EV
7.   

Auto Portal Awards

  

Technology of the Year award

  

Nexon EV

8.   

Unbiased Awards

  

Car of the Year

  

Tata Altroz

9.   

T3 Awards

  

Electric Car of the Year

  

Nexon EV

10.   

CII awards

  

Mobility Design: Four Wheeler Vehicle

  

Tata Nexon

11.   

Namaste Car Awards

  

Hatchback of the year

  

Tata Altroz

     

Car Manufacturer of the Year

  

Tata Motors

     

Design of the Year

  

Tata Safari

During Fiscal 2021, our Commercial Vehicles business received numerous awards, including:

BUSINESS LEADER OF THE YEAR AWARDS

 

No.

  

Award Category

  

Awarded Model/campaign

1.   

Innovative Project of the Year

   Spare Parts—Retail Financing, Commercial Vehicle Performance Management & Improvement through Predictive Analytics
2.   

Best Innovation in Marketing

  

Spare Part Marketing

3.   

Innovative Service Provider of the Year

  

Fleet Management Solution

4.   

Best Innovative on-line Service

  

E-Dukan

5.   

Customer Centric Excellence Award

  

Customer Experience

APOLLO CV AWARDS

 

No.

  

Award Category

  

Awarded Model/OEM

1.   

CV Manufacturer of the Year

  

Tata Motors Limited

2.   

LCV Cargo Carrier of the Year

  

Tata Ultra T.7

3.   

HCV Rigid Cargo of the Year

  

Tata Signa 4225.T

4.   

MCV Cargo Carrier of the Year

  

Tata Ultra 1918.T

5.   

HCV Tipper of the Year

  

Tata Signa 4825.TK

6.   

Special Application CV for the year

  

Tata Ultra T.11 Fuel Browser

Tata Motors Limited Commercial Vehicles business also won more than 114 awards at the 31st ISSAN National Convention.

 

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Jaguar and Land Rover has received numerous awards from leading international motoring writers, magazines and opinion leaders from Fiscal 2020, reflecting the strength of its model line-up, design and engineering capabilities. A selection of recent awards is listed below.

 

Award

  

Model

  

Awarding Institution

  

Date

World Car Design of the Year    All-new Land Rover Defender    World Car Awards    April 2021
Supreme Winner Women’s World Car of the Year 2021 and Best Medium SUV 2021    All-new Land Rover Defender    The Women’s World Car of the Year (WWCOTY) awards    March 2021
Car of the Year    All-new Land Rover Defender    Top Gear    December 2020
Best Electric Luxury SUV    Jaguar I-PACE    What Car? Electric Car Awards    August 2020
Best domestic compact SUV and offroader    All-new Range Rover Evoque    Best Car    March 2020

Environmental Performance

Jaguar Land Rover’s strategy is to invest in products and technologies that are ahead of expected stricter environmental regulations and ensure that it benefits from a shift in consumer awareness of the environmental impact of its vehicles. Jaguar Land Rover’s environmental vehicle strategy focuses on developing new propulsion technology, overall vehicle weight reduction and reducing parasitic losses through the driveline and minimizing energy consumption. Twelve of Jaguar Land Rover’s 13 nameplates now have electrified options, comprising eight plug-in hybrid and 11 mild hybrid models as well as the all-electric Jaguar I-PACE.

Jaguar Land Rover is a global leader in the use of aluminium and other lightweight materials to reduce vehicle weight and improve CO2 emissions and fuel efficiency. It plans to continue to build on this expertise and extend the application of aluminium construction as it develops new and refreshed products. The aluminium body architecture introduced on the Jaguar XE is also used in the Jaguar XF, the Jaguar F-PACE and the Range Rover Velar. The all-new Land Rover Defender, Land Rover Discovery, Range Rover and Range Rover Sport all use the same light weight architecture, with Land Rover’s new MLA to be launched soon. Its lighter vehicles, powered by downsized, more efficient engines and alternative powertrains, have all contributed to its improved carbon footprint. As indicated above, Jaguar Land Rover is developing a new aluminium modular longitudinal architecture, on which future Land Rover vehicles will be based, along with Land Rover’s future Electric Modular Architecture.

 

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Jaguar Land Rover has also developed more efficient powertrains and other related technologies. These include smaller and more efficient 2.0-Liter Ingenium diesel and gasoline engines, as well as 6-cylinder 3.0-litre Ingenium gasoline and diesel engines. Land Rover also has a 1.5-litre petrol engine that supports the plug-in hybrid variants of the Range Rover Evoque, Land Rover Discovery Sport and the Jaguar E-PACE. The modular nature of our Ingenium engines allows for different engine configurations, allowing us to further expand our Ingenium family of engines.

In addition to CO2 emissions and fuel efficiency, all our powertrains have been developed to meet the world’s most stringent air quality emissions regulations such as the United States Environmental Protection Agency (“EPA”) Tier 3 and California Low-Emission Vehicle 3 (“LEV3”). Furthermore, our early adoption of urea Selective Catalytic Reduction technology enabled us to react quickly to pressure to lower nitrogen oxide (“NOx”) emissions from diesel engines and allowed us to significantly reduce NOx emissions from all our diesel vehicles.

Jaguar Land Rover is also taking measures to reduce emissions, waste and the use of natural resources in all of its operations.

Mitigating Cyclicality

The automobile industry is impacted by cyclicality. To mitigate the impact of cyclicality, we plan to continually strengthen our operations through gaining market share across different segments and offer a wide range of products in diverse geographies. We also plan to continue to strengthen our business operations other than with vehicle sales, such as the financing of our vehicles, spare part sales, service and maintenance contracts, sales of aggregates for non-vehicle businesses, reconditioning of aggregates and sale of castings, production aids and tooling and fixtures in order to reduce the impact of cyclicality of the automotive industry.

Expanding Our International Business

Our international expansion strategy involves entering into new markets where we have an opportunity to grow and to introduce new products to existing markets in order to grow our presence in such markets. Our international business strategy has already resulted in the growth of our international operations in select markets and chosen segments over the last five years. Based on our internal assessments, in recent years, we have grown our market share across various African markets such as Tanzania, Kenya, Uganda and Nigeria, in addition to strengthening our dominant market position in the South Asian markets of Bangladesh, Nepal and Sri Lanka based on data compiled by our country managers. In keeping with our strategy to enter and grow in new regions, we have focused on business in the ASEAN countries. We have also expanded our international presence through acquisitions and joint ventures. Our acquisition of Jaguar Land Rover significantly expanded our presence in overseas markets. Through Jaguar Land Rover, we offer products in the premium performance car and premium all-terrain vehicle categories with globally recognized brands, and we have diversified our business across markets and product categories as a result. We intend to continue to build upon the internationally recognized brands of Jaguar Land Rover. The production of the Range Rover Evoque commenced at the China Joint Venture in October 2014 and went on general retail sale in China in February 2015. Production of the Discovery Sport was also added as the second vehicle to be manufactured at the China Joint Venture in Fiscal 2016, which went on general retail sale in November 2015. In September 2016, the long wheelbase Jaguar XFL went on sale followed by the long wheel base Jaguar XEL in December 2017. The E-PACE also went on sale in November 2017 and commenced sales from the China Joint Venture in September 2018. The all-new Land Rover Discovery went on sale in February 2017 and the new Range Rover Velar went on sale in July 2017 with the refreshed 18 model year Range Rover and Range Rover Sport (including PHEV models) going on sale from November 2017. The multi award winning Jaguar I-PACE went on sale in June 2018 and the all-new Evoque went on sale in February 2019. The new refreshed Jaguar XE was launched in March 2019 and the refreshed Land Rover Discovery Sport was revealed in May 2019 and was launched in China (through our China Joint Venture) in March 2020. The refreshed Jaguar F-TYPE was launched in December 2019 and the production of the all-new Land Rover Defender began in January 2020 at the manufacturing plant in Nitra, Slovakia, with its first retail sales in March 2020. Plug-in hybrid versions of the Range Rover Evoque and the Land Rover Discovery Sport, supported by a new 1.5-litre 3-cylinder Ingenium petrol engine, were recently launched in April 2020. In September 2020, we launched a refreshed Jaguar F-PACE (with exterior updates, all-new interior, improved infotainment and the choice of in-line 4- and 6-cylinder engines, including plug-in hybrid electric and mild hybrid electric technology) and a 2021 model year Range Rover Velar (with advanced new infotainment technology and elegant new design features and the choice of both plug-in hybrid and mild hybrid variant). Plug-in hybrid and mild hybrid variants of the Jaguar E-PACE and a mild hybrid variant of the Jaguar XE and the Jaguar XF as well as the refreshed Range Rover Discovery are now on sale. Jaguar Land Rover is ahead of its target schedule and has already launched one full battery electric vehicle, eight plug-in hybrid electric vehicles and 11 mild hybrid electric vehicles during Fiscal 2021.

 

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During Fiscal 2008, we established a joint venture company to undertake manufacture and assembly operations in South Africa, which has been one of our largest export markets from India in terms of unit volume. The joint venture company, Tata Motors (SA) (Proprietary) Limited, commenced operations in July 2011. Currently, Tata Motors (SA) (Proprietary) Limited caters to the South African, Zambia and Mozambique markets and, in Fiscal 2021, sold 631 units.

Reducing Operating Costs

We believe that our scale of operations provides us with a significant advantage in reducing costs and we plan to continue to sustain and enhance this cost advantage.

Our ability to leverage our technological capabilities and our manufacturing facilities among our Commercial Vehicles and Passenger Vehicles businesses enables us to reduce cost. For example, the diesel engine used in our Indica was modified to engineer a new variant for use in the Ace platform, which helped to reduce the project cost. Similarly, platform-sharing for the manufacture of pickup trucks and UVs enables us to reduce capital investment that would otherwise be required, while allowing us to improve the utilization levels at our manufacturing facilities. Where appropriate, we intend to apply our existing low-cost engineering and sourcing capability to Jaguar Land Rover vehicles.

The Passenger Vehicle business landscape is seeing rapid transformation in the form of tightening emission norms, push towards electrification, enhanced disruptions from autonomous and connected technologies and, as the aspiration levels of the Indian consumer continue to rise, requiring stepped-up investments in contemporary products in a competitive market. We are taking steps towards subsidiarization of the PV business to secure mutually beneficial strategic alliances that provide access to products, architectures, powertrains, new age technologies and capital and is likely to optimize the operating cost base further into Fiscal 2022.

We are working towards the consolidation of our future Passenger Vehicles on two architectures: the ALFA architecture and the Omega architecture. With all products coming out of these two platforms, we plan to utilize cost benefits coming out of common parts and economies of scale to continue our Passenger Vehicles turnaround. Similar efforts are being taken with our Commercial Vehicles as well.

Our vendor relationships also contribute to our cost reductions. For example, we believe that the vendor rationalization program has provided economies of scale to our vendors, which have benefitted our cost programs. We are also undertaking various internal and external benchmarking exercises that would enable us to improve the cost effectiveness of our components, systems and sub-systems.

In Fiscal 2021, significant efforts were dedicated toward cost reduction and cash conservation. Tata Motors Limited achieved savings of Rs.93,000 million against the cash and cost savings targets of Rs.60,000 million (based on analytically derived unaudited estimates comprising of savings of Rs. 26,000 million in investment spending, Rs. 45,000 million in working capital and Rs. 22,000 million in cost and profits against targets of Rs. 30,000 million, Rs. 15,000 million and Rs. 15,000 million, respectively).

As part of Jaguar Land Rover’s Project Charge and Charge+ programs GBP2.5 billion of cost and cash efficiencies (based on analytically derived unaudited estimates comprising of GBP0.4 billion in working capital, GBP1.0 billion in investment and GBP1.1 billion in cost and profits) were achieved in Fiscal 2021, leading to cumulative savings of GBP6 billion (based on analytically derived unaudited estimates comprising of GBP1.0 billion in working capital, GBP2.9 billion in investment and GBP2.1 billion in cost and profits) over the duration of the Charge and Charge + programs from Fiscal 2019 to Fiscal 2021 (based on analytically derived unaudited estimates).

 

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Enhancing Capabilities Through the Adoption of Superior Processes

Tata Sons and the entities promoted by Tata Sons, including us, aim at improving quality of life through leadership in various sectors of national economic significance. In pursuit of this goal, Tata Sons and the Tata Sons-promoted entities have institutionalized an approach, called the ‘Tata Business Excellence Model’, which has been formulated along the lines of the Malcolm Baldridge National Quality Award to enable us to improve performance and attain higher levels of efficiency in our businesses and in discharging our social responsibility. The model aims to nurture core values and concepts embodied in various focus areas such as leadership, strategic planning, customers, markets and human resources, and to translate them to operational performance. Our adoption and implementation of this model seeks to ensure that our business is conducted through superior processes.

We have deployed a balance score card system for measurement-based management and feedback. We have also deployed a new product introduction process for systematic product development and a PLM system for effective product data management across our organization. We have adopted various processes to enhance the skills and competencies of our employees. We have also enhanced our performance management system, with appropriate mechanisms to recognize talent and sustain our leadership base. We believe these will enhance our way of doing business, given the dynamic and demanding global business environment.

Expanding Customer Financing Activities

Vehicle sales embedded with financing expedite purchases and sales. As part of our efforts to achieve this objective, we have teamed up within Tata Motors Group to introduce various consumer programs that aim to increase sales and improve consumer satisfaction. We are servicing consumers in more than 11,000 postal codes in the country through a network of 261 physical branches and digital presence. To facilitate increased sale and retention of clients, we have launched life cycle products. Additionally, we also offer various customized funding solutions to dealers and vendors, thereby supporting the entire ecosystem.

Continuing to Invest in Technology and Technical Skills

We believe we are one of the most technologically advanced indigenous vehicle manufacturers in India. Over the years, we have enhanced our technological strengths through extensive in-house research and development activities. Further, our research and development facilities at our subsidiaries, such as TMETC, TDCV, TTL and Trilix, together with the two advanced engineering and design centers of Jaguar Land Rover, have increased our capabilities in product design and engineering. In our Jaguar Land Rover business, we are committed to investments in new technologies to develop products that meet the challenges and opportunities of the premium market, including developing sustainable technologies, like electric propulsion, to improve fuel economy and reduce CO2 emissions and new modular longitudinal architecture. We consider technological leadership to be a significant factor in our continued success, and therefore intend to continue to devote significant resources to upgrade our technological base.

Maintaining Financial Strength

Our cash flow from operating activities in Fiscal 2021 and Fiscal 2020 was Rs.290,005 million and Rs.266,329 million, respectively. Our operating cash flows are primarily due to implementation of cost-reduction programs, and prudent working capital management. We have established processes for project evaluation and capital investment decisions with an objective to enhance our long-term profitability.

Leveraging Brand Equity

Going beyond compliance, we have redesigned and re-engineered to bring in the new range of BSVI vehicles based on the strategy of product attribute leadership standing on four pillars - lower total cost of ownership, comfort, safety and connectivity.

For pre-owned vehicles, Tata Motors Limited has a brand named TATA OK. Under this brand, we promote exchange of vehicles in the India market, for which customers can exchange a pre-owned vehicle and buy a new vehicle in similar segment. This helps us to retain our existing customers and also capture new customers.

We offer a variety of support products and services for our customers. In order to improve customer experience and business prospects of our BSVI vehicles, we have decided to upgrade the connected vehicle solution on our existing connected vehicle platform.

In Fiscal 2021, Tata Motors launched Fleet Edge, a next-generation connected vehicle solution that enables fleet management, with informed decision making. Tata Motors is taking the connected vehicle solutions to the next level with the introduction of Fleet Edge that has the capability of processing large amounts of data generated by the Telematics Control Unit and offers real-time insights for track and trace, vehicle health, driving behavior, real-time fuel efficiency and fuel loss alert. Customers will also be able to track the due date of the important vehicle documents. These insights will be available to customers through a user-friendly interface on Tata Motors Fleet Edge portal and will help customers manage their fleet even more efficiently. Fleet Edge is also accessible on smartphones via an app, on a real-time basis.

 

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Tata Motors is India’s largest commercial vehicle manufacturer by volume in Fiscal 2021 and a leading M$HCV (>6ton) manufacturer globally. The Net Promoter Score, customer loyalty and satisfaction measurement, continued growth trajectory and grew by 300 basis points from 65 in Fiscal 2020 to 68 in Fiscal 2021. The Net Promoter Score saw an improvement of 1,100 basis points over the last five waves.

We believe customers associate the Tata name with reliability, trust and ethical value, and that our brand name is gaining significant international recognition due to the international growth strategies of various Tata companies. The Tata brand is used and its benefits are leveraged by Tata companies to their mutual advantage. We recognize the need for enhancing our brand recognition in highly competitive markets in which we compete with internationally recognized brands. We, along with Tata Sons and other Tata companies, will continue to promote the Tata brand and leverage its use in India, as well as in various international markets where we plan to increase our presence. Supported by the Tata brand, we believe our product brands, such as the Tiago, Tigor, Tigor (EV), Altroz, Nexon, Nexon (EV), Harrier, Safari, Ace, Magic, Prima, Daewoo, Jaguar, Range Rover and Land Rover are highly regarded brands, which we intend to continue to nurture and promote.

Overview of Automotive Operations

Our total wholesale sales worldwide (including international business sales, Jaguar Land Rover sales and excluding sales by our China Joint Venture) in Fiscal 2021 and Fiscal 2020 are set forth in the table below:

 

     Fiscal 2021      Fiscal 2020  
   Units  

Passenger cars

     203,361        202,010  

Utility vehicles

     366,909        411,866  

Intermediate and Light Commercial Vehicles

     42,386        47,406  

SCVs & Pick Ups

     146,174        167,639  

CV Passenger Vehicle

     10,377        44,335  

Medium and Heavy Commercial Vehicles

     68,576        88,207  
  

 

 

    

 

 

 

Total

     837,783        961,463  
  

 

 

    

 

 

 

We sold 490,151 units of Tata Commercial Vehicles and Tata Passenger Vehicles and 347,632 units (excluding wholesales from the China Joint Venture) of Jaguar Land Rover vehicles in Fiscal 2021. In terms of units sold, our largest market was India where we sold 463,736 and 448,614 units during Fiscal 2021 and Fiscal 2020, respectively (constituting 55.4% and 46.7% of total sales in Fiscal 2021 and Fiscal 2020, respectively), followed by North America, where we sold 93,759 units and 135,766 units in Fiscal 2021 and Fiscal 2020, respectively (constituting 11.2% and 14.1% of total sales in Fiscal 2021 and Fiscal 2020, respectively). Please see Item 5.A “Operating and Financial Review and Prospects—Operating Results—Geographical Breakdown” for a breakdown of the Company’s total revenue by geographic market in Fiscal 2021, Fiscal 2020 and Fiscal 2019.

 

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Our total sales worldwide segment wise (excluding sales by our China Joint Venture) in Fiscal 2021 and Fiscal 2020 are set forth in table below:

 

Category

      
     2021     2020  
     Units      %     Units      %  

Tata Commercial Vehicles

     267,513        31.9     347,587        36.2

Tata Passenger Vehicles

     222,638        26.6     137,924        14.3

Tata Commercial Vehicles and Tata Passenger Vehicles

     490,151        58.5     485,511        50.5

Jaguar Land Rover

     347,632        41.5     475,952        49.5
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

     837,783        100.0     961,463        100.0
  

 

 

    

 

 

   

 

 

    

 

 

 

Tata Commercial Vehicles and Tata Passenger Vehicles

India is the primary market for Tata and other brand vehicles (including vehicle financing). During Fiscal 2021, the Indian automotive sector was impacted by several challenges, including the COVID-19 pandemic, subdued demand, weak consumer sentiment, and supply shortages. The COVID-19 pandemic significantly impacted our sales in India in the first quarter of Fiscal 2021, although some recovery was observed beginning with the second quarter of Fiscal 2021.

The following table sets forth our total wholesale sales worldwide of Tata Commercial Vehicles and Tata Passenger Vehicles:

 

     Fiscal 2021     Fiscal 2020  
     Units      %     Units      %  

Tata Passenger Vehicles

     222,638        45.4     137,924        28.4

Tata Commercial Vehicles

     267,513        54.6     347,587        71.6
  

 

 

    

 

 

   

 

 

    

 

 

 

Total

     490,151        100.0     485,511        100.0
  

 

 

    

 

 

   

 

 

    

 

 

 

 

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Of the 490,151 units sold overall in Fiscal 2021, the Company sold 463,736 units of Tata and other brand vehicles in India and 26,415 units outside India, compared to 448,614 units and 36,897 units, respectively, in Fiscal 2020.

We maintained our leadership position in the Commercial Vehicle category in India, which was characterized by increased competition during the year. The Passenger Vehicle market also continued to be subject to intense competition.

The following table sets forth our market share in various categories in the Indian market based on TML wholesale volumes:

 

Category

   Fiscal 2021     Fiscal 2020  

Passenger Cars

     8.8     4.2

Utility Vehicles

     7.4     5.6

Total PV

     8.2     4.8

Medium and Heavy Commercial Vehicles

     58.1     57.4

Intermediate and Light Commercial Vehicles

     45.9     47.2

SCVs & Pick Ups

     37.5     37.9

CV Passenger Vehicles

     40.6     40.9

Total CV

     42.4     43.0
  

 

 

   

 

 

 

Total Four-Wheel Vehicles

     14.1     12.7
  

 

 

   

 

 

 

 

Source: Society of Indian Automobile Manufacturers Report and our internal analysis.

The following table sets forth TML total domestic wholesales and retails of Tata Commercial Vehicles and Tata Passenger Vehicles.

 

     Wholesale Volume (in units)     Retail Volume (in units)  
   Fiscal 2021      Fiscal 2020      % change     Fiscal 2021      Fiscal 2020      % change  

Tata Commercial vehicles

     241,668        312,267        (22.6     208,437        360,787        (42.2

Tata Passenger vehicles

     222,074        131,796        68.5       228,863        148,789        53.8  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total

        463,742           444,063        4.4       437,300        509,576        (14.2
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Passenger Vehicles in India

Industry sales of Passenger vehicles (including Vans) decreased by 2.0% to 2,709,936 units in Fiscal 2021 from 2,766,512 units in Fiscal 2020. The following table sets forth the breakup of the wholesale sales in various categories of TML.

 

     Industry Sales (in units)     Tata Passenger Vehicles Sales (in units)  
   Fiscal 2021      Fiscal 2020      % change     Fiscal 2021      Fiscal 2020      % change  

Passenger Cars

     1,541,968        1,695,344        (9.0     135,680        71,719        89.2  

Utility Vehicles

     1,062,887        952,764        11.6       86,394        60,077        43.8  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total

     2,604,855        2,648,108        (1.6     222,074        131,796        68.5  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Industry-wide sales of Passenger cars in India decreased by 9.0% in Fiscal 2021, compared to a 23.6% decline in Fiscal 2020, while Utility Vehicles sales increased by 11.6% in Fiscal 2021 compared to marginal increase in Fiscal 2020. While overall industry sales were lower than in Fiscal 2020, the trend of preference towards personal mobility reduced the overall impact of slowdown. TML Passenger vehicle sales increased by 68.5% to 222,074 units in Fiscal 2021 compared to 131,796 units in Fiscal 2020. Tata Passenger Vehicle sales in India increased by 62.8% to 222,075 units in Fiscal 2021 from 136,446 units, reflecting a strong response for the New Forever Range. Retail sales marginally outnumbered wholesale sales, thereby reaffirming strong demand for the New Forever Range and thin pipeline inventory at our dealers.

 

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In Passenger cars category, TML sales increased by 89.2% to 135,680 units in Fiscal 2021 compared to 71,719 units in Fiscal 2020. Tata-brand vehicles sales increased to 135,681 units in Fiscal 2021, compared to 75,781 units in Fiscal 2020. During Fiscal 2021, we launched refreshed variants of products, including Altroz I Turbo, Altroz XM and Tiago XTA. Our market share for Passenger Cars in India was higher at 8.8% in Fiscal 2021, compared to 4.2% in Fiscal 2020.

In the Utility Vehicles category, TML sales increased by 43.8% to 86,394 units in Fiscal 2021 compared to 60,077 units in Fiscal 2020 and Tata-brand vehicles sales increased to 86,394 units in Fiscal 2021 compared to 60,665 units in Fiscal 2020, representing a strong demand for Tata Nexon and Tata Harrier. Our market share of Utility Vehicles in India has increased and stands at 7.4% in Fiscal 2021, compared to 5.6% in Fiscal 2020. In Fiscal 2021, we launched Tata Safari and refreshed variants for Tata Nexon and Harrier. We launched Tata Safari in January 2021 and sold 3,855 units in Fiscal 2021.

Tata Motors continued to remain market leader in electric vehicles in Fiscal 2021, with a 71% share due to a strong response for Nexon EV.

Commercial Vehicles in India

Industry sales of commercial vehicles decreased by 21.7% to 569,307 units in Fiscal 2021 from 726,762 units in Fiscal 2020. The following table sets forth the breakup of the wholesale sales in various categories on standalone basis.

 

Category

   Industry Sales (in units)     Tata Commercial Vehicles Sales (in units)  
     Fiscal 2021      Fiscal 2020      % change     Fiscal 2021      Fiscal 2020      % change  

Medium and Heavy Commercial Vehicles

     100,712        132,272        (23.9     58,528        75,918        (22.9

Intermediate and Light Commercial Vehicles

     82,386        89,066        (7.5     37,826        42,077        (10.1

SCVs & Pick Ups

     365,347        411,352        (11.2     136,835        155,790        (12.2

CV Passenger Vehicles

     20,862        94,072        (77.8     8,479        38,482        (78.0
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

Total

     569,307        726,762        (21.7     241,668        312,267        (22.6
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

    

 

 

 

The Commercial Vehicle industry continued to be impacted in Fiscal 2021, because of the COVID-19 pandemic, lower freight utilizations, difficulties in obtaining financing and some hesitation due to rising costs for BS VI vehicles.

MHCVs in India

Sales of TML in the MHCVs category in India decreased by 22.9% to 58,528 units in Fiscal 2021 compared to 75,918 units in Fiscal 2020 and Tata-brand vehicle sales decreased to 58,521 units in Fiscal 2021, compared to 75,848 units in Fiscal 2020. The MHCV segment witnessed a sharp decline in the first quarter of Fiscal 2021, thereby sequentially improving quarter-on-quarter, as the economy unlocked and infrastructure projects, housing construction and mining segment picked up. We continued to witness strong demand in this segment and increased our market share by 70 bps to 58.1% in Fiscal 2021.

ILCVs in India

Sales of TML in the ILCVs category in India decreased by 10.1% to 37,826 units in Fiscal 2021 compared to 42,077 units in Fiscal 2020 and Tata-brand vehicle sales decreased to 37,826 units in Fiscal 2021, from 42,052 units in Fiscal 2020.

SCVs & Pick Ups in India

Sales in SCVs & Pick Ups category in India of Tata-brand vehicle decreased by 12.2% to 136,835 units in Fiscal 2021 from 155,790 units in Fiscal 2020. Amongst all segments in commercial vehicles, the SCV and Pick Up category witnessed a lower decline because of increased demand from e-commerce players and necessity for last mile distribution. TML received a significant order of 6,413 Tata Ace Gold vehicles from Andhra Pradesh State Civil Supplies Corporation.

CV Passenger Vehicles in India

Sales in CV Passenger Vehicles category in India of TML decreased by 78.0% to 8,479 units in Fiscal 2021 compared to 38,482 units in Fiscal 2020 and Tata-brand vehicle sales decreased to 8,479 units in Fiscal 2021 from 38,478 units in Fiscal 2020. Passenger segment was impacted the highest because of the COVID-19 pandemic, with work from home protocols, schools not reopening and lower demand from State Transport Undertakings.

 

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Tata Commercial Vehicles and Tata Passenger Vehicles—Exports

International business is a key part of our portfolio since its inception in 1961. We have a global presence in more than 46 countries, including all South Asian Association for Regional Cooperation countries, South Africa, Africa, Middle East and Southeast Asia. We market a range of products including M&HCV trucks, LCV trucks, buses, pickups and small commercial vehicles.

Our overall sales in international markets decreased by 32.0% to 20,849 units in Fiscal 2021, compared to 31,144 units in Fiscal 2020. Commercial vehicles exports were 20,283 units in FY 2020-21, as compared to 29,664 units in FY 2019-20. In Africa, Tanzania clocked the highest retails since September 2018, while both Congo and Ghana recorded highest retails after five years. Saudi Arabia also clocked its highest retails in the last two years and the entire Middle East buses closed the year with a 12% higher market share than the previous year. Passenger Vehicles exports were at 566 units in Fiscal 2021, compared to 1,480 units in Fiscal 2020. Sales were substantially impacted by the COVID-19 pandemic.

We continue to monitor our business in context of the evolving sanctions on certain individuals, entities and countries, including Myanmar. As of the date of this annual report on Form 20-F, the Tata Motors Group operates its business in a manner consistent with all applicable sanctions, including those imposed in early 2021 on certain individuals and entities related to Myanmar. As of the date of this annual report on Form 20-F, we only support after-sales services under contractual obligations existing prior to the 2021 sanctions relating to Myanmar, and we continue to monitor such activities in the country.

Tata Daewoo Commercial Vehicle Co. Ltd, or TDCV, our subsidiary company that engages in the design, development, and manufacturing of MHCVs and LCVs witnessed a decrease in overall sales by 1.2% to 5,127 units in Fiscal 2021 from 5,190 units in Fiscal 2020. In its domestic market (South Korea), TDCV’s sales increased by 3.4% from 3,581 units in Fiscal 2020 to 3,701 units in Fiscal 2021. The market share for this segment was 20.1% in Fiscal 2021, compared to 20.5% in Fiscal 2020. Apart from MHCV, TDCV also launched new product range of LCV vehicles in the fourth quarter of Fiscal 2021, which accounted 241 units of sales in the Fiscal 2021. Due to the product range expansion, total domestic sales increased by 10.1% from 3,581 units in Fiscal 2020 to 3,942 units in Fiscal 2021. The export market was severely impacted by the COVID-19 pandemic and experienced a reduction of 26.4% from 1,609 units in Fiscal 2020 to 1,185 units in Fiscal 2021.

Tata Commercial Vehicles and Tata Passenger Vehicles—Sales and Distribution

Our sales and distribution network in India as at March 2021 comprised approximately over 5,959 touch points for sales and service for its Passenger Vehicles and Commercial Vehicles businesses. We use a network of service centers on highways and a toll-free customer assistance center to provide 24-hour roadside assistance including replacement of parts, to vehicle owners.

We have customer relations management system at all of our dealerships and offices across India, which supports users both at our company and among our distributors in India and abroad.

We market our Commercial Vehicles and Passenger Vehicles in several countries in Africa, the Middle East, Southeast Asia, South Asia, Australia, Latin America, Russia and the Commonwealth of Independent States countries. We have a network of distributors in all such countries, where we export our vehicles. Such distributors have created a network of dealers and branch offices and facilities for sales and after-sales servicing of our products in their respective markets. We have also stationed overseas resident sales and service representatives in various countries to oversee our operations in the respective territories.

Tata Commercial Vehicles and Tata Passenger Vehicles—Competition

We face competition from various domestic and foreign automotive manufacturers in the Indian automotive market. Improving infrastructure and robust growth prospects compared to other mature markets have attracted strong international companies to India that have either formed joint ventures with local partners or have established independently owned operations in India. Global competitors bring with them their international experience, global scale, advanced technology, and significant financial resources, and as a result, competition is likely to further intensify in the future. We have designed our products to suit the requirements of the Indian market based on specific customer needs, such as safety, driving comfort, fuel-efficiency and durability. By moving to BS VI successfully we have demonstrated our ability to compete with the global players successfully. We believe that our vehicles are suited to the general conditions of Indian roads and the local climate. We also offer a wide range of optional configurations to meet the specific needs of our customers. We intend to develop and are developing products to strengthen our product portfolio in order to meet the increasing customer expectation of owning world-class products.

 

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Tata Commercial Vehicles and Tata Passenger Vehicles—Seasonality

Demand for our vehicles in the Indian market is subject to seasonal variations. Demand generally peaks between January and March each year, although there tends to be a decrease in demand in February just before release of the Government of India’s fiscal budget. Demand is usually lean from April to July and gains momentum again in the festival season from September onwards, with a decline in December due to year-end.

Tata Commercial Vehicles and Tata Passenger Vehicles—Vehicle Financing

Through our wholly-owned subsidiary TMF Holdings Ltd and its step-down subsidiaries Tata Motors Finance Ltd (“TMFL”) and Tata Motors Finance Solutions Ltd (“TMFSL”), we provide financing services to purchasers of our vehicles through independent dealers, who act as our agents for financing transactions, and through our branch network. TMF group disbursed Rs.132,576 million and Rs.150,290 million in vehicle financing during Fiscal 2021 and Fiscal 2020, respectively. Approximately 33% and 31%, of our commercial vehicle unit sales in India were made by the dealers through financing arrangements with the Company’s captive financing subsidiary during Fiscal 2021 and Fiscal 2020, respectively. As at March 31, 2021, and 2020, TMF group’s customer finance receivable portfolio comprised 718,149 and 624,354 contracts, respectively. We follow specified internal procedures, including quantitative guidelines, for selection of our finance customers and assist in managing default and repayment risk in our portfolio. We originate all the contracts through our authorized dealers and direct marketing agents with whom we have agreements. All our marketing, sales and collection activities are undertaken through dealers or by TMF group.

TMFL securitizes or sells its finance receivables based on the evaluation of market conditions and funding requirements. The sell-down happens either through Securitization Pass Through Certificates (“PTC”) or through Direct Assignment (DA) route. Securitization PTC is backed by credit enhancement where certain percentages of losses are protected to the extent of credit enhancement. The PTC route is one of the most prominent sources of fund raising in the market. TMF group also does securitization by way of direct assignment where there is no support provided to the pool in the form of credit enhancement. Significantly, these assets are Priority Sector Loan assets because of which demand for Direct Assignment is good with Public Sector Banks. The constitution of these pools is based on criteria that are decided by credit rating agencies and/or based on the advice that TMF group receives regarding the marketability of a pool. TMF Group undertakes these securitizations of its receivables due from purchasers by means of private placement.

TMFL acts as the collection agent on behalf of the investors, representatives, special purpose vehicles or banks, in whose favor the receivables have been assigned, for the purpose of collecting receivables from the purchasers on the terms and conditions contained in the applicable deeds of securitization, in respect of which pass-through certificates are issued to investors in case of special purpose vehicles, or SPVs. TMFL also secures the payments to be made by the purchasers of amounts constituting the receivables under the loan agreements to the extent specified by rating agencies by any one or all of the following methods:

 

   

furnishing collateral to the investors, in respect of the obligations of the purchasers and the undertakings to be provided by TMFL;

 

 

   

furnishing, in favor of the investors, certain percentages of the future principal in the receivables as collateral, for securitizations done through Fiscal 2021, either by way of a fixed deposit or bank guarantee or subordinate tranche to secure the obligations of the purchasers and our obligations as the collection agent, based on the quality of receivables and rating assigned to the individual pool of receivables by the rating agencies; and

 

 

   

by way of over-collateralization or by investing in subordinate pass-through certificates to secure the obligations of the purchasers. For further details, see Note 39(b) to our consolidated financial statements included elsewhere in this annual report on Form 20-F.

 

 

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Jaguar Land Rover

Total wholesale and retail volume of Jaguar Land Rover vehicles with a breakdown between Jaguar and Land Rover brand vehicles, in Fiscal 2021 and Fiscal 2020, are set forth in the table below:

 

     Wholesale Volume (in units excluding CJLR)     Retail Volume (in units including CJLR)  
   Fiscal 2021      Fiscal 2020      % change     Fiscal 2021      Fiscal 2020      % change  

Jaguar

     67,333        125,820        (46.5     97,669        140,593        (30.5

UK

     22,305        35,033        (36.3     22,529        32,533        (30.8

North America

     13,450        30,514        (55.9     18,186        30,095        (39.6

Europe

     20,693        36,158        (42.8     20,578        35,335        (41.8

China

     4,603        7,162        (35.7     28,181        26,061        8.1  

Overseas

     6,282        16,953        (62.9     8,195        16,569        (50.5

Land Rover

     280,299        350,132        (19.9     341,919        368,066        (7.1

UK

     59,195        75,034        (21.1     60,466        74,079        (18.4

North America

     80,309        105,252        (23.7     92,619        99,251        (6.7

Europe

     55,913        77,112        (27.5     58,682        71,702        (18.2

China

     42,542        31,150        36.6       83,025        64,063        29.6  

Overseas

     42,340        61,584        (31.2     47,127        58,971        (20.1

Jaguar Land Rover

     347,632        475,952        (27.0     439,588        508,659        (13.6

UK

     81,500        110,067        (26.0     82,995        106,612        (22.2

North America

     93,759        135,766        (30.9     110,805        129,346        (14.3

Europe

     76,606        113,270        (32.4     79,260        107,037        (26.0

China

     47,145        38,312        23.1       111,206        90,124        23.4  

Overseas

     48,622        78,537        (38.1     55,322        75,540        (26.8
  

 

 

    

 

 

    

 

 

         

CJLR

     65,279        49,450        32.0          
  

 

 

    

 

 

    

 

 

         

Jaguar Land Rover’s Performance on a Wholesale Basis

In Fiscal 2021, Jaguar Land Rover wholesale volumes (excluding our China Joint Venture) were 347,632 units, down 27.0% compared to Fiscal 2020, primarily reflecting the disruption in sales and production because of the COVID-19 pandemic. Wholesale volumes from the China Joint Venture were 65,279 units, reflecting a 32.0% increase compared to the 49,450 units in Fiscal 2020. Wholesale volumes (excluding our China Joint Venture) in China strongly grew year-on-year in Fiscal 2021, up 23.1% reaching 47,145 vehicles as the region continued to recover strongly from the pandemic. However, as a result of COVID-19-related impacts on society and business, Jaguar Land Rover wholesales declined in other regions including in Overseas markets (down 38.1% year-on-year), Europe (down 32.4%), North America (down 30.9%) and in the UK (down 26.0%). Wholesale volumes of all models declined due to the impact of the COVID-19 pandemic in Fiscal 2021, apart from the new Land Rover Defender, which wholesaled 53,501 vehicles, reflecting the strong reception in the market for an anticipated model.

Jaguar Land Rover’s Performance on a Retail Basis

Jaguar Land Rover retail sales were 439,588 vehicles in Fiscal 2021, down 69,071 vehicles (13.6%) from Fiscal 2020. The decline in retail sales was primarily the result of the initial COVID-19 lockdown impacting the first quarter sales, with some recovery in sales thereafter. Retail sales in every region and on every model declined as a result of the COVID-19 pandemic, with the exception of retail sales in China, which were up 23.1% year-on-year and sales of the newly introduced Land Rover Defender, which reached 45,244 vehicles in the period. In addition to the COVID-19 pandemic, other factors that impacted sales in the automotive industry during Fiscal 2021 included ongoing in the UK and Europe relating to Brexit developments (in spite of a trade agreement between the UK and the EU being reached in December 2020) and more generally regulatory and emissions challenges as well as continuing trade tensions and other geopolitical pressures.

Retails by Powertrain

Jaguar Land Rover continued to roll out electrification technology across its model range in Fiscal 2021. Twelve of JLR’s 13 nameplates are now available with an electrified option, with plug-in hybrids (“PHEV”) available in eight models and mild hybrids (“MHEV”) in 11 models. As a result, the mix of electrified vehicles retailed in the full year was 51%, including 3.6% for the all-electric Jaguar I-PACE, 4.6% PHEV and 42.9% MHEV, with the remaining 48.9% of retail sales from traditional diesel and petrol internal combustion engines.

 

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Jaguar Land Rover’s Sales and Distribution

As at March 31, 2021, Jaguar Land Rover distributes its vehicles in 118 markets for Jaguar and 123 markets for Land Rover globally. Sales locations for vehicles are operated as independent franchises. Jaguar Land Rover is represented in its key markets through its National Sales Company’s (“NSC’s”) as well as third-party importers. Jaguar Land Rover has regional offices in certain select countries that manage customer relationships and vehicle supplies and provide marketing and sales support to its regional importer markets. The remaining importer markets are managed from the United Kingdom.

Jaguar Land Rover products are sold through a variety of sales channels: through its dealerships for retail sales; for sale to fleet customers, including daily rental car companies; commercial fleet customers; leasing companies; and governments. Jaguar Land Rover does not depend on a single customer or small group of customers to the extent that the loss of such a customer or group of customers would have a material adverse effect on its business.

As at March 31, 2021, the Jaguar Land Rover global sales and distribution network comprised 23 NSCs, 78 importers, one export partner and 2,839 franchise sales dealers in 1,513 sites, of which 1,326 are joint Jaguar and Land Rover dealers.

Jaguar Land Rover—Competition

Jaguar Land Rover operates in a globally competitive environment and faces competition from established premium and other vehicle manufacturers who aspire to move into the premium performance car and premium SUV markets, some of which are much larger than they are. Jaguar vehicles compete primarily against other European brands such as Audi, Porsche, BMW and Mercedes Benz as well as Tesla. Land Rover and Range Rover vehicles compete largely against SUVs from companies such as Audi, BMW, Infiniti, Lexus, Mercedes Benz, Porsche, Volvo and Volkswagen.

Jaguar Land Rover—Seasonality.

Jaguar Land Rover volumes are impacted by the biannual change in age-related registration plates of vehicles in the United Kingdom, where new age-related plate registrations take effect in March and September each year. This has an impact on the resale value of the vehicles because sales are clustered around the time of the year when the vehicle registration number change occurs. Seasonality in most other markets is driven by the introduction of new model year vehicles and derivatives. Furthermore, Western European markets tend to be impacted by summer and winter holidays, and the Chinese market tends to be affected by the Lunar New Year holiday in either January or February, the PRC National Day holiday, and the Golden Week holiday in October. The resulting sales profile influences operating results on a quarter-to-quarter basis.

Other Operations

In addition to our automotive operations, we are also involved in other business activities, mainly Information Technology services. The Company’s revenue from other operations before inter-segment eliminations was Rs.26,076 million in Fiscal 2021, a decrease of 14.2% from Rs.30,376 million in Fiscal 2020. The decrease in revenue of Tata Technologies is due to the COVID-19 pandemic. Revenues from other operations represented 1.1% and 1.2% of our total revenues, before inter-segment eliminations, in Fiscal 2021 and Fiscal 2020, respectively.

Information Technology Services

As of March 31, 2021, TML owned a 74.42% equity interest in our subsidiary, TTL. TTL provides product development IT services solutions for PLM and enterprise risk management to automotive, aerospace, industrial heavy machinery and consumer durables manufacturers and their suppliers. TTL’s services include IT Consultancy, SAP implementation and maintenance, providing networking solutions, CAD/CAM engineering & design consultancy. TTL provides product engineering services which cater to the global manufacturing industry; enabling ambitious manufacturing companies to design and build better products. Engineering and Design services provide outsourced engineering services for our manufacturing customers globally to help them conceive, design, develop and realize better products and Digital Enterprise Solutions, help manufacturing customers identify and deploy emerging technologies, tools and solutions to manufacture, service and realize better products. TTL also distributes, implements and supports PLM products from leading solution providers in the world, such as Dassault Systems and Autodesk.

TTL is headquartered in India, with regional headquarters in the United States, the United Kingdom and Singapore. In Fiscal 2014, TTL acquired Cambric Corporation, an engineering services organization, to achieve greater domain expertise and presence in the industrial equipment sector. In Fiscal 2018, TTL acquired Tata Technologies Nordics AB (formerly known as Escenda Engineering AB), a Sweden-based design company with the aim of strengthening its offering to existing clients and to expand its footprint in Scandinavian countries. TTL has a combined global workforce of around 7,954 professionals (including 713 contractors) serving clients worldwide from facilities in the North America, Europe and Asia Pacific. As of March 31, 2021, TTL had 11 subsidiary companies and one joint venture, as well as offshore development centers in India, Thailand and Romania.

 

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The consolidated revenues of TTL decreased by 16.5% in Fiscal 2021 to Rs.23,809 million (including sales to Tata Motors Limited and its consolidated subsidiaries) from Rs.28,521 million in Fiscal 2020, primarily due to the COVID-19 pandemic. TTL recorded profit after tax of Rs.2,392 million in Fiscal 2021, reflecting a decrease of 4.9% over Rs.2,516 million in Fiscal 2020.

Research and Development

Our research and development focuses on developing and acquiring the technology, core competencies and skill sets required for the timely delivery of our envisaged future product portfolio with industry-leading features across our range of Commercial Vehicles, Passenger Vehicles and electric vehicles. For the Passenger Vehicles product range, our focus is on design, driving pleasure and connected car technologies. For the Commercial Vehicle product range, our focus is on enhancing fuel efficiency, minimizing the TOC and providing maximum overall value. We continue to endeavor to adopt technologies for our product range to meet the requirements of a globally competitive market. We have also undertaken programs for development of vehicles, which run on alternative fuels such as LPG, CNG, bio-diesel, electric-traction and hydrogen.

Our research and development activities involve product development, environmental technologies and vehicle safety. In India, the ERC, established in 1966, is one of the few in-house automotive research and development centers in India recognized by the Government of India. The ERC is headquartered at Pune, with branches at Jamshedpur and Lucknow in India, Trilix in Italy and TMETC in the UK.

In Fiscal 2021, we continued to prioritize our electric vehicles development capabilities and believe that we are currently among the frontrunners in this industry. We have developed a comprehensive approach to address the barriers and “Winning proactively in e-Mobility”. In addition, we have developed the Tata UniEVerse, which is a comprehensive electric mobility ecosystem providing charging infrastructure, battery cells, battery packs and electric motors, as well as financing options customized for the needs of electric vehicle ownership. Our entry into the electric vehicles market is expected to reduce our GHG emissions, which mostly originate during the operational phase.

As the only OEM with an end-to-end extensive product portfolio across its Passenger Vehicles and Commercial Vehicles businesses, we intend to play a complementary role in the smart cities of the future. From public transport to personal cars, from last-mile connectivity to bus rapid transit systems, from emergency response vehicles to commercial Utility Vehicles, from green and sustainable solutions to vehicles designed to amplify the driving experience, we strive to carry a product portfolio to connect the aspirations and needs of our customers.

Our focus on digitization, connectivity, automation and advanced regulations compliance is helping us deliver exciting innovations to our customers worldwide. On our current product portfolio, we offer enhancements through an approach of modular architecture strategy, enhanced powertrain solution, light weighting and system efficiency improvement strategies.

With a revitalized vision set for TML, by Fiscal 2024, we expect to become the most aspirational Indian auto brand, consistently winning by delivering superior financial returns, driving sustainable mobility solutions, exceeding customer expectations and creating a highly engaged work force. As a proactive step towards delivering this vision, Tata Motors looked upon the BS VI implementation not as a hurdle but rather as an opportunity to not only migrate to the stricter emission norms, but to enhance and upgrade the entire product portfolio with technologies and features and further delight our customers by setting new benchmarks for performance, operating efficiency, comfort and safety. In addition to the proactive measures in meeting the regulatory regime of the country, the company has been actively pursuing enhancements in fuel efficiency; leading to reduction in carbon footprint through various powertrain as well as vehicle-level technology interventions.

In spite of the COVID-19 pandemic and its effects on business and consumer sentiment, we have maintained our focus on BSVI launches in Fiscal 2021 for lead models and variants across passenger and commercial vehicles. A state-of-art and futuristic advanced Powertrain development center was commissioned in a span of the last 15 months and the facility is being extensively used for ongoing and future BSVI related developments. Engine programs have been initiated for BSVI Phase-2, which is scheduled to commence in April 2023, and Phase-2 Fuel economy regulation for M1 class vehicles from Fiscal 2023.

In the passenger vehicles business, the company’s continued efforts have translated into successful product launches and concept unveils. TML recently launched the third-generation Safari in India, with evolved design, versatility, comfort and performance.

The Tata Nexon EV was launched earlier in 2020 and won several awards in Fiscal 2021. Tata Motors introduced the new Altroz iTurbo, powered by a new 1.2L Petrol iTurbo engine and a new “top of the line” XZ+ trim. The Altroz has also been equipped with the iRA tech—a connected car technology deployed through its Connected Vehicle Platform approach by Tata Motors.

 

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Leading automobile manufacturers have started utilizing this opportunity related to safety regulations and take vehicular safety to the next level by using digital technology, design, and ergonomics to their advantage. This has led to the emergence of cars with global NCAP 4- and 5-star safety ratings across all segments within India. Tata Motors from the last couple of years has been enjoying a leadership position through its philosophy of “safety—a prerogative for all”. The first ever GNAP 5-star certified compact SUV (Nexon) and the first GNAP 5-star certified premium hatchback (Altroz) were delivered from the Tata Motors stable. The other models, Tiago and Tigor, are 4-star Global NCAP-certified cars in their respective segments.

Tata Motors announced its “Future Ready” portfolio for BSVI in early Fiscal 2021, and amongst a huge portfolio spread across SCV, ILCV, Buses and MHCV few significant launches are:

 

   

the Signa 4825.TK, which is India’s first 47.5-tonne multi-axle tipper truck for surface transport of coal and construction aggregates;

 

 

   

the Signa 5525.S, India’s highest GCW prime mover (tractor) in 4×2 segment, whose 55-tonne GCW offers unique value proposition for customers to maximize profitability;

 

 

   

the Tata Signa 3118.T, India’s first 3-axle 6×2 (10-wheeler) rigid truck with 31 tonnes GVW;

 

 

   

the range of refrigerated trucks, which we announced in January 2021, are available for transportation of the COVID-19 vaccine countrywide;

 

 

   

the commercial launch of its extensive range of M&HCVs in the all-new BS6 powertrain; which offers the maximum variety in terms of engines, tonnage and cabin options; and

 

 

   

the advent of Magic Express in Compact Ambulance segment.

 

Tata Motors’ focus on waste management is aligned with the Waste Management Hierarchy as mandated in the national regulations, namely to prevent/eliminate, minimize, reuse, re-cycle, energy/material recovery, and safe disposal. Tata Motors has won the 2019 SAE Environmental Excellence in Transportation (E2T) Award for creating the first commercially viable and safe prototype of a cost effective and green auto air conditioner that has a dual AC configuration and uses R152a - a refrigerant with a low global warming potential that helps to reduce environmental impact.

During Fiscal 2021, we filed 89 patent applications and 11 design applications. In respect of applications filed in earlier years, 79 patents have been granted and 47 designs registered. Both filing and grant details include India and international jurisdictions.

We plan to continue our endeavors in the research and development space to develop vehicles with reduced cost, time to market and shorter product life cycles. We aim for the timely and successful conclusion of technology projects so as to begin their induction into mainstream products, which will lead to a promising future. Our focus is going to be building Technology, Capability, scale & capacities in R&D to able to ride the wave of automotive trends. With “Connecting Aspirations” at the core of our brand promise, our innovation efforts are focused to develop pioneering technologies that are sustainable as well as suited to evolving aspirations of the market and the customers. We are now focusing on advancing new CESS technologies, and also invested in expanding capacity even while pruning costs. Tata Motors follows the four pillars on which every car is based. The first one is Design. Our philosophy is “Love at first sight”. We have increasingly made better-looking cars which have helped us get younger customers. We have invested a lot in safety as well.

Continuing the journey of excellence, we constantly adopted new technologies and practices in the digital product development domain to improve the product development efficiency. This has led to better front loading of product creation, validation and testing, which results in timely delivery and ensuring that new products are developed with lower cost impacts due to design change.

 

   

Tata Motors Limited initiated the Connected Vehicle Platform journey in 2019 and crossed multiple layer specific and integrated platform milestones to reach a production level maturity and release as part of connected features on Nexon EV and Nexon MCE. To make information available to the right stakeholders at the right time, the latest technology of BOTs based apps are deployed for multiple agencies, which help them to verify data and to make decisions. Developed and deployed a Smart Engineering Tool Assistant that will provide innovative and practical solutions for the Engineering support function. BOT framework with TML Genie is developed as a platform to serve different chatbot services within CAD with interface with Creo and JT.

 

 

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Developed and deployed the “ARena” augmented reality platform on TML’s premises to cater engineering design, service and manufacturing problems. Eight pilot use cases covering various areas of PAT are developed on this platform.

 

 

   

More than 200 new automation and KBE application tools were developed and deployed across ERC, which has resulted into ~6% improvement in the Productivity for the designers.

 

 

   

Artificial Intelligence- and Machine Learning-based applications are introduced into various domains such as design, service, quality, manufacturing, etc. Trained ML models help identification of the precise failure mode from warranty claim details, reducing early tire wear issues, automating the prototype supply chain process whilst predicting part classification, commodity and material receipt date and packing details, etc. To reduce physical testing cycles by building predictive models, Deep Learning (AI) based algorithms and apps are introduced into the design process.

 

 

   

TML embarked on a journey of a Model Based Systems Engineering approach to address complexities in embedded systems development as well as for enhancing control on project delivery and cost. Evaluation of multiple solutions is completed and deployment of complete MBSE process is planned. The Measured Data Management system is developed and deployed across ERC testing functions. MDM provides engineers with a holistic view of functional behavior of vehicle systems / subsystems across test systems.

 

In our quest to ensure that the workforce remains fully engaged and relevant to the disruptions in the mobility industry, our thrust on development of unique competencies continued while ensuring the outreach of already deployed/sustenance competencies development for new technology adaptation and integration.

Jaguar Land Rover’s research and development operations are built around state-of-the-art engineering facilities, test tracks, testing centers, design hubs and a virtual innovation center. Our ERC in India and Jaguar Land Rover’s engineering and development operations in the United Kingdom work to enhance the product development process and achieve economies of scale.

Jaguar Land Rover’s product design and development centers are equipped with computer-aided design, manufacture and engineering tools, with sophisticated hardware, software and other IT infrastructure to create a digital product development environment and virtual testing and validation, aiming to reduce the product development cycle time and data management. Rapid prototype development systems, testing cycle simulators, advanced emission test laboratories and styling studios are also a part of its product development infrastructure. Jaguar Land Rover has aligned its end-to-end digital product development objectives and infrastructure with its business goals and has made significant investments to enhance the digital product development capabilities especially in the areas of product development through computer-aided design, computer aided manufacturing, computer-aided engineering, knowledge-based engineering and product data management. Jaguar Land Rover has opened a software engineering center in Shannon, Ireland. The center is to be used to develop technology for electric vehicles and to assist those vehicles in reaching Level 4 autonomy.

In September 2013, Jaguar Land Rover announced its investment in the National Automotive Innovation Campus at the University of Warwick in the United Kingdom, which opened in 2018 and focuses on advanced technology, innovation and research. The campus features engineering workshops and laboratories, advanced powertrain facilities and advanced design, visualization and rapid prototyping and helps complement our existing product development centers. Jaguar Land Rover works with Intel at the Open Software Technology Center in Portland, Oregon, to develop next-generation in-vehicle technologies, helping it enhance its future vehicle infotainment systems and provide incubator space for budding automotive technology entrepreneurs.

In June 2019, Jaguar Land Rover announced a collaboration with BMW to develop the next-generation Electric Drive Units to support the advancement of electrification technologies.

Intellectual Property

We create, own, and maintain a wide array of intellectual property assets throughout the world that are among our most valuable assets. Our intellectual property assets include patents, trademarks, copyrights, designs, trade secrets and other intellectual property rights. We proactively and aggressively seek to protect our intellectual property in India and other countries.

We own a number of patents in different fields of automobile technology and have applied for new patents which are pending for grant in India, as well as in other countries. We have also filed a number of patent applications outside India under the Patent Cooperation Treaty and Paris Convention Treaty, which we expect will be effective in other countries going forward. We also obtain new patents as part of our ongoing research and development activities.

 

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We own registrations for a number of trademarks and domain names and have pending applications for registration of these in India, as well as in other countries. The registrations mainly include trademarks for our vehicle models and other promotional initiatives. We use the Tata brand, which has been licensed to us by Tata Sons. We believe that establishment of the Tata word mark and logo mark in India and around the world is material to our operations. As part of our acquisition of TDCV, we have rights to the perpetual and exclusive use of the Daewoo brand and trademarks in South Korea and overseas markets for the product range of TDCV.

As part of the acquisition of our Jaguar Land Rover business, ownership (or co-ownership, as applicable) of core intellectual property associated with Jaguar Land Rover was transferred to us; however, such intellectual property is still ultimately owned by Jaguar Land Rover entities. Additionally, perpetual royalty-free licenses to use other essential intellectual property from the third parties have been granted to us for use in Jaguar and Land Rover vehicles. Jaguar Land Rover owns registered designs to protect the design of its vehicles in several countries.

In varying degrees, all of our intellectual property is important to us. In particular, the Tata, Jaguar, Land Rover and Range Rover brands are integral to the conduct of our business, a loss of which could lead to the dilution of our brand image and have a material adverse effect on our business.

Components and Raw Materials

The principal materials and components required by us for use in Tata Commercial Vehicles and Tata Passenger Vehicles are steel sheets (for in-house stampings) and plates, iron and steel castings and forgings, items such as alloy wheels, tires, fuel injection systems, batteries, electrical-wiring systems, electronic information systems and displays, interior systems such as seats, cockpits, doors, plastic finishers and plastic functional parts, glass and consumables, such as paints, oils, thinner, welding consumables, chemicals, adhesives and sealants, and fuels. We also require aggregates such as axles, engines, gear boxes and cams for our vehicles, which are manufactured in-house or by our subsidiaries, affiliates, joint ventures or operations and strategic suppliers. We have long-term purchase agreements for certain critical components such as transmissions and engines. We have established contracts with certain commodity suppliers to cover our own as well as our suppliers’ requirements in order to moderate the effect of volatility in commodity prices. We have also undertaken special initiatives to reduce material consumption through value engineering and value analysis techniques.

Our sourcing department in India has two divisions: purchasing and supplier quality and supply chain management (“SCM”). Purchasing oversees the commercial aspects of products sourcing. It also oversees the allocation of share of business. The supplier quality division is responsible for APQP and managing ongoing supplier relationships. SCM oversees the supply and delivery of parts from our suppliers. Our purchasing back office, known as GDC, supports the Purchasing division in managing all transactional work in the SAP ERP system.

As part of our strategy to become a value for money vehicle manufacturer, we have undertaken various initiatives to reduce our fixed and variable costs. We started an e-sourcing initiative in India in 2002, pursuant to which we procure some supplies through reverse auctions. We also use external agencies as third-party logistic providers. This has resulted in space and cost savings. Our initiatives to leverage information technology in supply chain activities have resulted in improved efficiency through real-time information exchange and processing with our suppliers. We continue to explore saving opportunities through our supplier base using various mechanisms such as our “Value Addition and Value Engineering” initiative and competitive sourcing.

We have an established supplier quality 16-step process in order to ensure the quality of outsourced components. We formalized the component development process using Automotive Industry Action Group guidelines. We also have a program for assisting suppliers from whom we purchase raw materials or components to maintain quality. Preference is given to suppliers with TS 16949 certification. We also maintain a stringent quality assurance program that includes the random testing of production samples, frequent re-calibration of production equipment and analysis of post-production vehicle performance, as well as an ongoing dialogue with supplier partners to eliminate production defects.

We are also exploring opportunities for increasing the global sourcing of parts and components from low-cost countries, and have in place a supplier management program that includes supplier base upgradation, supplier quality improvement and supplier satisfaction surveys. We have begun to include our supply chain in our initiatives on social accountability and environment management activities, including supply chain carbon footprint measurement and knowledge sharing on various environmental aspects.

The principal materials and components required for use in Jaguar Land Rover vehicles are steel and aluminum, in sheet (for in-house stamping) or externally in pre-stamped form, aluminum castings and extrusions, iron and steel castings and forgings and items such as alloy wheels, tires, fuel injection systems, batteries, electrical wiring systems, electronic information systems and displays, leather-trimmed interior components such as seats, cockpits and doors, plastic finishers and plastic functional parts, glass and consumables (paints, oils, thinner, welding consumables, chemicals, adhesives and sealants), rare earth minerals and fuels. Jaguar Land Rover also requires certain highly functional components, such as axles, engines and gear boxes for its vehicles, which are mainly manufactured by strategic suppliers. We have purchase agreements for critical components, such as transmissions (ZF Friedrichshafen AG). The components and raw materials in Jaguar Land Rover cars include steel, aluminum, copper, platinum, palladium and a number of other commodities. Jaguar Land Rover has established contracts with certain commodity suppliers (e.g., Novelis) to cover its own and its suppliers’ requirements to mitigate the effect of price volatility and supply disruption. Special initiatives are also undertaken to reduce material consumption through value engineering and value analysis techniques.

 

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Jaguar Land Rover works closely with its suppliers to meet its requirements for parts and components. Jaguar Land Rover has established quality control programs to ensure that externally purchased raw materials and components are monitored and meet its quality standards. Jaguar Land Rover also outsources many of the manufacturing processes and activities to various suppliers. Where this is the case, Jaguar Land Rover provides training to outside suppliers. Jaguar Land Rover also continues to work with its suppliers to optimize procurement.

In 2008, when Tata Motors acquired Jaguar Land Rover businesses from Ford, Jaguar Land Rover entered into certain supply agreements with Ford with a long stop date as of December 31, 2020, for (i) the long-term supply of engines developed by Ford, (ii) engines developed by Jaguar Land Rover but manufactured by Ford and (iii) engines developed by the Ford-PSA joint venture. Jaguar Land Rover is now producing its own family of 4-cylinder and 6-cylinder Ingenium diesel and petrol engines manufactured at the EMC in Wolverhampton, WK, as well as 3-cylinder and 4-cylinder Ingenium petrol manufactured in China. The supply arrangement with Ford has now terminated. Jaguar Land Rover started low-volume production of Supercharged V8 engines at the EMC, replacing the Ford Bridgend supply, from March 15, 2021.

Suppliers

We have an extensive supply chain for procuring various components. We also outsource many manufacturing processes and activities to various suppliers. Where this is the case, we provide training to the external suppliers.

Our associate company, Tata Auto Comp Systems Ltd., manufactures automotive components and collaborates with international manufacturers by setting up joint ventures with them.

In 2016, we introduced manufacturing site assessment (“MSA”) for India suppliers, a comprehensive supplier assessment process. The framework is broadly based on lead measures and lag measures to assess the suppliers’ capability to service our requirements. To facilitate financial oversight, MSA also integrates financial risk assessment.

We have initiated a supplier optimization initiative for Indian domestic suppliers. This initiative will rationalize the current supply base enabling scale cost benefits, improved quality and balance in volume cyclicality. This also improves supplier relationships, giving TML better access to technologies and support in vehicle development for new programs.

Suppliers are appraised based on our long-term requirements through a number of platforms, such as vendor council meetings, council regional chapter meetings, national vendor meets and location-specific vendor meets. We also take efforts to assess supplier financial risk.

Capital and Product Development Expenditures

Our capital expenditures totaled Rs.178,199 million and Rs.302,945 million during Fiscal 2021 and Fiscal 2020, respectively. Our capital expenditures during the past two fiscal years related primarily to new product development and capacity expansion for new and existing products to meet market demand as well as investments toward improving quality, reliability and productivity that are each aimed at increasing operational efficiency.

We intend to continue to invest in our business units in general, and in research and product development in particular, over the next several years in order to improve our existing product range, develop new products and platforms and to build and expand our portfolio in the Passenger Vehicle and Commercial Vehicle categories. We believe this will strengthen our position in the Indian automotive market and help us to grow our market share internationally.

As part of this future growth strategy, we plan to make investments in product development, capital expenditures in capacity enhancement, plant renewal and modernization and to pursue other growth opportunities. Our subsidiaries also have their individual growth plans and related capital expenditure plans. These expenditures are expected to be funded largely through cash generated from operations, existing investible surplus in the form of cash and cash equivalents, investment securities and other external financing sources.

 

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Governmental Regulations

Governmental Regulations in India

Automotive Mission Plan, 2016–2026

The Automotive Mission Plan 2016-26 (“AMP 2026”) is the collective vision of the Government of India and the Indian automotive industry, in which the goal is for the vehicles, auto components and tractor industries to reach certain size benchmarks over the next 10 years and also contribute to India’s development, global footprint, technological maturity, competitiveness, and institutional structure and capabilities. AMP 2026 also seeks to define the trajectory of specific regulations and policies that govern research, design, technology, testing, manufacturing, imports/exports, sales, use, repair, and scrapping of automotive vehicles, components and services.

The vision statement of AMP 2026—“Vision 3/12/65”—states: “By 2026, the Indian automotive industry will be among the top three of the world in engineering manufacture and export of vehicles and auto components, and will encompass safe, efficient and environment friendly conditions for affordable mobility of people and transportation of goods in India comparable with global standards, growing in value to over 12% of India’s gross domestic product (“GDP”), and generating an additional 65 million jobs”.

AMP 2026 envisages that the Government of India and the Indian automotive industry will work together to strengthen India’s position in the global automotive industry. AMP 2026 is intended to help the Indian automotive industry focus on its strengths and to improve its competitiveness in selected segments, achieve the annual production target of Rs.1,616,000 crores to Rs.1,889,500 crores in terms of its size, and establish its “Right to Win” on the global stage.

The Auto Policy, 2002

The auto policy was introduced by the Department of Heavy Industry, Ministry of Heavy Industries and Public Enterprises of the Government of India in March 2002, with the aims, among other things, of promoting a globally competitive automotive industry that would emerge as a global source for automotive components, establishing an international hub for manufacturing small, affordable Passenger Cars, ensuring a balanced transition to open trade at a minimal risk to the Indian economy and local industry, encouraging modernization of the industry and facilitating indigenous design, research and development, as well as developing domestic safety and environment standards on par with international standards.

Auto Fuel Vision and Policy 2025

The Ministry of Petroleum and Natural Gas formed an expert committee under the chairmanship of Shri Saumitra Chaudhuri, a member planning commission, on December 19, 2012. Its objective was to recommend auto fuel quality applicable through model year 2025. The committee in its draft report has recommended Bharat Stage IV compliant fuel across the country by 2017 and Bharat Stage V compliant fuel with 10 ppm of sulfur to be made available from 2020 onward. The draft report proposes nationwide Bharat Stage V emission standards for new four-wheelers from model year 2020 and for all four-wheelers from model year 2021. It also recommends BSVI emissions standards from model year 2024 onwards. In April 2014, the expert committee submitted its recommendations to the committee empowered by the Ministry of Petroleum and Natural Gas, which proposed the implementation of emission standards one year earlier than the expert committee’s recommendations, which would result in the implementation of Bharat Stage V emission standards starting in model year 2019 and BSVI emissions standards starting in model year 2023. However, in January 2016, the Government of India decided to implement the BSVI emission standards even earlier by skipping Bharat Stage V emission standards. As such, the BSVI standards were made applicable from April 1, 2020, to all categories of vehicles across India. The BSVI Phase 2 emission norms will apply from April 1, 2023, and are expected to present a significant challenge from a developmental and continual capital expenditure standpoint.

FAME II Scheme

The Government of India announced the Faster Adoption and Manufacturing of Hybrid & Electric Vehicles in India Phase II (“FAME II”) scheme in March 2019. FAME II is proposed to be implemented over a period of three years from Fiscal 2020 to Fiscal 2022. This scheme, in furtherance of the National Mission on Electric Mobility 2020 (“NEMMP”), is intended to support PHEV, or xEV, market development and its manufacturing network to achieve self-sustenance and the scheme is proposed to be implemented through three areas: (i) demand incentives, (ii) establishment of network of charging stations, and (iii) administration of scheme including publicity, information, education and communication activities.

Central Motors Vehicles Rules, 1989

Chapter V of the Central Motor Vehicle Rules, 1989 (the “CMV Rules”) sets forth provisions relating to construction, equipment and maintenance of motor vehicles, including specifications for dimensions, gears, indicators, reflectors, lights, horns, safety belts and others. The CMV Rules govern emission standards for vehicles operating on CNG, gasoline, liquefied petroleum gas and diesel.

 

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On and from the date of commencement of the Central Motor Vehicle (Amendment) Rules, 1993, every manufacturer must submit the prototype of every vehicle to be manufactured by it for testing by the Vehicle Research and Development Establishment of the Ministry of Defense of the Government of India, the Automotive Research Association of India, Pune, the Central Machinery Testing and Training Institute, Budni (MP), the Indian Institute of Petroleum, Dehradun, the Central Institute of Road Transport, Pune, the International Center for Automotive Technology, Manesar or such other agencies as may be specified by the central government for granting a certificate by that agency as to the compliance of provisions of the Motor Vehicles Act, and the CMV Rules.

The CMV Rules also require the manufacturers to comply with notifications in the Official Gazette, issued by the Government of India, to use such parts, components or assemblies in the manufacture of certain vehicles according to standards specified by either the Automotive Industry Standards Committee or the Bureau of Indian Standards.

Emission and Safety in India

The Government of India mandated Bharat Stage VI standards, which are equivalent to Euro VI standards, for all vehicles across India. Bharat Stage VI standards are applicable across the country starting April 1, 2020. All categories of our vehicles manufactured from April 1, 2020, are compliant with Bharat Stage VI standards. Phase 2 BS VI emission norms will be applicable from April 1, 2023. Manufacturers have to comply with stringent regulatory requirements like OBDII, RDE/PEMS & IUPR.

CAFE standards for M1 category vehicles

The CAFE standards are applicable to M1 category vehicles from April 1, 2017. As a result, we are required to demonstrate CAFE compliance for our passenger vehicles, commercial vehicles and electric vehicle M1 models. TML has successfully complied with the Phase 1 CAFE requirements for Fiscal 2017, Fiscal 2018 and Fiscal 2019. Through the use of the CAFE calculator, we regularly monitor production volumes and process to ensure that organizational level CAFE compliance (which will require us to produce enough fuel-efficient models to compensate for those models having higher CO2 emissions in g/km) is established at all times during the year. Any non-compliance could lead to penalties, product recalls and/or other punitive measures. To support our compliance obligations, our overall product portfolio needs to be enhanced with the incorporation of electric and hybrid vehicles as well as the inclusion of environmentally friendly technological features in existing and forthcoming models.

Light, Medium and Heavy Duty Fuel-Efficiency Norms

The Ministry of Power issued the final notification for Heavy Duty Fuel-Efficiency Norms for Diesel Vehicles of categories M3 and N3 with GVW of 12T and above. Every vehicle of the specified categories must meet fuel-efficiency targets mentioned in notification based on constant speed fuel consumption tests conducted at 40 km/h and 60 km/h. The norms apply from January 1, 2021, for vehicles complying with BSVI emission standards. However, in the absence of notification from the Ministry of Road Transport and Highways (“MoRTH”), the norms have not been implemented. The correction factor for BSVI-compliant vehicles are recently finalized by the Petroleum Conservation Research Association (“PCRA”) and the same would be notified in due course of time. Our developmental efforts are in final stages for ensuring compliance and our Commercial Vehicles range of products would be complying with the mandated norms as and when they are notified by MoRTH.

Fuel Efficiency Norms for Light and Medium Duty vehicles having gross vehicle weight ranging from 3.5T to 12T was notified by the Ministry of Power in July 2019. The notification is applicable with effect from April 1, 2020, however final notification from Ministry of Road Transport and Highways is still awaited for its implementation. The correction factor for BSVI compliant vehicles is recently finalized by PCRA and the same would be notified in due course of time. Developmental efforts are in final stages for ensuring compliance, and our CV range of products would be complying with the mandated norms as and when they are notified by MoRTH.

Crash and Other Safety Requirements for Motor Vehicles

India has a well-established regulatory framework administered by the MoRTH. Recently, the Government of India has embarked on a wide ranging program to institute standardized safety features for a variety of motor vehicles. Crash safety requirements, such as full frontal, offset frontal and lateral impact, have been made mandatory for all new models starting October 1, 2017, and from October 1, 2019, for all existing models of vehicle categories as specified in the individual standards. A pedestrian compliance program has been instituted for all new models from October 1, 2018, and for all existing models from October 1, 2020. Passenger Vehicles (M1 Category) have been mandatorily equipped with additional safety features such as driver airbag, safety belt reminders for driver and co-driver, reverse parking alert system, speed alert system and manual override for central locking system from July 1, 2019, onwards. In addition, the provisioning of child lock systems have been prohibited in M1 transport category vehicles from July 1, 2019. Subsequently, co-driver airbags have also been mandated in M1 vehicles from April 1, 2021, in the case of New Models, and August 31, 2021, in the case of Existing Models.

 

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Anti-lock braking system (“ABS”) have been mandated for all M1 and M2 category Passenger Vehicles starting April 1, 2018, and April 1, 2019, for new models and existing models, respectively. The Government of India has also mandated advanced braking requirements for all motor vehicles, which would become applicable progressively from 2021 onwards. The revised anti-lock braking requirements for M2, M3, N3 and N2 (for vehicles meant for the carriage of hazardous goods and LPG) were applicable from April 1, 2021, for new models and will be applicable from April 1, 2022, for all models. The revised braking requirements for all category of vehicles were applicable from April 1, 2021, for new models and will be applicable from April 1, 2022, for all models. To facilitate informed consumer decision-making, the government is in the process of formulating the Bharat New Vehicle Safety Assessment Programme, a star-rating based system of safety assessment for Passenger Vehicles.

Fitment of vehicle location tracking system and emergency buttons have been mandated for national permit vehicles from November 2, 2018, and for all passenger public service vehicles from January 1, 2019. Subsequently, in January 2020, MORTH has issued a circular to the Principal Secretary (Transport) / Secretary (Transport) and Transport Commissioners of all States/UTs regarding the scheme for Implementation of “Development, Customization, Deployment and Management of State-wise vehicle tracking platform for Safety & Enforcement as per AIS 140 Specifications”, in States / UTs under Nirbhaya Framework.

Additionally, the MoRTH has also mandated the compliance with the Truck Body Code for all N2, N3 category vehicles in two phases (Phase I and Phase II) from October 1, 2018, and October 1, 2019, respectively. However, drive away chassis without cabins built by OEMs were exempted until March 31, 2020. The MoRTH has also mandated compliance with advanced requirements for fully built buses manufactured on and after April 1, 2019, supplied by OEM body builders. This calls for compliance to requirements such as acceleration, NVH limits, multiplexing for wiring harness and fitment of fire detection and suppression systems. The reverse parking alert system for all buses and trucks including small Commercial Vehicles has been mandated from April 1, 2020. Many revised standards are now being mandated for various component and system level requirements such as fuel tanks, mirrors, light signaling devices, steering gears and effort, retro reflective devices, Safety Glazing in Fiscal 2019, Fiscal 2020 and Fiscal 2021. Also, MoRTH has mandated the fitment of high security registration plates by the vehicle manufacturer and dealers on all motor vehicles manufactured on or after April 1, 2019. Also multiple Quality Control Orders and Compulsory Registration Orders have been issued by the Government of India in recent times for components such as wheelrims, brake liners, Safety glazing, electronic items to control the imports and sale of substandard after-market parts.

MoRTH has recently issued the Final Notification mandating detailed CMV Rules for Implementation of various provisions on Auto Recall and Non-compliance from April 1, 2021. Final Notification stipulates Rules for Implementation of Sections 39-40 of the Motor Vehicles (Amendment) Act, 2019 dealing with procedure for investigation, officers empowered to conduct investigations, procedure for hearing, and the penalties to be levied thereof, for violation of standards prescribed in Section 110; procedure for recall of defective motor vehicles; the accreditation, registration and regulation of testing agencies; and the procedure for type approval of motor vehicles and confirmatory of production. MoRTH has also issued Final Notification prescribing the Vehicle category wise Percentage of owners reporting identical defects in reference to CMV Rule 127C: Defective Motor Vehicle and Recall Notice. With the intent of incorporating various checks and measures towards ensuring a safer public and private transportation, MoRTH has issued Draft Notification towards implementation of Whole Vehicle Safety Conformity of Production (“WVSCoP”).

TML is working toward meeting all applicable regulations which we believe are likely to come into effect in various markets in the near future. We believe our vehicles also comply with the various safety regulations in effect in the other international markets where we currently operate.

India is a signatory to the 1998 United Nations Economic Commission for Europe (“UNECE”) Agreement on Global Technical Regulations and has voted in favor of all eleven global technical regulations (“GTRs”). TML works closely with the Government of India to participate in WP 29 World Forum for Harmonization of Vehicle Regulations activities.

The Motor Vehicle (Amendment) Act 2019 has been published on August 9, 2019. This act addresses vehicle recalls, road safety, traffic management and accident insurance, among other matters. The act imposes civil and criminal liability on manufacturers selling vehicles in contravention of the standards specified in the act, or required by the government to recall their vehicles. The act also proposes the creation of the National Road Safety Board to provide advice to the central and state governments on all aspects of road safety and traffic management. Accordingly, MoRTH has recently issued the Draft Notification G.S.R 754 dated December 8, 2020 regarding National Road Safety Board Rules, 2020. The Board shall consist of the Chairman and not less than three but not exceeding seven members to be appointed by the Central Government from amongst the persons who fulfil the criteria specified. The Board shall be responsible for promoting road safety, innovation and the adoption of new technology and for regulating traffic and motor vehicles.

Recently MoRTH has issued a draft Notification regarding the Motor Vehicles (Registration and Functions of Vehicle Scrapping Facility) Rules, 2021. The Draft Notification lays down the procedure for establishment of Registered Vehicle Scrapping Facilities. These will apply to all vehicles and their last registered owners, automobile collection centers, automotive dismantling, scrapping and recycling facilities and recyclers of all types of automotive waste products. MoRTH has also issued a draft Notification regarding non-renewal of registration certificate of government vehicles after 15 years. Another Draft Notification mentions for the provision of Concession in Motor Vehicle Tax on submission of a certificate of vehicle scrapping.

 

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The Essential Commodities Act, 1955

The Essential Commodities Act, 1955, as amended by the Essential Commodities (Amendment and Validation) Act, 2009 (the “Essential Commodities Act”) authorizes the Government of India, if it finds it necessary or expedient to do so, to provide for regulating or prohibiting the production, supply, distribution, trade and commerce in the specified commodities under the Essential Commodities Act, in order to maintain or increase supplies of any essential commodity or to secure their equitable distribution and availability at fair prices, or to secure any essential commodity for the defense of India or the efficient conduct of military operations. The definition of “essential commodity” under the Essential Commodities Act includes “component parts and accessories of automobiles”.

Environmental Regulations

Our manufacturing units must ensure compliance with various environmental statutes. Significant statutes for our business include the Water (Prevention and Control of Pollution) Act, 1974 and the Rules thereunder, the Air (Prevention and Control of Pollution) Act, 1981 and the Rules thereunder, the Environment Protection Act, 1986 and the Rules thereunder and the Hazardous and Other Wastes (Management and Transboundary Movement) Rules, 2016. The basic purpose of these statutes is to control, abate and prevent pollution. In order to achieve these objectives, PCBs, which are vested with diverse powers to deal with water and air pollution and hazardous waste disposal, have been set up in each state. The PCBs are responsible for establishing standards of environmental quality and regulating industries through the issue of “Consent to Establish”, “Consent to Operate” and “Hazardous Waste Authorisation” and undertaking inspection of industries to ensure that units or plants are functioning in compliance with the standards prescribed therein. These authorities also have the power of search, seizure and investigation. All of our manufacturing plants are either in possession of current, valid Consents to Operate and Hazardous Waste Authorizations or are in the process of renewing the same from the respective PCBs of the states where they operate. Other key regulations applicable to our Plants include the Batteries (Management and Handling) Amendment Rules, 2010. The Plastic Waste Management Rules 2016, the Bio-Medical Waste (BMW) Management Rules 2016, e-waste Management Rules-2016, and the Construction and Demolition (“C&D”) Waste Management Rules 2016. We ensure that all prescribed standards are followed for control of pollution and management of waste and we have made significant investments toward pollution control and environmental protection at our manufacturing Plants.

The Environmental Impact Assessment Notification, 2006 and its amendments (the “EIA”) govern the process of granting ‘Environmental Clearance’ to certain projects which are specified in the Schedule to the Rules. All of our manufacturing plants have obtained environmental clearances for specific projects in the past as and when mandated.

The Ministry of Environment, Forests and Climate Change (“MoEFCC”) has recently published a draft notification on March 23, 2020, titled The EIA Notification, 2020. We have submitted our comments and suggestions to MoEFCC on the Draft Notification. The Government of India intends to regulate end-of-life vehicles (“ELVs”), which would be applicable to Passenger Cars and two wheelers. The authorized collection and dismantling centers would be equipped to handle Commercial Vehicles as well. The purpose of the ELV policy is to remove vehicles that are endangering the environment and public safety.

The Central Pollution Control Board has formulated the draft guidelines for environmentally sound management of end-of-life vehicles for implementation on the principle of shared responsibility that mandates the specific roles for the stakeholders in the electric vehicle value chain which includes government authorities, manufacturers, recyclers, dealers, intermediaries, insurers and consumers.

MoRTH has also issued the draft guidelines for setting up, authorization and operation of a Authorized Vehicles Scrapping Facility in the country. These guidelines are notified for the safe and regulated disposal of above-mentioned vehicles for the protection of the environment and promotion of a legally compliant vehicle dismantling and scrapping industry. Recently, the Government of India has announced the Scrappage Policy in the Union Budget. However, detailed Notification in this regard is still awaited.

Regulation of Imports and Exports

Regulation of quantitative restrictions on imports into India were liberalized with effect from April 1, 2001, pursuant to India’s World Trade Organization obligations, and imports of capital goods and automotive components were placed under the open general license category.

Automobiles and automotive components may, generally, be imported into India without a license from the Government of India subject to their meeting Indian standards and regulations, as specified by designated testing agencies. As a general matter, cars, UVs and SUVs in completely built-up condition (“CBU”) may be imported at 60% basic customs duty. However, cars with cost, insurance and freight value of more than US$40,000 or with engine capacities greater than 3,000 cubic centimeters for petrol variants and 2,500 cubic centimeters for diesel variants or with both, may be imported at a 100% basic customs duty. Commercial Vehicles may be imported at a basic customs duty of 40%, and components may be imported at a basic customs duty ranging from at 15% to 7.5%.

 

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MoRTH issued the final notification regarding the acceptance of international standards (such as the United Nation Economic Commission for Europe (the “ECE”) or Japan) for direct import of “completely knocked down” units without any need of domestic type approval by amending provisions of CMV Rules 92 and 126. Under the modified rules, the compliance of such part, component or assembly shall be deemed to be established for the purpose of CMV Rules 124 and 126. Also, vehicle manufacturers can import unused right-hand drive CBUs or CKDs directly or through their authorized representative, up to 2,500 units of M1 and up to 500 units of other categories of vehicles annually, compliant with the international standard (such as the ECE or Japan) without any need for domestic CMV Rules Type Approval for Sales and Registration.

The FDI Policy

Automatic approval for foreign equity investments up to 100% is allowed in the automobile manufacturing sector under the FDI Policy. See Item 10.D “Additional Information—Exchange Controls” for additional information relating to restrictions on foreign investment under Indian law.

Indian Taxes

See Item 10.E “Additional Information—Taxation” for additional information relating to our taxation.

Goods and Services Tax

The introduction of the GST from July 1, 2017, was a very significant step in the field of indirect tax reforms in India. By subsuming a large number of central and state taxes into a single tax, the aim was to mitigate cascading or double taxation and pave the way for a common national market.

The salient features of the GST are:

 

   

Applicable on “supply” of goods or services as against the earlier concept of tax on the manufacture of goods or on the sale of goods or on the provision of services.

 

   

Based on the principle of destination based consumption taxation as against the present principle of origin-based taxation.

 

   

Dual GST with the center and the states simultaneously levying it on a common base.

 

   

Replaced the taxes earlier levied and collected by the center, namely: (a) central excise duty; (b) duties of excise (medicinal and toilet preparations); (c) additional duties of excise (goods of special importance); (d) additional duties of excise (textiles and textile products); (e) additional duties of customs (commonly known as CVD); (f) special additional duty of customs; (g) service tax; (h) cesses and surcharges insofar as they relate to supply of goods or services.

 

   

State taxes that were subsumed within the GST are (a) state value-added tax; (b) the central sales tax; (c) purchase tax; (d) luxury tax; (e) entry tax (all forms); (f) entertainment tax (except those levied by the local bodies); (g) taxes on advertisements; (h) taxes on lotteries, betting and gambling; (i) state cesses and surcharges insofar as they relate to supply of goods or services.

The GST rates together with the GST compensation cess rates applicable to vehicles as of March 31, 2021, are listed below:

 

Commodity    GST Rate    

GST Comp.

Cess Rate

 

Small Cars (Diesel)

     28     3

Small Cars (Gasoline)

     28     1

Motor Vehicles for transport of 10 to 13 persons incl. driver

     28     15

Motor vehicles for transport of more than 13 persons

     28      

Chassis fitted with engine for transport of more than 13 persons

     28      

Chassis fitted with engine for trucks

     28      

SUVs and UVs

     28     22

Car—Motor vehicle of engine capacity not exceeding 1500cc

     28     17

Motor vehicle of engine capacity exceeding 1500 cc and other than SUV

     28     20

Truck

     28      

Electrically operated vehicles (any type)

     5      

 

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Environmental, Fiscal and Other Governmental Regulations Around the World

Our Jaguar Land Rover business has significant operations in the United Kingdom, North America, Europe, China and other markets that have stringent and ever evolving regulations relating to vehicle emissions. Compliance with the proposed tightening of vehicle emissions regulations by the European Union may entail significant costs. Although Jaguar Land Rover is pursuing various technologies to meet the different environmental standards, the costs of compliance can be significant to its operations and may adversely and materially impact its business, financial condition and results of operations.

Greenhouse Gas / CO2 / Fuel Economy Legislation

Current legislation in Europe limits Passenger Car fleet average greenhouse gas emissions to 95 grams of CO2 per kilometer for all new cars from 2020. Different targets apply to each manufacturer based on its respective fleets of vehicles and average weight. Jaguar Land Rover has been granted a derogation by the European Commission Secretariat General under Regulation (EU) 2019/631 Article 10 (4 - Derogations for certain manufacturers) from the weight based target requirement available to small volume and niche manufacturers (defined by European sales of less than 10,000 units and between 10,000 and 300,000 units, respectively). As a result, under the provisions of the niche manufacturer derogation, we are permitted to reduce our emissions by 45% from 2007 levels rather than meeting a specific CO2 mass-based emissions target. Jaguar Land Rover had an overall 2012-2019 target of an average of 178.0 grams of CO2 per kilometre for our full fleet of vehicles registered in the European Union. In 2018 our fleet delivered 155.4 grams of CO2 per kilometre (ref report— Monitoring CO2 emissions from passenger cars and vans in 2018—EEA Report No 02/2020), well below the mandated target.

From January 2021, the United Kingdom will not be treated as an EU member state and the CO2 regulation currently in force will cover the remaining 27 member states as well as Iceland, Norway and Northern Ireland (even though cross-border sales impact on registrations into the United Kingdom are difficult to delineate at this time). The United Kingdom (excluding Northern Ireland for this regulation) has an almost identical copy of the 2020 European Regulation, the only differences are some super credit provisions extended into 2021 and that targets are based on 2007 United Kingdom only status (similarly EU targets are based on 2007 EU15, excluding the United Kingdom) this results in a c1 gram more stringent target in the United Kingdom and 1 gram less stringent target in the EU when compared with the target applicable before January 2021.

All European compliance up to and including 2020 has been based on certification to the New European Driving Cycle (“NEDC”). Since September 2018, all vehicles have been certified to the Worldwide Harmonised Light Vehicle Test Procedure (“WLTP”). Compliance is still referenced to NEDC targets up to and including December 31, 2020. From 2021, compliance will be based on a new WLTP target, to determine new niche-derogated targets for us, the ratio of WLTP status: NEDC status in 2020 is then multiplied by the 2020 NEDC target to result in the 2021 WLTP target. This is system should preserve the WLTP intention of making the change to this new test procedure “compliance neutral”. As a result, there will be an apparent increase in WLTP target and WLTP status, though the compliance task and stringency is identical.

In the United States, both CAFE standards and greenhouse gas emission standards are imposed on manufacturers of passenger cars and light trucks. The federal CAFE standards for passenger cars and light trucks was set in 2011 by the NHTSA to meet an estimated combined average fuel economy level of 54.5 miles per U.S. gallon for 2025 model year vehicles achieved by an average 4.5% year-on-year fuel consumption reduction from model year 2016. Meanwhile, the Environmental Protection Agency (“EIA”) had set an average greenhouse gas emissions target from passenger cars, light trucks and medium-duty passenger vehicles at 163 grams per mile in model year 2025 (equivalent to the CAFE 54.5 miles per U.S. gallon if achieved exclusively through fuel economy standards).

In April 2020, EPA and NHTSA jointly announced their new Safer Affordable Fuel Economy (“SAFE”) Regulation mandating new less-stringent targets from 2021MY through 2026MY. Instead of the average 4.5% year-on-year fuel consumption reduction from model year 2016, the SAFE Regulation now mandates a 1.5% year-on-year fuel consumption reduction from model year 2021 with new targets of 40.4mpUSg and 199g/mile in 2026MY.

Although the State of California has been empowered to implement more stringent greenhouse gas emission standards, it has, so far, elected to accept the existing U.S. federal standards for compliance with the state’s own requirements. In November 2012, the California Air Resources Board (“CARB”) accepted the federal standard for vehicles with model years 2017 to 2025 for compliance with the state’s own greenhouse gas emission regulations via the “deemed to comply” mechanism. Through the coordination of the National Program with the CARB’s standards, automakers can seek to build one single fleet of vehicles across the United States that satisfies all requirements, and consumers can continue to have a full range of vehicle choices that meet their needs.

 

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However, in September 2019, the U.S. federal government revoked California’s right to set its own standards that require stricter air pollution rules than the federal government requires. California immediately moved to challenge the revocation in court and is looking to move forward with other stringent emission regulations for vehicles, including the Zero Emission Vehicle regulation, (“ZEV”), which requires manufacturers to increase their sales of zero emissions vehicles year-on-year, up to an industry average of 22% of vehicles sold in the state by 2025. The precise sales required in order to meet a manufacturer’s obligation in any given model year depend on the size of the manufacturer and the level of technology sold. For example, transitional zero emission technologies, such as plug-in hybrids, can account for at least a proportion of a manufacturer’s obligation, but these technologies earn compliance credits at a different rate from pure zero emissions vehicles. Other compliance mechanisms are available under ZEV, such as banking and trading of credits generated through the sale of eligible vehicles. The final rule that emerges from the NPRM process and the outcome of the dispute between the State of California and the U.S. federal government over California’s ability to adopt separate, stricter emission standards may affect our sales in the U.S. although the ultimate impact cannot be determined at present.

In addition, many other markets have employed similar greenhouse gas emissions standards, including Brazil, Canada, China, India, Japan, Mexico, Saudi Arabia, South Korea, Switzerland and, recently, Taiwan, each with different target mechanisms, targets, timing, requirements, compliance penalties and regulatory flexibilities.

We are fully committed to meeting all of these standards. Local excise tax initiatives are a key consideration in ensuring our products meet customer needs for environmental footprint and cost of ownership concerns as well as continued access to major city centers (such as London’s and Paris’ Ultra Low Emission Zones and similar low emissions areas being contemplated in other major urban centers). We are fully engaged with UK government consultation on its proposed Internal Combustion Engine (“ICE”) ban from 2030 in the United Kingdom (as recently announced by the UK government), indeed many other nations are looking at similar strategies at or around 2040/2045. All our long-term strategies are being written with these future restrictions in mind.

Non-Greenhouse Gas Emissions Requirements

The European Union has adopted Euro 6, the latest in a series of more stringent standards for emissions of other air pollutants from passenger and light commercial vehicles, such as NOx, carbon monoxide, hydrocarbons and particulates. These standards have been tightened again by the Euro 6d Temp standard, which incorporates the introduction of Real Driving Emissions (“RDE”) as a complement to laboratory testing to measure compliance. As a first step, manufacturers are required to reduce the discrepancy between laboratory compliance values and RDE procedure values to a conformity factor of a maximum of 2.1 (110%) for all models from September 2017 for passenger cars and from September 2018 for new light commercial vehicles. Following that, manufacturers will be required to reduce this discrepancy to a conformity factor of a maximum of 1.43 (43%) by January 2020 for new models of passenger cars and by January 2021 for all vehicles registered.

In 2017 and 2018, there was a move to the new WLTP in Europe, with changes made in September 2018, to address global concerns on more customer correlated fuel economy certified levels as well as air quality concerns. Other markets will likely adopt similar requirements. All programs are fully engineered to enable the adoption of these new requirements.

Ongoing court cases and proposed amendments to Euro 6 legislation in Europe introduce a significant level of uncertainty with respect to the emissions that could be faced in the next two to five years. In the longer term, the European Commission has also commenced work on a proposed Euro 7 emissions standard legislation, which could become applicable at some stage from the middle of the decade.

In California, the Low Emission Vehicle 3 (“LEV3”) regulations and ZEV regulations place strict limits on emissions of particulates, NOx, hydrocarbons, organics and greenhouse gases from passenger cars and light trucks. These regulations require ever-increasing levels of technology in engine control systems, on-board diagnostics and after treatment systems affecting the base costs of our powertrains. California’s LEV3 and ZEV regulations cover model years 2015 to 2025. Additional stringency of evaporative emissions also requires more-advanced materials and joints solutions to eliminate fuel evaporative losses, all for much longer warranty periods (up to 150,000 miles in the United States).

In addition, the Tier 3 Motor Vehicle Emission and Fuel Standards issued by the EPA in April 2014 established more stringent vehicle emissions standards broadly aligned to California’s LEV3 standards for 2017 to 2025 model year vehicles.

The Californian Air Resources Board has commenced development of their next stage of emissions legislation, Advanced Clean Cars II, which will be anticipated to define emissions standards beyond 2025 model year.

While Europe and the United States typically lead the implementation of these emissions programs, many other nations and states typically follow on with adoption of similar regulations two to four years thereafter.

 

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For example, in response to severe air quality issues in Beijing and other major Chinese cities, the Chinese government has adopted more stringent emissions standards known as China 6, which is broadly aligned with California LEV3 levels, and are expected to introduce RDE from 2023; India has introduced Bharat Stage VI from April 2020, and is expected to introduce RDE from 2023; Japan will introduce RDE for diesel vehicles from 2022.

To comply with the current and future environmental norms, we may have to incur substantial capital expenditure and research and development expenditure to upgrade products and manufacturing facilities, which would have a material and adverse impact on our cost of production and results of operations.

Noise Legislation

The European Commission adopted rules, which apply to new homologations from July 2016, to reduce noise produced by cars, vans, buses, coaches and light and heavy trucks. Noise limit values would be lowered in two steps of each two A-weighted decibels for vehicles other than trucks, and one A-weighted decibel in the first step and two in the second step for trucks. Compliance would be achieved over a 10-year period from the introduction of the first phase.

Vehicle Safety Legislation

Our products are certified in all markets in which they are sold and compliance is achieved through vehicle certification in respective countries. Many countries use, and in many instances adopted into their own regulatory frameworks, the regulations and technical requirements provided through the UNECE series of vehicle regulations.

Vehicles sold in Europe are subject to vehicle safety and environmental regulations established by both the European Union and by individual member states, if any. Following the incorporation of the United Nations standards commenced in 2012, the European Commission requires new model cars to have electronic stability control systems and has introduced regulations relating to low-rolling resistance tires, tire pressure monitoring systems and requirements for heavy vehicles to have advanced emergency braking systems and lane departure warning systems. The latest mandatory measures include safety belt reminders for more that the driver seat, electric car safety requirements, easier child seat anchorages, tire pressure monitoring systems and gear shift indicators.

NHTSA issues Federal Motor Vehicle Safety Standards covering a wide range of vehicle components and systems such as occupant protection, seatbelts, brakes, windshields, tires, steering columns, displays, lights, door locks, side impact protection and fuel systems. NHTSA has recently added, in addition to the technical requirements United States Federal Motor Vehicle Safety Standard (“FMVSS”) requirements, voluntary agreements relating to autonomous emergency brake system installation and rear seat reminder systems.

Failure to meet product regulated requirements in any jurisdiction will likely require some form of product recall to remedy the compliance failure. The financial cost and impact on consumer confidence of such recalls can be significant depending on the nature of the deficiency, repair required and the number of vehicles affected. The different standards applicable across the territories or countries increase the cost and complexity of designing and producing vehicles and equipment.

As regulations continue to evolve, there are methods and processes in place to monitor regulatory developments and to ensure these are captured, internally communicated and design and engineering completed which consider all regulated requirements.

On June 22, 2017, we filed a noncompliance report after determining that approximately 126,127 Jaguar vehicles do not fully comply with FMVSS No. 135, Light Vehicle Brake Systems, as the brake fluid warning statement label on the subject vehicles is not permanently affixed as required. Instead, we installed a label that fits over the neck of the brake fluid reservoir that can be removed when the brake fluid reservoir cap is removed. On July 20, 2017, we petitioned the NHTSA for a decision that the subject noncompliance is inconsequential as it relates to motor vehicle safety for the following reasons, among others:

 

   

The installed label will not fall off or become displaced during normal vehicle use or operation.

 

   

The installed label is only able to be removed when the brake fluid reservoir cap is displaced which, based on routine maintenance schedules, is once in every three years of service.

 

   

We have not received any customer complaints on this issue.

 

   

There have been no accidents or injuries as a result of this issue.

 

   

Vehicle production has been corrected to fully conform, with a new filler cap.

 

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In April 2019, NHTSA granted the above mentioned petition.

NHTSA continues to raise enquiries relating to reports of product safety matters. More recently, NHTSA has been actively reviewing post recall remedy issues through its recall query process. In June 2019, NHTSA requested information relating to reports of fuel leaks from the fuel tank outlet flange or dust cover. All NHTSA enquiries are published and are in the public domain.

While vehicle safety regulations in Canada are similar to those in the United States, many other countries have different requirements. The differing requirements among various countries create complexity and increase costs such that the development and production of a common product that meets the country regulatory requirements of all countries is not possible. Global Technical Regulations, (“GTRs”), developed under the auspices of the United Nations, continue to have an increasing impact on automotive safety activities, as indicated by European Union legislation. In 2008, GTRs on electronic stability control, head restraints and pedestrian protection were each adopted by the United Nations World Forum for the Harmonisation of Vehicle Regulations, and are now in different stages of national implementation. While global harmonization is fundamentally supported by the automobile industry in order to reduce complexity, national implementation may still introduce subtle differences into the system.

The effect of Brexit on vehicle certification and type approval in the United Kingdom and the European Union is clear and implementation of the changes required to accommodate this have now been completed. The European Union has issued regulation to facilitate a transition from the current 28-member state system permitting transfer to one of the remaining member state approval authorities. The UK government has introduced legislation allowing proof of compliance from the European Union to be accepted in the United Kingdom for a limited period of time whilst the United Kingdom implements its system of vehicle certification and type approval.

Insurance Coverage

The Indian insurance industry is predominantly state-owned, and insurance tariffs are regulated by the Indian Insurance Regulatory and Development Authority. We have insurance coverage which we consider reasonably sufficient to cover all normal risks associated with our operations, including business interruptions, and which we believe are in accordance with industry standards in India. We have obtained coverage for product liability for some of our vehicle models in several countries to which we export vehicles. TDCV has insurance coverage as is required and applicable to cover all normal risks in accordance with industry standards in South Korea, including product liability. We have also taken insurance coverage on directors’ and officers’ liability to minimize risks associated with international litigation for us and our subsidiaries.

In accordance with treasury policy, Jaguar Land Rover has maintained insurance coverage that is reasonably adequate to cover normal risks associated with the operation of its business, such as coverage for people, property and assets, including construction, general, auto and product liability. On August 12, 2015, a series of explosions caused widespread damage at the Port of Tianjin in China, one of three major locations in China through which Jaguar Land Rover imports its vehicles. At the time of the explosion, approximately 5,800 Jaguar Land Rover vehicles were stored at various locations in Tianjin. Many of these vehicles were destroyed or damaged in the explosion, and, as a result, Jaguar Land Rover recognized an exceptional charge of GBP245 million in the second quarter of Fiscal 2016. By the end of Fiscal 2017, GBP274 million had been recovered through the receipt of insurance proceeds and other recoveries. These included amounts received for insurance, tax recoveries, foreign exchange gains and the sales of vehicles that were at the port at the time of the explosion including GBP35 million related to other costs associated with Tianjin including lost and discounted vehicle revenue. There can be no assurance that any claim under our insurance policies will be honored fully or timely, our insurance coverage will be sufficient in any respect or our insurance premiums will not increase substantially. Accordingly, to the extent that we suffer loss or damage that is not covered by insurance or which exceeds our insurance coverage, or have to pay higher insurance premiums, our financial condition may be materially and adversely affected.

We are insured by insurers of recognized financial standing against such losses and risks and in such amounts as are prudent and customary in the business in which it is engaged. All such insurance is in full force and effect.

We are able to renew our existing insurance coverage, as and when such policies expire or to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business, as now conducted.

 

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Export Promotion Capital Goods

Since Fiscal 1997, we have benefited from participation in the Export Promotion Capital Goods Scheme (the “EPCG Scheme”), which permits us to import capital equipment under a special license at a substantially reduced customs duty. Our participation in this scheme is subject to us fulfilling an obligation to export goods manufactured or produced by the use of capital equipment imported under the EPCG Scheme to the value of a multiple of the cost plus insurance and freight value of these imports or customs duty saved over a period of six to eight years from the date of obtaining the special license. We currently hold 36 licenses (excluding redeemed licenses) which require us to export our products of a value of approximately Rs.38.62 billion between the years 2016 to 2027, and we carefully monitor our progress in meeting our incremental milestones. After fulfilling some of the export obligations as per provisions of foreign trade policy, as of March 31, 2021, we have remaining obligations to export products worth approximately Rs.11.96 billion by March 2027. In the event that the export obligation under the EPCG Scheme is not fulfilled, we would have to pay the differential between the reduced and normal duty on the goods imported along with interest. In view of our past record of exceeding our export milestones, and our current plans with respect to our export markets, we do not currently foresee any impediments to meeting our export obligation in the required time frame.

Legal Proceedings

In the normal course of business, we face claims and assertions by various parties. We record a liability for all claims where a potential loss is probable and capable of being estimated. We disclose such matters in our financial statements if they are material. We disclose potential losses that are considered reasonably possible but less than probable in our financial statements. However, we do not record a liability in our financial statements unless the loss becomes probable. If certain new developments arise, such as a change in law or a ruling against us, we may need to make provisions in our financial statements, which could adversely impact our reported financial condition and results of operations. If we are required to pay all or a portion of a significant claim, there could be a material adverse effect on our business and profitability. Certain claims that are above Rs.1,000 million are described in Note 37 to our consolidated financial statements included in this annual report on Form 20-F. Certain claims that are below Rs.1,000 million pertain to indirect taxes, labor and other civil cases. Other claims against us pertain to motor accidents in India involving vehicles that were damaged in accidents while being transferred from our manufacturing plants to regional sales offices, product liability claims and consumer complaints. Some of these other claims relate to the replacement of vehicles parts and/or compensation for deficiencies in services provided by us or our dealers.

Capital investments underway as of March 31, 2014, included the investment of Rs.3,098.8 million to build an automobile manufacturing facility at Singur in West Bengal for the Nano project. In October 2008, we moved the Nano project from Singur in West Bengal to Sanand in Gujarat. In June 2011, the newly elected government of West Bengal (the “West Bengal Government”) enacted a law known as the Singur Land Rehabilitation & Development Act, 2011 and by virtue of the provisions of this Act the West Bengal Government took possession of land. We challenged the law’s constitutionality. In June 2012, the Calcutta High Court declared the law unconstitutional and restored our rights under the land lease agreement. The West Bengal Government filed an appeal in the Supreme Court of India in August 2012.

The appeal regarding the constitutionality of the Singur Act before the Supreme Court of India was rendered moot and was subsequently withdrawn, in light of the fact that, in August 2016, the Supreme Court of India declared the acquisition of the land for the project by the West Bengal Government illegal and directed that the land be returned to the landowners. In Fiscal 2015, our management made a provision for carrying the capital cost of buildings at Singur amounting to Rs.3,098.8 million, excluding other assets (such as electrical installations) and expenses written off or provided in earlier years, security expenses, lease rent and claim for interest on the whole amount (including Rs.3,098.8 million).

There are two main issues in the case, namely: (i) the West Bengal Government’s acquisition of the land from the original landowners (ii) and the leasing of the acquired land by the West Bengal Government to the Company. In January 2008, the Calcutta High Court upheld the West Bengal Government’s acquisition of the land for the purpose of leasing it to the Company to set up the plant for manufacturing Tata Nano vehicles. The losing parties appealed the Calcutta High Court’s judgment to the Supreme Court of India. In August 2016, the appeal was set aside by the Supreme Court of India as detailed above. The Supreme Court of India’s decision also rendered the West Bengal Government’s lease of the land to TML unviable. However, the lease agreement contained a clause stating that, if the acquisition was deemed illegal, the West Bengal Government would indemnify TML for the capital cost it had incurred on the site. The lease agreement also provided for arbitration as a mechanism to resolve any dispute between TML and the West Bengal Government. When TML raised its claim for compensation for indemnification for capital and other costs, the West Bengal Government declined to grant the same. TML sought arbitration pursuant to the lease agreement in order to resolve the dispute. After arbitration commenced, TML filed its claim for compensation before the arbitral tribunal comprising two retired judges from the Calcutta High Court and presided over by a retired judge from the Supreme Court of India. The arbitration proceedings before the arbitral tribunal have started in May 2019 and a counterclaim was also filed by West Bengal Industrial Development Corporation. In December 2020, the arbitral tribunal adjourned the hearing on a date to be fixed and noted that it would be for the parties to take such steps as they are advised in law.

 

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In 2011, complaints were filed with the CCI against certain automakers on the ground that the genuine spare parts of automobiles manufactured by the OEMs were not made freely available in the open market in India and, accordingly, anti-competitive practices were carried out by the OEMs for being indulged in anti-competitive practices. The CCI ordered an investigation on the matter, and subsequently, the Director General (the “DG”) of the CCI expanded the scope of investigation to other car manufacturers operating in India, including TML.

In 2014, the CCI held that automobile manufacturers, including TML, have engaged in anti-competitive practices and imposed a penalty of 2% of their total turnover in India. TML was ordered to pay a penalty of Rs.13,465 million within a period of 60 days of the receipt of order. TML challenged the order of the CCI in the Delhi High Court on constitutional issues. In 2019, the High Court allowed the petitions, partly by striking down Section 22(3) of the Competition Act. Also in 2019, the Supreme Court extended the relief that was granted by Delhi High Court during the pendency of the matter before it. As of the date of this annual report on Form 20-F, the matter remains to be listed for further proceedings in due course.

In another matter, two of our ex-dealers filed information with the CCI alleging that TML had engaged in anti-competitive practices by colluding with its finance subsidiaries (TMFL and TMFSL) and abused its dominance in the market. The complaints include allegations that TML had coerced dealers to avail finance from Tata NBFCs, established a cartel to impose minimum stock requirements and make available financing and violated certain anti-competitive provisions of the Indian Competition Act. In May 2021, the CCI issued an order directing the director general of the CCI to initiate an investigation against TML, but did not otherwise make any final or binding observations or determinations (including with respect to any possible penalties or fines) with regard to the allegations. As of the date of this annual report on Form 20-F, we have not received any notice or query from the director general of the CCI following the order. We are preparing internally to respond to the queries as soon as raised by the director general of the CCI.

In another instance, in February 2021, TML received notice from the competition commission of Tanzania in connection with an investigation of TML’s distribution business, and a compliance order providing, among other matters, that TML cease the operation relating to exclusivity of distributorship for its commercial vehicles; revising of import prices; and fixing and reviewing the retail prices of each of its commercial vehicles in the Tanzanian market, until the date of final determination of the complaint by the competition commission of Tanzania. TML has applied to the competition tribunal in Tanzania for hearing and determination. As a result of this application, the competition commission’s order is automatically stayed as of the date of the application. Despite such automatic stay on account of pending appeal before the competition tribunal, the commission vide order dated June 10, 2021, has passed an ex-parte order with provisional findings indicating an administrative fine of approximately TZS9.5 billion (US$4.1 million) on TML and allowing 21 days from the date of the order is received to file its reply. As of the date of this annual report on Form 20-F, the matter is being examined by TML through its local counsel in Tanzania.

A SEBI Order, dated March 6, 2018, directed TML to conduct an internal inquiry within three months into the leakage of information relating to its financial results for the quarter ended December 2015 and to take appropriate actions against those responsible. TML hired Ernst & Young LLP to conduct an internal investigation. The report was submitted to SEBI on June 11, 2018. The Company has taken various steps to strengthen and improve communications within the Company and amongst designated employees, to prevent leakages and to restrict communication of Unpublished Price Sensitive Information to restricted few and that to with encrypted password protected files. These steps have been communicated to SEBI assuring them that the highest degree of importance was accorded to strict adherence of all applicable regulatory and legal requirements at TML. There have been no further communication after November 20, 2020.

The Company, consequent to an order of the Supreme Court of India in the case of R.C Gupta and Ors. Vs Regional Provident Fund Commissioner, Employees Provident Fund Organization and Ors, evaluated the impact on its employee pension scheme and concluded that because the Court had stated that the decision was applicable to the facts of that case, it will not be applicable to TML due to factual differences as per the external legal opinion. Hence it is not probable that there will be an outflow of resources. The Company has also filed an intervention application with the Supreme Court of India on April 2019, which is pending before the Court. The Company has also filed application before the authorities for surrender of exemption in respect of its pension scheme.

The Pimpri Chinchwad Municipal Corporation (the “PCMC”) had fixed the ratable value of the open land of the Company at Pune on the basis of a Departmental Circular of the Commissioner, PCMC, dated August 13, 2001. The open area was assessed as: Open Land = Plot Area—Plinth Area. The property tax on open land is based on the ratable value. This issue was challenged before several courts including the Supreme Court and presently the matter is pending before the Civil Court at Pune. The court has passed an injunction order restraining the PCMC form taking any steps to recover any tax basis the ratable value fixed by the PCMC.

 

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C. Organizational Structure.

Tata Sons—Our Promoter and its Promoted Entities

Tata Sons holds equity interests in its promoted companies engaged in a wide range of businesses. The entities promoted by Tata Sons, including Tata Motors Limited, are based substantially in India and had aggregate revenues in excess of approximately US$100 billion for the financial year ending March 2021. The businesses of entities promoted by Tata Sons can be categorized under 10 business verticals, information technology, steel, automotive, consumer and retail, infrastructure, financial services, tourism and travel, aerospace and defense, telecom and media and trading and investments.

Some of the entities promoted by Tata Sons have their origins in the trading business founded by the founder Mr. Jamsetji Nusserwanji Tata in 1868, which was developed and expanded in furtherance of his dreams by his two sons, Sir Dorabji Tata and Sir Ratan Tata, following their father’s death in 1904. The family’s interests subsequently vested largely in the Sir Ratan Tata Trust, the Sir Dorabji Tata Trust and other associate trusts, collectively called “the Tata Trusts”. The Tata Trusts have been established for philanthropic and charitable purposes and together own a significant percentage of the share capital of Tata Sons.

Over the years, the operations of the entities promoted by Tata Sons have expanded to encompass a number of major industrial and commercial enterprises, including Indian Hotels Company Limited (1902), Tata Steel Limited (1907), Tata Power Company Limited (1910), Tata Chemicals Limited (1939), and Tata Motors Limited (1945). Other Tata entities include Voltas Limited (1954) and Tata Consumer Products Limited (formerly known as Tata Global Beverages Ltd.) (1962), along with its UK-based Tetley tea business.

Tata Consultancy Services Limited (“TCS”), a subsidiary of Tata Sons, which started its operations in the 1960s as a division of Tata Sons and later became a listed public company, is a leading software service provider in India and several countries abroad and the first Indian software firm to breach the US$100 billion market capitalization mark. TCS has delivery centers around the globe including the United States, the United Kingdom, Hungary, Brazil, Uruguay, China, Europe, Asia Pacific, Latin America, as well as India. Tata Sons promoted India’s first airline, Tata Airlines, which later changed its name to Air India (India’s national carrier), as well as India’s largest general insurance company, New India Assurance Company Limited, both of which were subsequently taken over by the government as part of the Government of India’s nationalization program. In 1999, entities promoted by Tata Sons also invested in several telephone and telecommunication ventures, including acquiring a significant portion of the Government of India’s equity stake in the then-state-owned Videsh Sanchar Nigam Limited, which was subsequently renamed Tata Communications Limited. Companies promoted by Tata Sons are building multinational businesses that aspire to achieve growth through excellence and innovation, while balancing the interests of shareholders, employees and society.

Some of the other companies promoted by Tata Sons include: Titan Company, established in 1984, which manufactures India’s largest and best-known range of personal accessories, such as watches, jewelry, sunglasses and prescription eyewear, and excels in precision engineering; Tata Housing Development Company, established in 1984, a real estate developer in India; Tata AIA Life Insurance Company, established in 2001, which is a joint venture between Tata Sons and AIA Life Group Ltd., Tata AIG General Insurance Company, established in 2001, which provides non-life insurance solutions to individuals, groups and corporate houses in India; Tata Capital, established in 2007, a systemically important non-deposit-taking NBFC and a core investment company registered with the RBI, that services the financial needs of retail and institutional customers in India; Tata Realty and Infrastructure Limited, established in 2007, which is an Infrastructure and Real Estate developer; AirAsia (India) Limited, a joint venture established in 2013, which is a low-cost airline; Tata SIA Airlines Limited, a joint venture established in 2013 which is engaged in full service scheduled passenger airline services; Tata Advanced Systems Limited, established in 2006 and its subsidiaries which are, inter alia, engaged in activities including scientific, technical and research and development activities, manufacturing, testing and experimenting equipment, and components, in the field of advanced defense technologies, security systems, aerospace and aerostructures.

We have for many years been a licensed user of the “TATA” brand owned by Tata Sons, and thus have gained from the use of the “TATA” brand and its brand equity. Tata Sons instituted a corporate identity program in the year 1998 to re-position the brand to compete in a global environment. A substantial ongoing investment and recurring expenditure is undertaken by Tata Sons to develop and promote a strong, well-recognized and common brand, which is intended to represent for the consumer a high level of quality, service and reliability associated with products and services offered by the entities promoted by Tata Sons.

 

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Companies which have subscribed to the Tata Brand Equity & Business Promotion Scheme pay an annual subscription fee to use the “TATA” business name and trademarks and participate in and gain from the promotion of the Tata brand equity as well as to avail themselves of various services including legal, human resources, economics and statistics, corporate communications and public affairs services organized by Tata Sons. We believe that we benefit from the use of and association with the “TATA” brand identity and accordingly, Tata Motors Limited and certain of its subsidiaries have subscribed to the Tata Brand Equity & Business Promotion Agreement and pay an annual subscription fee to Tata Sons which is in the range of 0.15% to 0.25% of the annual net income (defined as net revenues exclusive of excise duties and other governmental taxes and non-operating income), subject to a ceiling of 5% of annual profit before tax (defined as profit after interest and depreciation but before income tax), each calculated on a standalone basis for these entities. In some of the past years, Tata Sons has lowered the absolute amount of subscription fee in light of its outlay for activities related to brand promotion and protection in those years. For Fiscal 2014, Fiscal 2015, Fiscal 2017, Fiscal 2018, Fiscal 2020 and Fiscal 2021, no amount was paid in view of losses of Tata Motors Limited calculated on a standalone basis. Pursuant to our licensing agreement with Tata Sons, we have also undertaken certain obligations for the promotion and protection of the Tata brand identity licensed to us under the agreement. The agreement can be terminated by written communications between the parties or by Tata Sons upon our breach of the agreement and our failure to remedy such a breach, or by Tata Sons upon providing six-months’ notice for reasons to be recorded in writing. The agreement can also be terminated by Tata Sons upon the occurrence of certain specified events, including liquidation of Tata Motors Limited.

The entities promoted by Tata Sons continue to follow the ideals, values and principles of ethics, integrity and fair business practices espoused by the founder Mr. Jamsetji Tata and his successors. To further protect and enhance the Tata brand equity, these values and principles have been articulated in the Tata Code of Conduct, which has been adopted by the entities promoted by Tata Sons. The Tata Trusts have also made significant contributions towards national causes through promotion of public institutions in the field of science, such as the Indian Institute of Science and the Tata Institute of Fundamental Research and in the field of social services through the Tata Institute of Social Sciences, the Tata Memorial Hospital, National Centre for the Performing Arts in Mumbai and, more recently, the Tata Medical Center at Kolkata in India for cancer patients, set up by the Tata Trusts and supported by Tata Sons and its promoted companies. The Tata Trusts are among the largest charitable foundations in India.

Some of the entities promoted by Tata Sons hold shares in other companies promoted by Tata Sons. Similarly, some of the Company’s directors may hold directorships on the boards of Tata Sons and/or other entities promoted by Tata Sons. However, there are no voting agreements, material supply or purchase agreements or any other relationships or agreements that have the effect of binding us with other entities promoted by Tata Sons at management, financial or operational levels. With the exception of Tata Steel, which under the Articles of Association has the right to appoint one Director on the Board, neither Tata Sons nor its subsidiaries have any special contractual or other power to appoint Directors or management. They have only the voting power of their respective shareholdings in Tata Motors Limited. Except as set forth in the tables below under the heading “Subsidiaries and Affiliates” and except for approximately a 15.37% equity interest in Tata Services Limited, a 17.29% equity interest in Tata International Limited and a 10.47% equity interest in Tata Industries Limited, our shareholdings in other entities promoted by Tata Sons are generally insignificant as a percentage of their respective outstanding shares or in terms of the amount of our investment or the market value of our shareholdings of those companies.

 

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Subsidiaries and Affiliates

The subsidiaries, joint operation and equity method affiliates and joint ventures of Tata Motors Limited that together with Tata Motors Limited form the Tata Motors Group as of March 31, 2021, are set forth in the chart below:

 

 

 

 

(1)

Incorporated a wholly-owned subsidiary named TML Business Analytics Services Limited with effect from April 4, 2020.

(2)

Ceased to be a joint venture and became a Wholly-owned Subsidiary, consequent to 50% share transfer from Jayem Automotive Private Limited to Tata Motors Limited with effect from August 11, 2020.

(3)

These subsidiaries are based in many countries outside India.

(4)

Holding Company of Jaguar Land Rover Automotive Plc, Tata Daewoo Commercial Vehicle Co. Limited, Tata Motors (Thailand) Limited, Tata Motors (SA) (Proprietary) Limited, PT Tata Motors Indonesia and TMNL Motor Services Nigeria Limited.

(5)

Shareholding in Tata Motors (Thailand) Limited increased from 97.17% to 97.21% with effect from November 18, 2020.

(6)

Holding in its subsidiary, Tata Daewoo Commercial Vehicle Sales and Distribution Co. Ltd. is 100%.

(7)

Holding 99.997% in PT Tata Motors Distribusi Indonesia, a subsidiary, along with TML Holdings Pte. Ltd. holding 0.003%.

(8)

The holdings in its 12 subsidiaries range between 74.42% and 74.48%, out of which one subsidiary, namely, Cambric GmbH, was liquidated with effect from September 17, 2020.

(9)

Holds 100% shareholding in Tata Motors Finance Limited and Tata Motors Finance Solutions Limited.

(10)

Jaguar Land Rover Limited increased its shareholding from 10% to 30% with effect from November 25, 2020.

(11)

The indirect holding in these 14 subsidiaries ranges between 13% to 26% and the indirect holdings in these seven joint ventures ranges between 6.63% to 15.60%.

(12)

Holding in its subsidiary, Chery Jaguar Land Rover Auto Sales Company Limited, is 100%.

(13)

An affiliate of Tata Technologies Limited.

 

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Out of the above, the following are the Company’s three significant subsidiaries as defined under Regulation S-X:

 

Name

   Country of Incorporation      Ownership Interest /
Voting Power
 

Jaguar Land Rover Automotive Plc

     United Kingdom        100

Jaguar Land Rover Limited

     United Kingdom        100

Jaguar Land Rover Holdings Limited

     United Kingdom        100

With respect to certain subsidiaries and affiliates, where Tata Motors Limited has a joint venture partner, voting on certain items of business may be based on affirmative voting provisions and board of director’s participation clauses in the relevant joint venture agreement(s).

D. Property, Plants and Equipment

Facilities

We operate six principal automotive manufacturing facilities in India. The first facility was established in 1945 at Jamshedpur in the state of Jharkhand in eastern India. We commenced construction of the second facility in 1966 (with production commencing in 1976) at Pune, in the state of Maharashtra in western India, the third facility in 1985 (with production commencing in 1992) at Lucknow, in the state of Uttar Pradesh in northern India, the fourth at Pantnagar in the state of Uttarakhand, India, which commenced operations in Fiscal 2008, the fifth at Sanand in Gujarat in western India for manufacturing of the Nano, which commenced operations in June 2010, and the sixth plant for manufacturing Tata Marcopolo buses under our joint venture with Marcopolo and LCVs at Dharwad in Karnataka (which buses are also produced at Lucknow). The Jamshedpur, Pune, Sanand, Pantnagar and Lucknow manufacturing facilities have been accredited with an ISO/TS 16949:2000(E) certification.

The manufacturing facilities of TDCV are based in Gunsan, South Korea. TDCV has received the IATF 16949 certification, the automotive quality management system, given by SGS UK Ltd., a certification body accredited by the International Automotive Task Force. It is the first South Korean commercial vehicle manufacturer that received the IATF 16949 certification.

Fiat India Automobiles Private Limited, our joint arrangement with the FCA, has its manufacturing facility located in Ranjangaon, Maharashtra. The plant is used for manufacturing Tata and Fiat branded cars and engines, and transmissions for use by both partners.

Through Jaguar Land Rover, we currently operate four principal automotive manufacturing facilities in the United Kingdom at Solihull, Castle Bromwich, Halewood and the EMC at Wolverhampton, as well as two product development facilities in the United Kingdom at Gaydon and Whitley. Most of these facilities are owned as freehold estates or are held through long-term leaseholds, generally with nominal rents. In December 2015, Jaguar Land Rover announced an initial investment of GBP1 billion to build a manufacturing facility in Slovakia (owned as a freehold estate), which opened in October 2018 and currently produces the Land Rover Discovery and the new Land Rover Defender. Jaguar Land Rover also owns a joint venture manufacturing plant under our China Joint Venture, in Changshu, near Shanghai, as part of an RMB10.9 billion investment that also includes a new research and development center, which opened in October 2014. A new engine plant producing Jaguar Land Rover’s 2.0-Liter Ingenium petrol engines opened in July 2017 for installation into vehicles manufactured by the China Joint Venture. Jaguar Land Rover also opened a new manufacturing facility in Brazil in June 2016, which manufactures the Range Rover Evoque and Discovery Sport for the Brazilian market. Jaguar Land Rover now produces the I-PACE battery electric vehicle and the new Jaguar E-PACE in Graz, Austria under its manufacturing partnership with Magna Steyr.

Tata Motors (SA) (Proprietary) Limited, our joint venture with Tata Africa Holdings (SA) (Proprietary) Ltd. for the manufacture and assembly operations of our LCVs and MHCVs in South Africa, owns and operates a manufacturing facility located in Rosslyn, South Africa.

Description of Environmental Issues That May Affect Our Utilization of Facilities

Tata Commercial Vehicles and Tata Passenger Vehicles

The automobile industry is exposed to regulatory risks related to climate change. The design and development of fuel-efficient vehicles and vehicles running on alternative renewable energy has become a priority because of fossil fuel scarcity, escalating fuel price, climate change concerns, and government regulations. New and advanced technologies encourage customers to look beyond standard purchasing factors and they may start looking for the product differentiation based on advanced technologies used in the vehicle.

 

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We have implemented our sustainability and climate change policies that address key climate change issues related to products, processes and services, and we are committed to reduce the greenhouse gas emissions throughout the life cycle of our products. Our approach towards climate change mitigation and pursuing low-carbon growth is three-fold; develop cleaner and more fuel-efficient vehicles, reduce environmental impacts of manufacturing operations and build awareness among stakeholders. Our sustainability strategy is aligned with global and national policies of future mobility solutions. Accordingly, we are extensively working on low-carbon product development across our Commercial Vehicle and Passenger Vehicle segments. We have already launched a range of advanced technology vehicles, which would not only help mitigation of climate change risk, but also curb rising urban air pollution.

India is a signatory to the Paris global climate agreement, and is committed to reduce its emission intensity to 33-35% compared to 2005 levels by 2030, through nationally determined contributions. Considering the climate change risk, we are actively involved in partnerships with technology providers to adopt energy efficient technologies for products and processes. We also participate actively in various National Committees in India, working on formulating policies and regulations for environment protection, including reduction of greenhouse gases.

We are continually developing products to meet the current and future emission standards in India and other countries. In order to manage regulatory and general risks of climate change, we are increasingly investing in the design and development of new advanced technologies. With the growing need for reducing on road emission for vehicles, innovative technologies are needed to support the changing scenario and achieving targets. In order to reduce carbon emissions from vehicles, our focus is on researching, developing and producing advanced technologies, such as hybrid engines, electric cars and fuel-cell vehicles. We have developed a range of electric vehicles, such as the Ultra 9m AC Electric bus, Tiago EV, Tigor EV, Nexon EV along with Altroz EV which we showcased at Geneva International Motor show in March 2019. We are also simultaneously putting efforts in our research and development of vehicles, which are powered by alternative fuels like CNG, LPG, biodiesel and hydrogen.

For dealing with the challenges posed by climate change, we are determined to reduce carbon footprint of our manufacturing operations. Pursuant to our commitment to climate change mitigation, we are a signatory to the RE100, a global collaborative initiative of influential businesses committed to usage of 100% renewable electricity. We have made substantial investments in the area of wind and solar power to increase our renewable energy capacity. We have signed power purchase agreements with renewable energy producers. In addition to renewable energy, we have taken several energy conservation initiatives, which helped us in reducing our greenhouse gas emissions. All our manufacturing facilities in India are certified for ISO-14001. Going beyond our manufacturing boundaries, we are implementing sustainable supply chain initiative in a phased manner since Fiscal 2017 for integrating sustainability in supply chain to minimize the environmental and social impacts of our supply chain. We have already covered 350+ suppliers under this initiative in the last four years. We are also working on the downstream side of supply-chain with our dealerships and channel partners for improving the sustainability performance.

Jaguar Land Rover

Jaguar Land Rover’s production facilities are subject to a wide range of increasingly strict environmental, health and safety requirements. These requirements address, among other things, air emissions, wastewater discharges, releases into the environment, human exposure to hazardous materials, the storage, treatment, transportation and disposal of wastes and hazardous materials, the investigation and clean-up of contamination, process safety and the maintenance of health and safety conditions in the workplace. Many of Jaguar Land Rover’s operations require permits and controls to monitor or reduce pollution. We have incurred, and will continue to incur, substantial ongoing capital and operating expenditures to ensure compliance with current and future environmental, health and safety laws and regulations or their more stringent enforcement. Violations of these laws and regulations could result in the imposition of significant fines and penalties, the suspension, revocation or non-renewal of Jaguar Land Rover’s permits, production delays or limitations, imposition of terms of imprisonment, or the closure of Jaguar Land Rover’s plants. Other environmental, health and safety laws and regulations could impose restrictions or onerous conditions on the availability or the use of raw materials we need for Jaguar Land Rover’s manufacturing process. Violations of these laws and regulations may occur, among other ways, from errors in monitoring emissions of hazardous or toxic substances from Jaguar Land Rover’s vehicles or production sites into the environment, such as Jaguar Land Rover’s use of incorrect methodologies or defective or inappropriate measuring equipment, errors in manually capturing results, or other mistaken or unauthorized acts of our employees, suppliers or agents.

Jaguar Land Rover’s business and manufacturing processes result in the emission of greenhouse gases, such as carbon dioxide. We expect the legal requirements to reduce greenhouse gases to become increasingly more stringent and costly to address over time. For example, the European Union Emissions Trading Scheme (“EU ETS”), a European Union-wide system in which allowances to emit greenhouse gases are issued and traded, is now in Phase IV and currently applies to three manufacturing facilities in the United Kingdom, and is in the process of being applied to our Slovakia manufacturing facility. The free allocation of EU ETS carbon allowances significantly reduces in Phase 4 of the EU ETS (starting from the end of 2020) and, as a result, we will be required to purchase an increased number of allowances, potentially at substantial cost. This forecast is subject to further evaluation based on the final terms of the Brexit negotiations and their potential impact on the regulated carbon schemes. In any event, there will be a cost to purchase increased credits in Slovakia and that will be assessed following EU ETS permit application and issue.

 

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In response to increased public interest, carbon legislation is rapidly evolving around the globe. The implementation requirements differ, with some countries such as the United Kingdom setting targets for “Net Zero Carbon” attainment by 2050. In other countries, timeframes and the degree of commitment vary.

We have a Climate Change Agreement (“CCA”) in the United Kingdom, which covers Jaguar Land Rover’s three vehicle manufacturing plants and one of our Special Operations facilities. This requires us to deliver a 15% reduction in energy use per vehicle by 2020 compared to the 2008 baseline.

The Carbon Reduction Commitment (“CRC”) energy efficiency scheme ceased in 2019. In response to the loss of revenue for Her Majesty’s Treasury from the cessation of the CRC, the amount of Climate Change Levy that we pay has increased in the United Kingdom. There has been the development of the Streamlined Energy and Carbon Reporting Scheme (“SECR”) which will replace reporting under CRC and is compulsory for UK entities for UK operations.

The Best Available Techniques Reference Document (“BREF”) for Jaguar Land Rover’s paint shops has been under review and, in 2019, changes have been proposed, including the lowering of permissible emissions to 30g/m2. Subject to the final terms of Brexit negotiations, it is possible that Jaguar Land Rover’s paint shops will need to adhere to the revised BREF requirements within four years from its issue date and, in any event, our paint shop in Slovakia will need to meet this requirement.

Many of Jaguar Land Rover’s sites have an extended history of industrial activity. We may be required to investigate and remediate contamination at those sites, as well as properties we formerly operated, regardless of whether we caused the contamination or the activity causing the contamination was legal at the time it occurred. For example, some of our buildings at our Solihull plant and other plants in the United Kingdom are undergoing an asbestos removal program in connection with ongoing refurbishment and rebuilding. Prior to purchase of overseas facilities for Jaguar Land Rover, we undertook studies that informed us of the presence of contamination or otherwise in the ground prior to development. In Brazil, Jaguar Land Rover’s manufacturing site is adjacent to a facility (the “Itatiaia West” site), where organic solvent contamination of the ground had previously occurred. We have purchased the Itatiaia West site and are currently progressing relevant permits for operation and developing plans for further remediation of the organic solvent contamination. The Itatiaia West site is listed on the Environmental Regulators site (Instituto Estadual do Ambiente) as contaminated. Some of these historical issues are being addressed in conjunction with Jaguar Land Rover’s site development works whilst others are subject to ongoing treatment regimes.

In connection with contaminated properties, as well as Jaguar Land Rover’s operations generally, we also could be subject to claims by government authorities, individuals and other third parties seeking damages for alleged personal injury or property damage or damage to natural resources resulting from hazardous substance contamination or exposure caused by our operations, facilities or products. The discovery of previously unknown contamination, or the imposition of new obligations to investigate or remediate contamination at our facilities, could result in substantial unanticipated costs. We could be required to establish or substantially increase financial reserves for such obligations or liabilities and, if we fail to accurately predict the amount or timing of such costs, the related adverse impact on Jaguar Land Rover’s business, financial condition or results of operations could be material.

Production Capacity

The following table shows our production capacity as of March 31, 2021, and production levels by plant and product type in Fiscal 2021 and Fiscal 2020:

 

     As of March 31, 2021      Year ended March 31,  
     Production
Capacity
     2021      2020  
     Production (Units)  

Tata Motors Limited Plants in India1

        

Medium and Heavy Commercial Vehicles, Light Commercial Vehicles, Utility Vehicles and Passenger Cars

     1,450,700        427,200        424,453  

Jaguar Land Rover2, 5

        

Utility Vehicles, Passenger Cars

     839,000        402,420        521,289  

Other subsidiary companies’ plants (excluding Jaguar Land Rover)3

        

Medium and Heavy Commercial Vehicles, buses, bus bodies and pickup trucks

     21,200        5,688        5,662  

Joint operations4 (Passenger Vehicles)

     100,000        31,312        28,894  

 

1.

This refers to estimated production capacity on a double-shift basis for all plants (except the Uttarakhand plant for which capacity is on a three-shift basis) for the manufacture of vehicles and replacement parts.

2.

Production capacity is on a three-shift basis. Includes assembly plant in Brazil and vehicles manufactured under the manufacturing agreement with Magna Steyr in Graz, Austria.

3.

The plants are located in South Korea, South Africa and Thailand.

4.

Excludes production of engines and powertrains.

5.

Includes capacity at the China Joint Venture.

 

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Properties

We produce vehicles and related components and carry out other businesses through various manufacturing facilities. In addition to our manufacturing facilities, our properties include sales offices and other sales facilities in major cities, repair service facilities and research and development facilities.

The following table sets forth information with respect to our principal facilities, a substantial portion of which are owned by us as of March 31, 2021. The remaining facilities are on leased premises.

 

Location

  

Facility or Subsidiary / Joint Operations Name

  

Principal Products or Functions

India      
In the State of Maharashtra      
Pune (Pimpri, Chinchwad, Chikhali1, Maval)    Tata Motors Ltd.    Automotive vehicles, components, factory automation equipment and services, research and development
Pune (Hinjewadi)1    Tata Technologies Ltd.    Software consultancy and services
Pune (Pimpri)    TML Business Services Ltd.    Shared Services
Mumbai, Pune    Tata Motors Limited/Jaguar Land Rover/Tata Motors Finance Ltd.    Automobile sales and service and vehicle financing
Satara    Tata Cummins Pvt. Ltd.    Automotive engines
Pune (Ranjangaon)    Fiat India Automobiles Pvt. Ltd.    Automotive vehicles and components
In the State of Jharkhand      
Jamshedpur    Tata Motors Limited    Automotive vehicles, components and research and development
Jamshedpur    Tata Cummins Pvt. Ltd.    Automotive engines
In the State of Uttar Pradesh      
Lucknow1    Tata Motors Ltd.    Automotive vehicles, parts and research and development
   Tata Marcopolo Motors Ltd.    Bus bodies
In the State of Karnataka      
Dharwad    Tata Motors Limited    Automotive vehicles, components, spare parts and warehousing
   Tata Marcopolo Motors Ltd.    Bus body manufacturing
In the State of Uttarakhand      
Pantnagar1    Tata Motors Ltd.    Automotive vehicles and components
In the State of Gujarat      
Sanand    Tata Motors Ltd.    Automotive vehicles and components
Rest of India      
Hyderabad    TML Business Services Ltd.    Automobile sales and service
Various other properties in India    Tata Motors Ltd./Tata Motors Finance Ltd.    Vehicle financing business (office/ residential)
Outside India      
Singapore    Tata Technologies Pte Ltd.    Software consultancy and services
South Korea    Tata Daewoo Commercial Vehicles Co. Ltd.    Automotive vehicles, components and research and development
Thailand    Tata Motors (Thailand) Ltd.    Pick-up trucks
   Tata Technologies (Thailand) Ltd.    Software consultancy and services
United Kingdom    Tata Motors European Technical Centre    Engineering consultancy and services
United Kingdom    INCAT International PLC, Tata Technologies Europe Ltd.    Software consultancy and services
United Kingdom      

Solihull

   Jaguar Land Rover Limited    Automotive vehicles and components

Castle Bromwich

   Jaguar Land Rover Limited    Automotive vehicles and components

Halewood

   Jaguar Land Rover Limited    Automotive vehicles and components

Gaydon

   Jaguar Land Rover Limited    Research and product development

Whitley

   Jaguar Land Rover Limited    Headquarters and research and product development

Wolverhampton

   Jaguar Land Rover Limited    Engine manufacturing

 

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Location

  

Facility or Subsidiary / Joint Operations Name

  

Principal Products or Functions

Spain    Tata Hispano Motors Carrocera S.A.    Bus body service
Morocco    Tata Hispano Motors Carrocerries Maghreb SA    Bus body manufacturing and service
South Africa    Tata Motors (SA) (Proprietary) Limited    Manufacture and assembly operations of vehicles
Indonesia    PT Tata Motors Indonesia    Distribution of vehicles
Austria    Jaguar Land Rover Limited    Automotive vehicles and components
Brazil    Jaguar Land Rover Limited    Automotive vehicles and components
Slovakia    Jaguar Land Rover Limited    Automotive vehicles and components
Italy    Trilix Srl.    Automotive design and engineering
Others (e.g., United States, United Kingdom, China, Europe, Australia, Mexico)    Tata Technologies Ltd.    Software consultancy and services
   Jaguar Land Rover2    National sales companies
      Regional sales offices

 

Note: Excludes facilities held by our joint ventures, including the manufacturing plant held by Jaguar Land Rover Automotive Company Limited.

1.

Land at each of these locations is held under lease.

2.

National sales companies are held by various subsidiaries of the Jaguar Land Rover group of companies.

A significant portion of our property, plants and equipment, except those in the United Kingdom, Brazil and Slovakia are pledged as collateral securing indebtedness incurred by us. We believe that there are no material environmental issues that may affect our utilization of these assets.

We have additional property interests in various locations around the world for limited manufacturing, sales offices, and dealer training and testing. The majority of these are housed within leased premises.

For further details regarding the current legal proceedings with respect to the leased land in West Bengal, please refer to Item 4.B “Information on the Company—Business Overview—Governmental Regulations—Legal Proceedings” of this annual report on Form 20-F.

We consider all of our principal manufacturing facilities and other significant properties to be in good condition and adequate to meet the needs of our operations.

 

Item 4A.

Unresolved Staff Comments

None.

 

Item 5.

Operating and Financial Review and Prospects

You should read the following discussion of our financial condition and results of operations together with our consolidated financial statements prepared in conformity with IFRS and information included in this annual report on Form 20-F. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors including, but not limited to, those set forth in Item 3.D and elsewhere in this annual report on Form 20-F.

A. Operating Results

All financial information discussed in this item is derived from our audited financial statements included in this annual report on Form 20-F, which have been prepared in accordance with IFRS.

The following discussion covers the fiscal years ended March 31, 2021, and 2020. For the discussion covering the fiscal year ended March 31, 2019, please refer to “Item 5.A.” of the Company’s annual report on Form 20-F for the fiscal year ended March 31, 2020, filed with the SEC on August 13, 2020.

 

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Overview

In Fiscal 2021, our total revenue, including finance revenues, decreased by 4.3% to Rs.2,481,631 million from Rs.2,594,251 million in Fiscal 2020. This decrease was mainly attributable to lower sales volumes from both Tata Motors Limited and Jaguar Land Rover and partially offset by a favorable currency translation from GBP to Indian rupees and increase in average selling price per unit under BS VI norms.

 

We recorded net loss of Rs.142,701 million in Fiscal 2021, compared to a loss of Rs.113,940 million in Fiscal 2020. The loss in Fiscal 2021 was largely driven by the impairment charges under the Reimagine strategy taken by Jaguar Land Rover business of Rs.149,943 million. This was offset by reversal of impairment charge for passenger vehicle business of Tata Motors Ltd of Rs.3,714 million and reversal for onerous contract provision of Rs.6,630 million (net of provision Rs.1,140 million). In Fiscal 2020, we have provided for impairment for passenger vehicle business of Tata Motors Ltd of Rs.4,455 million, provision for onerous contract of Rs.7,770 million and impairment at certain subsidiaries, namely TMETC and Trilix of Rs.3,532 million, totalling to Rs.15,757 million.

We use Earnings Before Other Income, Interest and Tax, a non-IFRS measure, to assess our operating performance; a reconciliation of our consolidated Earnings Before Other Income, Interest and Tax to our consolidated net income for Fiscal 2021 and Fiscal 2020 is set forth below.

 

     For the year ended
March 31,
 
     2021      2020  
     Rs. in million  

Net Income/(loss)

     (142,138      (112,984

Add/(Less):

     

Share of (profit)/loss of equity accounted investees (net)

     3,789        10,000  

Loss/(gains) on sale/write-off of assets and others (net)

     3,095        3,132  

Other (income)/loss (net)

     (42,368      (16,009

Foreign exchange (gain)/loss (net)

     (18,293      16,985  

Interest income

     (4,925      (11,697

Interest expense

     80,840        72,553  

Income tax (expense)/ credit

     25,411        3,645  

Earnings Before Other Income, Interest and Tax

     (94,589      (34,375

 

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We use Free Cash Flow, a non-IFRS measure, to measure ongoing needs for investments in plants and machinery, products and technologies; a reconciliation of our Free Cash Flow to our cash flow from operating activities for Fiscal 2021 and Fiscal 2020 is set forth below.

 

     Fiscal
2021
     Fiscal 2020  
     Adjusted      Reported  
     Rs. in million  

Cash flow from operating activities

     290,005        266,329        266,329  

Add/(Less):

        

Payments for property, plants and equipment

     (117,757      (143,192      (143,192

Proceeds from sale of property, plants and equipment

     3,506        1,715        1,715  

Payment for intangible assets

     (84,298      (153,829      (153,829

Interest paid

     (85,003      (79,877   

Interest received

     4,275        11,045     

Dividends received from equity accounted investees

     15        6,225     

Investments in equity accounted investees

     (99      (6,064   
  

 

 

    

 

 

    

 

 

 

Free cash flow

     10,644        (97,648      (28,977
  

 

 

    

 

 

    

 

 

 

In Fiscal 2021, we have changed definition of free cash flow to better align with other OEMs based on external benchmarking.

We use Ratio of Net Debt to Shareholders’ Equity to measure our debt commitments; a reconciliation of our Ratio of Net Debt to Shareholders’ Equity as of March 31, 2021 and 2020 is set forth in Exhibit 7.1 to this annual report on Form 20-F.

Economy

India

 

Source: Bloomberg, RBI, Ministry of Statistics

 

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According to the National Statistical Office (“NSO”), India’s GDP is estimated to contract by 8.0% in Fiscal 2021. To control the spread of the COVID-19 pandemic, India had imposed severe lockdowns in April and May 2020 resulting in curtailment of economic activities. As a result of the lockdowns, India’s GDP contracted by 24.4% in the first quarter of Fiscal 2021. As lockdown restrictions were gradually eased from June 2020, the economy witnessed a strong V-shaped recovery. The recovery in economy is resilient with sustained improvement in majority of high frequency indicators. The Purchase Manager’s Index manufacturing index was at 55.4 in March 2021 compared to 51.8 in March 2020. Based on data provided by the NSO, gross value added at basic prices for Fiscal 2021 from the manufacturing sector is estimated to decline by 6.4% compared to Fiscal 2020. Sector-wise, agriculture has remained the silver lining while contact-based services, manufacturing, construction were hit hardest, and have been recovering steadily. Government consumption and net exports have further provided support in the recovery. As per International Monetary Fund (“IMF”) projections in March 2021, Indian economic growth is estimated at 12.5% in Fiscal 2022 and 6.9% in Fiscal 2023.

India has been severely affected by a second wave of COVID-19 and hospitals in several states are, as of the state of this annual report on Form 20-F, still reeling under the shortage of health workers, vaccines, oxygen, medicines and beds. Several states have introduced varying levels of curbs on economic activity and public movement to stop the spread of the virus, which are mostly being reviewed and extended on a weekly or fortnightly basis. The respective state governments are imposing restrictions as they are witnessing surges in the COVID-19 cases. We are expecting a weaker first quarter in Fiscal 2022 due to supply disruptions and the impacts of the COVID-19 pandemic in India. We expect gradual sequential recovery as supply chain conditions improves and the impacts of the COVID-19 pandemic in India gradually subside.

The RBI announced rate cuts in Fiscal 2020 to revive growth and mitigate economic impact of the COVID- 19 pandemic. The repo rate remains unchanged at 4% and the RBI is continuing with its accommodative stance and will continue if necessary, to sustain growth on a durable basis and continue to mitigate the impact of the COVID-19 pandemic on the economy, while ensuring that inflation remains within the target going forward. To provide liquidity support and strengthen public in general in their fight against COVID-19 pandemic, the RBI Governor announced “on tap liquidity” to the public in general. Considering the present situation of the medical infrastructure in the country, banks are encouraged to provide fresh lending support to a wide range of entities including vaccine manufactures, importers and suppliers of vaccines and priority medical devices; hospitals/dispensaries; pathology labs; manufactures and suppliers of oxygen and ventilators; importers of vaccines and COVID-19-related drugs; logistics firms and patients for treatment. The RBI also announced certain relaxations in overdraft (“OD”) facilities of state governments to better manage their fiscal situation in terms of their cash flows and market borrowings. Accordingly, the maximum number of days of OD in a quarter is being increased from 36 to 50 days and the number of consecutive days of OD from 14 to 21 days will be available until September 30, 2021.

The automobile industry recovered slightly in Fiscal 2021 due to the resurgence of the economy. According to data released by SIAM, in Fiscal 2021, the Indian automotive industry recorded a 6.1% decline in domestic sales compared to a 20.3% decline in Fiscal 2020. The Passenger Vehicle segment declined 2.0% in Fiscal 2021, compared to a 17.3% decline in Fiscal 2020. While overall industry sales were lower than in Fiscal 2020, the trend of preference towards personal mobility reduced the overall impact of the slowdown. The Commercial Vehicle industry in India registered a 21.7% decline in Fiscal 2021 compared to a 30.0% decline in Fiscal 2020, because of the COVID-19 pandemic, lower freight utilizations, difficulties in obtaining financing and some hesitation due to rising costs for BS VI vehicles.

The demand for Passenger Vehicles has grown in Fiscal 2021 on the back of some pent-up demand but more importantly a structural shift in personal mobility preference arising out of an urge to break free in the aftermath of the restrictions in travelling during the COVID-19 pandemic situation as well as resurgence in the rural markets. Passenger car sales are dominated by small and mid-sized cars. With the shutdown of all non-essential services accompanied by liquidity and cash crunch, the demand for Commercial Vehicles was severely impacted in the first half of Fiscal 2021.

While there are short term challenges on account of the COVID-19 pandemic, the Commercial Vehicle industry in India is likely to rebound and show signs of recovery after witnessing two consecutive years of double digit decrease. Demand for Commercial Vehicles, particularly Medium and Heavy Commercial Vehicles, is likely to also benefit from various government initiatives to help revive the economy. Demand for Commercial Vehicles, particularly Medium and Heavy Commercial Vehicles, is likely to also benefit from various governmental initiatives to help revive the economy.

The Government of India has encouraged foreign investment in the automobile sector and has allowed 100% foreign direct investment under the automatic route. Focus is now shifting to electric vehicles to reduce emissions. Under union budget 2019-20, the Government of India has also provided an income tax deduction of Rs.1.50 lakhs on interest paid on loan taken for purchase of electric vehicles. The Government of India has shown strong commitment to encouraging the adoption of electric vehicles in the last few years and have introduced several policy interventions to encourage transition to electric vehicles.

 

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World

Global economy GDP

 

Economic Growth: Global activity is estimated to have contracted 3.3% in 2020 because of the COVID-19 pandemic. Given the unprecedented nature of the pandemic, prospects for the global economy are uncertain, and several growth outcomes are possible. Global growth is estimated at 6.0% in 2021 and is projected to stabilize further at 4.4% in 2022. Among advanced economies, the United States is expected to surpass its pre-COVID-19 pandemic GDP level this year, while other advanced countries are expected to return to their pre-COVID-19 economic growth levels from 2022 onwards. Similarly, among emerging market and developing economies, China is estimated to have already returned to pre-COVID-19 GDP levels in 2020, whereas many other emerging and developing countries are not expected to do so until well into 2023. Most commodity prices have rebounded in the second half of calendar year 2020. However, the pickup in oil prices lagged the broader recovery in commodity prices due to the prolonged impact of the pandemic on global oil demand. Oil demand fell 9% during 2020, the steepest one-year decline on record because of pandemic-control measures and the associated plunge in global demand, which was partly offset by historically large production cuts among OPEC+ (Organization of the Petroleum Exporting Countries), as well as Russia and other non-OPEC oil exporters.

Commodities: There has been significant increase in steel prices over the last 12 months. Base metal prices were, on net, broadly flat in the calendar year 2020, as sharp falls in the first half of the year were followed by a strong recovery in the second half due to rising demand from China. Prices of commodity items used in manufacturing automobiles, including steel, aluminum, copper, zinc, rubber, platinum, palladium and rhodium, have become increasingly volatile in recent years. Semiconductor shortages have also impacted the auto industry adversely. Many major automotive companies have been experiencing a shortage of semiconductors, used in the production of automotive chips and charging or other components of electric vehicles. Major semiconductor suppliers have been operating at reduced capacity for the past year due to proactive local government actions in response to the spread of COVID-19, causing a global shortage of semiconductors supply. Following the advent of the COVID-19 pandemic, automakers have generally reduced their production levels and, as a result, semiconductor orders, which also had an impact on the global semiconductor supply.

China: Growth in China decelerated to 2.3% in year 2020 which was still above the previous projections helped by the country’s effective control of the COVID-19 pandemic and public investment-led stimulus. For most of last year, China’s import growth lagged a rebound in exports, contributing to a widening current account surplus. Accommodative fiscal and monetary policies led to a sharp increase in the government deficit and total debt. Fiscal policy support, which initially focused on providing relief and boosting public investment, is starting to moderate. Growth in China is forecast to pick up to 8.4% in 2021 which is above previous projections due to the release of pent-up demand, lower base and moderate to 5.6% in 2022 as deleveraging efforts resume. Even as GDP growth returns to its pre-pandemic level in Fiscal 2021, it is still expected to be approximately 2% below its pre-pandemic projections by 2022, with the crisis accentuating pre-existing vulnerabilities and imbalances. Following a sharp contraction, the Chinese economy returned to growth during the middle of 2021, albeit at an uneven pace. Industrial production has recovered much faster than consumption and services. Import growth has lagged, but there was a rebound in exports, which also contributed to a widening of the trade and current account surpluses. Industrial profits have improved, and government revenue has been strengthening.

 

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Tensions between the United States and China remain elevated on numerous fronts, including on international trade, intellectual property, and cybersecurity. Domestic economic disparities arising from the pandemic downturn may also prompt new trade barriers, motivated by the need to protect domestic workers. Furthermore, risks of protectionist tendencies surrounding technology are emerging. Protectionist tendencies could extend to medical supplies and COVID-19 pandemic-related pharmaceutical APIs, which would impede the global supply of vaccines and medicines.

United States: The decline in the U.S. economy in the first half of year 2020 was nearly three times as large as the peak decline during the global financial crisis, underscoring the depth of the recession. U.S output fell by 3.5% in 2020. Although the COVID-19 pandemic’s economic impact was not as severe as envisioned in previous projections, last year’s contraction was more than one percentage point larger than that of 2009. Substantial fiscal support to household incomes far exceeding similar measures delivered during the global financial crisis contributed to a robust initial rebound in the third quarter of 2020, which was subsequently cut short by a broad resurgence of the pandemic. Growth in the U.S. is forecast to recover to 6.4% in Fiscal 2021, held down in the early part of the year by subdued demand amid renewed restrictions and a broad-based resurgence of the COVID-19 pandemic. Activity is expected to strengthen in the second half of this year and firm further next year, as improved COVID-19 management aided by ongoing vaccination allows for an easing of pandemic-control measures. At $1.9 trillion, the Biden administration’s new fiscal package is expected to deliver a strong boost to growth in the United States in Fiscal 2021 and provide sizable positive spillovers to trading partners. Debt service costs are expected to remain manageable across advanced economies, thanks to the relatively large fraction of their debt burden covered by long-term and sometimes negative-yielding bonds. Fiscal support in emerging market and developing economies has been more limited, and deficits are generally expected to decline as revenues improve and crisis-related expenditures unwind with the projected economic recovery. Higher debt service costs are also expected to constrain their ability to address social needs, including rising poverty and growing inequality, or to correct the setback in human capital accumulation during the crisis.

Europe: Economic activity in Europe has deteriorated significantly due to the widespread virus outbreak. In Europe, following the historic pandemic-induced collapse, an emerging rebound in economic activity in the third quarter of last year was cut short by a sharp resurgence of the COVID-19 pandemic, which prompted many member countries to re-impose stringent lockdown measures. Against the backdrop of a historic recession, the policy response has been far-reaching and sustained. National fiscal support packages were bolstered by grants from the European Union to the hardest-hit member countries, which are expected to support activity starting in Fiscal 2021. The European economy declined by 6.6% in 2020 and growth is expected to rebound to 4.4% in 2021 owing to improved COVID-19 management, an initial vaccine rollout, and rising external demand, particularly from China.

United Kingdom: The IMF raised its forecast for British economic growth, which is set to outpace the euro zone this year after its slump in 2020, but is unlikely to regain its pre-pandemic size until sometime in 2022. The IMF said the UK economy would grow by 5.3% in 2021, up from a previous forecast of 4.5% it made in January 2021, helped by the country’s fast COVID-19 vaccination program and a latest round of stimulus by the government. The UK has suffered Europe’s highest COVID-19 death toll and its economy shrank by almost 10% last year, the worst performance among the region’s big economies except for Spain. But it has moved more quickly than almost all other countries with its coronavirus vaccination program. Almost half the total population of the United Kingdom had a first jab of the vaccine. For 2022, the IMF raised its forecast to British economic growth slightly to 5.1%, which would be the strongest expansion among Europe’s big economies next year, according to the IMF.

(Source: RBI, World bank, IMF, etc.)

Automotive operations

Automotive operations is our most significant operating segment, accounting revenue in each of Fiscal 2021 and Fiscal 2020 as below.

 

     Year ended March 31,      Percentage Change  
     2021      2020      2020 to 2021  

Total Revenues from operations (before inter-segment elimination) (Rs. million)

     2,465,542        2,576,583        (4.3

Percentage of Total revenues (%)

     99.4        99.3     

Our automotive operations include:

 

   

All activities relating to the development, design, manufacture, assembly and sale of vehicles, as well as related spare parts and accessories;

 

   

Distribution and service of vehicles; and

 

   

Financing of our vehicles in certain markets.

 

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Our automotive operations segment is further divided into four reporting segments: Tata Commercial Vehicles, Tata Passenger Vehicles, Jaguar Land Rover and Vehicle Financing. The breakup of revenue for Fiscal 2021 and Fiscal 2020, and the percentage change from period to period (before intra-segment eliminations) are set forth in the table below.

 

     Year ended March 31,      Change (%)  
     2021      2020  
     Rs. million  

Tata Commercial Vehicles

     329,655        362,125        (9.0

Tata Passenger Vehicles

     165,188        103,882        59.0  

Jaguar Land Rover

     1,926,617        2,070,321        (6.9

Vehicle Financing

     43,926        40,255        9.1  

 

For further detail see Item 5.A “Operating and Financial Review and Prospects—Operating Results—Fiscal 2021 Compared to Fiscal 2020—Revenue.”

Other operations

Our other operations business segment mainly includes information technology services, machine tools and factory automation solutions. Our revenue from other operations before inter-segment eliminations was Rs.26,076 million in Fiscal 2021, a decrease of 14.2% from Rs.30,376 million in Fiscal 2020. Revenues from other operations represented 1.1% and 1.2% of our total revenues, before inter-segment eliminations, in Fiscal 2021 and Fiscal 2020, respectively. Earnings Before Other Income, Interest and Tax before inter-segment eliminations, were Rs.2,943 million and Rs.3,339 million in Fiscal 2021 and Fiscal 2020, respectively.

Geographical Breakdown

As a result of the COVID-19 pandemic in Fiscal 2021, there is a reduction in revenue across most geographical markets except China and India. In Fiscal 2021, volume and percentage of revenues in China and India have improved from Fiscal 2020 levels. China witnessed a double-digit growth in volumes in Fiscal 2021 as the region continued to recover strongly from the pandemic. However, as COVID-19 pandemic spread globally, many government authorities were forced to introduce and re-introduce strict social distancing measures over the course of the year, as a result, Jaguar Land Rover wholesale volumes declined in other regions including in Overseas markets (down 38.1% year-on-year), Europe (down 32.4%), North America (down 30.9%) and in the UK (down 26.0%). In addition to COVID-19 pandemic, other factors impacting automotive industry sales during Fiscal 2021 included Brexit uncertainty for the UK and Europe, although a trade agreement was reached between the UK and the EU in December 2020, and more generally regulatory and emissions challenges as well as continuing trade tensions and other geopolitical pressures.

 

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The following table sets forth our revenue in millions of Indian rupees and percentage of total revenue from our key geographical markets:

 

Significant Factors Influencing Our Results of Operations

Our results of operations are dependent on a number of factors, which mainly include the following:

 

   

General economic conditions. We, similar to other participants in the automotive industry, are materially affected by general economic conditions. See Item 3.D “Key Information—Risk Factors—Risks Associated with Our Business and the Automotive Industry.”

 

   

Interest rates and availability of credit for vehicle purchases. Our volumes depend significantly on availability of vehicle financing arrangements and their associated costs. For further discussion of our credit support programs, see Item 4.B “Information on the Company—Business Overview—Overview of Automotive Operations.”

 

   

Goods and service tax rates/excise duties and sales tax rates. In India, the goods and service tax, the excise duties and sales tax rate structures affect the cost of vehicles to the end user and, therefore, impact demand significantly. For more information on taxes applicable to us, please see Item 4.B “Information on the Company—Business Overview—Governmental Regulations—Indian Taxes”.

 

   

Our competitive position in the market. For a detailed discussion regarding our competitive position, see Item 4.B “Information on the Company—Business Overview—Overview of Automotive Operations—Tata Commercial Vehicles and Tata Passenger Vehicles—Competition.”

 

   

Cyclicality and seasonality. Our results of operations are also dependent on the cyclicality and seasonality in demand in the automotive market. For a detailed discussion on seasonal factors affecting our business, please see Item 4.B “Information on the Company—Business Overview—Overview of Automotive Operations—Tata Commercial Vehicles and Tata Passenger Vehicles—Seasonality” and Item 4.B “Information on the Company—Business Overview—Overview of Automotive Operations—Jaguar Land Rover—Seasonality.”

 

   

Environmental regulations. Governments in the various countries in which we operate are placing a greater emphasis on raising emission and safety standards for the automobile industry. Compliance with applicable environmental and safety laws, rules, regulations and standards will have a significant impact on costs and product life cycles in the automotive industry. For further details with respect to these regulations, please see Item 4.B “Information on the Company—Business Overview—Governmental Regulations.”

 

   

Pricing pressures. Similar to other major automotive companies, we face significant pricing pressures, as competitors offer customers and dealers price reductions in order to stimulate demand, which may in turn adversely affect our results of operations. See Item 3.D “Key Information—Risk Factors—Risks Associated with Our Business and the Automotive Industry.”

 

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Branding. The various product brands in our business, including Tata, Jaguar, Land Rover and Range Rover, are crucial in the marketing of our products. We believe our brands are associated with reliability, trust and ethical value. Our business, results of operations and reputation may be negatively affected by any usage of the brand by others that adversely affects or dilutes the brand. See Item 3.D “Key Information—Risk Factors—Risks Associated with Our Business and the Automotive Industry” and Item 4.B “Information on the Company—Business Overview—Intellectual Property.”

 

   

New products. Early in Fiscal 2021, we announced our “Future Ready” portfolio for BSVI, adding to our portfolio of SCV, ILCV, Buses and MHCV segments. The all-new M&HCV BSVI range includes a number of products, such as Signa 4825.TK, Signa 3118.T, Signa 5525.S, Signa 3521 and Ultra 2821. In the ILCV space, we introduced the Ultra T.7, which was designed specifically for urban transportation, and extended our CNG range to the 16T segment with the launch of LPT 1512g Cargo and LPT 1512 Sleeper Cabin for e-commerce. The range of refrigerated trucks, which we announced in January 2021, are available for the transportation of the COVID-19 vaccine countrywide. In the Small Commercial Vehicles and Pick-up segment, we launched new variants of Ace, Intra and Yodha with increased payload options and other improved features. Tata Ace was introduced in multiple fuel options (i.e., Diesel, gasoline and CNG). We also introduced the Magic Express Ambulance in the compact ambulance segment. In the passenger vehicles business, we launched new variants across our product portfolio, including Tata Altroz I-turbo, Tiago XTA, Harrier XT, Harrier CAMO and Nexon XM-S. In addition, in February 2021, we launched the iconic flagship SUV the all-new Safari. An important part of our growth strategy is the development of new and refreshed products and product lines, such as the all-new Land Rover Defender, (including the 90 short wheelbase, hardtop commercial and V8 variants); the 2021 year model refreshes and upgrades including the expansion of electrified options across 12 of Jaguar Land Rover’s 13 nameplates, comprising eight plug-in hybrids, 11 mild-hybrids and the all-electric Jaguar I-PACE. Innovation and the development of new products and product lines require significant capital expenditures. There is also intense competition, as well as uncertainty with respect to changing consumer preferences, which may adversely affect our results of operations. See Item 3.D “Key Information—Risk Factors—Risks Associated with Our Business and the Automotive Industry” and Item 4.B “Information on the Company—Business Overview—Research and Development.”

 

   

Foreign Currency Rates. Our operations and our financial position are quite sensitive to fluctuations in foreign currency exchange rates. Jaguar Land Rover earns significant revenue in the United States, Europe and China, and also sources a significant portion of its input materials from Europe. Thus, an exchange rate fluctuation of GBP to Euro, GBP to U.S. dollar or GBP to any other currency would affect our financial results. We have significant borrowings in foreign currencies denominated mainly in U.S. dollars. Our consolidated financial results are affected by foreign currency exchange fluctuations through both translation and transaction risks. Changes in foreign currency exchange rates may positively or negatively affect our revenues, results of operations and net income. To the extent that our financial results for a particular period will be affected by changes in the prevailing exchange rates at the end of the period, such fluctuations may have a substantial impact on comparisons with prior periods. Furthermore, Jaguar Land Rover constitutes a major portion of our consolidated financial position, the figures of which are translated into Indian rupees. However, the translation effect is a reporting consideration and does not impact our underlying results of operations. Please see Item 11 “Quantitative and Qualitative Disclosures about Market Risk” and Note 39(d)(i) –(a) to our consolidated financial statements included elsewhere in this annual report on Form 20-F for further details on our exposure to fluctuations in foreign currency exchange rates.

 

   

Political and Regional Factors. As with the rest of the automotive industry, we are affected by political and regional factors. For a detailed discussion regarding these risks, please see Item 3.D “Key Information—Risk Factors.”

 

   

COVID-19 pandemic. COVID-19 pandemic has rapidly spread throughout the world, including India. Governments in India and across the world have taken significant measures to curb the spread of the virus including imposing mandatory lockdowns and restrictions in activities. Consequently, the Company’s manufacturing plants and offices had to be closed down / operate under restrictions for a considerable period of time during the year and post year end. Lockdowns / restrictions have impacted the Company operationally including on commodity prices, supply chain matters (including semiconductor supplies), consumer demand and recoveries of loans under its vehicle financing business. More recently, the next wave of the pandemic has impacted India and the Company is monitoring the situation closely taking into account the increasing level of infections in India and across the world and directives from the various Governments. Management believes that it has taken into account all the possible impacts of known events arising from the COVID-19 pandemic in the preparation of the financial results including but not limited to its assessment of the Company’s liquidity and going concern, recoverable values of its property, plant and equipment, intangible assets, intangible assets under development, allowances for losses for finance receivables, product warranty, residual value risk, lease payments, employee benefits, government grants and the net realizable values of other assets, including inventory and Deferred tax asset. However, given the effect of these lockdowns and restrictions on the overall economic activity and in particular on the automotive industry, the impact assessment of the COVID-19 pandemic on the financial statement is subject to significant estimation uncertainties due to its nature and duration and, accordingly, the actual impacts in the future may be different from those estimated as at the date of approval of these financial statements. The Company will continue to monitor any material changes to future economic conditions and consequential impact on its financial statements.

 

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Results of Operations

The following table sets forth selected items from our consolidated statements of income for the periods indicated and shows these items as a percentage of revenue:

 

     Revenue (in Rs. Million)     Percentage of Total Revenue        
     Year ended March 31,     Year ended March 31,     Percentage Change  
     2021     2020     2021     2020     2020 to 2021  

Total revenues

     2,481,631       2,594,251       100.0       100.0       (4.3

Raw materials, components and purchase of product for sale (including change in inventories of finished goods & work-in-progress)

     1,582,985       1,670,560       63.8       64.4       (5.2

Employee cost

     281,084       308,373       11.3       11.9       (8.8

Defined benefit pension plan amendment cost/(credit)

     848                 —         100.0  

Depreciation and amortization

     229,638       207,632       9.3       8.0       10.6  

Other expenses

     470,557       601,339       19.0       23.2       (21.7

Restructuring cost at JLR—Asset write downs, employees and third party obligations

     149,943             6.0       —         100.0  

Impairment /(reversal of impairment) losses in Passenger Vehicle business

     (3,714     4,455       (0.1     0.2       (183.4

Provision/(reversal of provision) for onerous contracts

     (6,630     7,770       (0.3     0.3       (185.3

Impairment losses of assets in subsidiaries

           3,532       —         0.1       (100.0

Expenditure capitalized

     (128,491     (175,034     (5.2     (6.7     (26.6

Loss/(gains) on sale/write-off of assets and others (net)

     3,095       3,132       0.1       0.1       (1.2

Other (income)/loss (net)

     (42,368     (16,009     (1.7     (0.6     164.6  

Foreign exchange (gain)/loss (net)

     (18,293     16,985       (0.7     0.7       (207.7

Interest income

     (4,925     (11,697     (0.2     (0.5     (57.9

Interest expenses

     80,840       72,553       3.3       2.8       11.4  

Share of (profit)/loss of equity accounted investees (net)

     3,789       10,000       0.2       0.4       (62.1

Net income/(loss) before tax

     (116,727     (109,340     (4.8     (4.3     6.8  

Income tax (expense)/credit

     (25,411     (3,644     (1.0     (0.1     597.2  

Net income/(loss)

     (142,138     (112,984     (5.8     (4.4     25.8  

Net income/(loss) attributable to shareholders of Tata Motors Limited

     (142,701     (113,940     (5.8     (4.4     25.2  

Net income attributable to non-controlling interests

     563       956               (41.1

 

*

Less than 0.1%.

 

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The following table sets forth selected data regarding our automotive operations (Tata Commercial Vehicles, Tata Passenger Vehicles, Vehicle Financing and Jaguar Land Rover) for the periods indicated and the percentage change from period to period (before inter-segment eliminations):

 

     Total Revenues (Rs. million)      Earnings/(loss) Before
Other Income, Interest and
Tax (Rs. million)
    Earnings Before Other
Income, Interest and Tax (%
of revenue)
 
     Fiscal 2021      Fiscal 2020      Fiscal 2021     Fiscal 2020     Fiscal 2021     Fiscal 2020  

Tata Commercial Vehicle

     329,655        362,125        (6,059     (7,643     (1.8     (2.1

Tata Passenger Vehicle

     165,188        103,882        (11,019     (44,833     (6.7     (43.2

Jaguar Land Rover

     1,926,617        2,070,321        (104,041     (6,657     (5.4     (0.3

Vehicle Financing

     43,926        40,255        26,962       25,766       61.4       64.0  

Unallocable

     156           (4,043     (3,793    
  

 

 

    

 

 

    

 

 

   

 

 

     

Total

     2,465,542        2,576,583        (98,200     (37,160    
  

 

 

    

 

 

    

 

 

   

 

 

     

The following table sets forth selected data regarding other operations for the periods indicated and the percentage change from period to period (before inter-segment eliminations):

 

     Total Revenues (Rs. million)      Earnings/(loss) Before
Other Income, Interest and
Tax (Rs. million)
     Earnings Before Other
Income, Interest and Tax (%
of revenue)
 

Other Operations

     26,076        30,376        2,943        3,339        11.3        11.0  

Fiscal 2021 Compared to Fiscal 2020

Revenue

Our total consolidated revenue from operations, including finance revenue, decreased by 4.3% to Rs.2,481,631 million in Fiscal 2021 from Rs.2,594,251 million in Fiscal 2020. Revenue from the sale of vehicles decreased to Rs.2,063,457 million in Fiscal 2021 compared to Rs.2,188,600 million, a decrease of 5.7%. We sold 837,783 vehicles in Fiscal 2021, compared to 961,463 vehicles in Fiscal 2020. The revenue of our Tata brand vehicles increased by 6.2% to Rs.495,000 in Fiscal 2021 from Rs.466,007 million in Fiscal 2020, mainly due to increased volumes in passenger car segment. The revenue from Tata Commercial Vehicles decreased by 9.0% and revenue from Tata Passenger Vehicles increased by 59.0% in Fiscal 2021 from Fiscal 2020.

Our revenues from sales of vehicles and spare parts manufactured in India decreased by 7.2% to Rs.464,528 million in Fiscal 2021 from Rs.433,331 million in Fiscal 2020.

The revenue from Passenger Cars in India has increased by 105.9% to Rs.58,316 million in Fiscal 2021 from Rs.28,321 million in Fiscal 2020, Electric vehicle increased to Rs.5,715 million in Fiscal 2021 from Rs.1,518 million in Fiscal 2020 and Utility Vehicles increased by 56.7% to Rs.65,343 million in Fiscal 2021 from Rs.41,682 million in Fiscal 2020. The increase in Passenger Vehicles was mainly on account of pent-up demand, better products and safety features of our New forever range of vehicles. The revenue from Commercial Vehicle in ILCVs category increased by 9.6% to Rs.40,466 million in Fiscal 2021 from Rs.36,930 million in Fiscal 2020. The SCVs & Pick Ups category in India increased by 26.1% to Rs.48,239 million in Fiscal 2021 from Rs.38,259 in Fiscal 2020. However, revenues from MHCVs category decreased by 1.4% to Rs.138,081 million in Fiscal 2021 from Rs.140,064 million in Fiscal 2020 and CV Passenger Vehicles category revenue decreased by 72.6% to Rs.10,777 million in Fiscal 2021 from Rs.39,363 million in Fiscal 2020. The revenue of commercial vehicle at overall level decreased mainly due to the COVID-19 pandemic, lower freight utilizations, difficulties in obtaining financing and some hesitation due to rising costs for BS VI vehicles. There is a reduction in sales volume, which was partially offset by an increase in average selling price per unit under BSVI norms.

Revenue attributable to TDCV, increased marginally by 5.9% to Rs.33,111 million in Fiscal 2021 from Rs.31,252 million in Fiscal 2020. Domestic (South Korea) sales witnessed a 10.1% increase from 3,581 units in Fiscal 2020 to 3,942 units in Fiscal 2021 due to product range expansion. The export market was severely impacted by COVID-19 and experienced a reduction of 26.4% from 1,609 units in Fiscal 2020 to 1,185 units in Fiscal 2021.

 

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Revenue from our Vehicle Financing operations increased by 9.1% to Rs.43,926 million in Fiscal 2021 compared to Rs.40,255 million in Fiscal 2020. This is mainly due to increase in average loan book and upfront recognition of excess interest spread on the direct assignment transaction undertaken during Fiscal 2021.

The revenue of our Jaguar Land Rover business decreased by 6.9% to Rs.1,926,617 in Fiscal 2021 from Rs.2,070,321 million in Fiscal 2020. This was partially offset by a favorable translation of Rs.153,168 million from GBP to Indian rupees in Fiscal 2020. Excluding currency translation, the revenue of Jaguar Land Rover decreased by 14.2%. Jaguar Land Rover wholesale volumes (excluding China joint venture) declined across all key regions in Fiscal 2021 by 27.0% compared to Fiscal 2020, except in China, where wholesales grew 23.1% year-on-year. The reduction in revenue was much lower than the decline in wholesales, reflecting the strong favorable sales mix, higher average revenue per vehicle and much lower incentive spending during the year. Jaguar brand vehicles sales were 67,333 units in Fiscal 2021 from 125,820 units in Fiscal 2020, a decrease of 46.5%, and Land Rover vehicles sales from 350,132 units in Fiscal 2020 to 280,299 units in Fiscal 2021, a decrease of 19.9% (volumes excluding the China Joint Venture).

Revenue from other operations (before inter-segment eliminations) decreased by 14.2% in Fiscal 2021 from Fiscal 2020. Revenues from other operations represented 1.1% and 1.2% of our total revenues, before inter-segment eliminations, in Fiscal 2021 and Fiscal 2020, respectively.

Cost and Expenses

Raw materials, components and purchase of products for sale (including change in inventories of finished goods and work-in-progress) (“material costs”)

Material costs decreased by 5.2% to Rs.1,582,985 million in Fiscal 2021 from Rs.1,670,560 million in Fiscal 2020 in line with reduction in revenue. The material cost as a percentage of total revenue decreased to 63.8% in Fiscal 2021, compared to 64.4% in Fiscal 2020, mainly due to change in product mix.

Material costs for Tata Commercial Vehicles and Tata Passenger Vehicles increased by 9.5% to Rs.375,826 million in Fiscal 2021 from Rs.343,221 million in Fiscal 2020, due to increase in volumes. The material costs as a percentage of total revenue increased to 75.8% in Fiscal 2021, compared to 73.2% in Fiscal 2020, primarily due to a change in product mix and increase in commodity prices, especially steel and other precious metal.

For our Passenger vehicle segment of India operations, material costs of Passenger Cars increased to Rs.52,739 million in Fiscal 2021, compared to Rs.24,707 million in Fiscal 2020. Electric vehicles increased to Rs.5,040 million in Fiscal 2021 compared to Rs.1,419 million in Fiscal 2020 and Utility vehicles increased to Rs.52,710 million in Fiscal 2021, compared to Rs.33,539 million in Fiscal 2020. The increase in material costs is mainly due to increased sales volumes and increase price under BS VI. Material costs for the ILCVs category increased by 15.4% to Rs.31,186 million in Fiscal 2021, compared to Rs.27,022 million in Fiscal 2020, and for SCVs & Pick Ups increased by 33.0% to Rs.39,168 million in Fiscal 2021, compared to Rs.29,458 million in Fiscal 2020, mainly due to increase in volumes and increase in commodity prices. Material costs for the MHCVs category decreased by 4.7% to Rs.101,905 million in Fiscal 2021, compared to Rs.106,884 million in Fiscal 2020 and for CV Passenger Vehicles substantially decreased to Rs.8,283 million in Fiscal 2021, compared to Rs.32,218 million in Fiscal 2020. The decrease was mainly due to a decrease in volumes which was partially offset by increase in commodity prices. Further, material costs as a percentage of revenue increased to 77.4% in Fiscal 2021, compared to 75.5% in Fiscal 2020, primarily due to product mix (increased passenger vehicle volumes).

Material costs increased by 8.1% to Rs.23,185 million in Fiscal 2021, compared to Rs.21,445 million in Fiscal 2020 for TDCV, primarily due to higher volumes, particularly in the domestic (South Korea) market. As a percentage of total revenue, material costs increased to 70.0% in Fiscal 2021, compared to 68.6% in Fiscal 2020, primarily due to product mix (introduction of LCVs).

At our Jaguar Land Rover operations, material costs in Fiscal 2021 decreased by 9.1% to Rs.1,203,626 million from Rs.1,323,643 million in Fiscal 2020. The decrease was partially offset by an unfavorable currency translation from GBP to Indian rupees of Rs.91,056 million. Excluding currency translation, material costs attributable to our Jaguar Land Rover operations decreased by 16.0%, mainly due to a 27.0% decrease in sales volume and change in product mix. Material costs at our Jaguar Land Rover operations as a percentage of revenue decreased to 62.5% in Fiscal 2021, from 63.9% in Fiscal 2020 (in GBP terms).

Employee costs

Our employee costs decreased by 8.8% in Fiscal 2021 to Rs.281,084 million from Rs.308,373 million in Fiscal 2020, including the foreign currency translation impact from GBP to Indian rupees as discussed below.

Our permanent employee headcount decreased by 4.6% as at March 31, 2021, to 75,278 employees from 78,906 employees as at March 31, 2020, primarily due to voluntary early separations that commenced in the third quarter of Fiscal 2021 at Tata Motors and Jaguar Land Rover and in Fiscal 2020-21 at Tata Daewoo. The average temporary headcount has increased to 28,291 employees in Fiscal 2021 from 19,169 employees in Fiscal 2020, due to increase in productions, mainly passenger vehicles.

 

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The employee costs for Tata Commercial Vehicles and Tata Passenger Vehicles decreased by 4.0% to Rs.57,049 million in Fiscal 2021 from Rs.59,430 million in Fiscal 2020.

For our India operations, employee costs increased marginally to Rs.48,488 million in Fiscal 2021 from Rs.48,105 million in Fiscal 2020. The permanent headcount decreased by 4.4% as of March 31, 2021, to 37,301 employees from 39,012 employees as of March 31, 2020, due to voluntary early separations commenced in the third quarter of Fiscal 2021 at Tata Motors.

At TML, employee costs marginally increased by 1.1% to Rs.44,065 million in Fiscal 2021 compared to Rs.43,601 million in Fiscal 2020 mainly due to voluntary early separations commenced in the third quarter of Fiscal 2021. The employee costs as a percentage of revenue decreased to 9.5% in Fiscal 2021 from 10.2% in Fiscal 2020.

Employee costs at TDCV were decreased to Rs.6,338 million in Fiscal 2021 compared to Rs.9,318 million in Fiscal 2020 primarily due to abolishment of certain overtime and voluntary early separation that was given during Fiscal 2021.

The employee costs at Jaguar Land Rover decreased by 9.7% to Rs.211,226 million (GBP2,169 million) in Fiscal 2021 from Rs.234,018 million (GBP2,598 million) in Fiscal 2020, primarily due to average headcount reduction of 5.8% (Fiscal 2021 average 37,500 vs Fiscal 2020 average 39,800) and furlough grant of Rs.18,240 million (GBP188 million) received under the UK government’s Coronavirus Job Retention Scheme on fulfillment of all related conditions. This decrease was partially offset by an unfavorable foreign currency translation impact from GBP to Indian rupees of Rs.15,841 million. The employee costs as a percentage of revenue decreased to 11.0% in Fiscal 2021 from 11.3% in Fiscal 2020 (in GBP terms).

Defined benefit pension plan amendment

Jaguar Land Rover had recognized a past service cost due to the requirement to equalize male and female members’ benefits for the inequalities within guaranteed minimum pension earned in the year ended March 31, 2019. This assessment has been updated during the year ended March 31, 2021, based on new information and accordingly, a charge of Rs.848 million (GBP9 million) has been recognized.

Depreciation and Amortization

Our depreciation and amortization expenses increased by 10.4% in Fiscal 2021, the breakdown of which is as follows:

 

     Year ended March 31,  
     2021      2020  
     (Rs. in millions)  

Depreciation

     107,664        104,594  

Amortization

     110,200        91,873  

Amortization of Leased Assets (RTU)

     11,774        11,165  
  

 

 

    

 

 

 

Total

     229,638        207,632  
  

 

 

    

 

 

 

The increase in depreciation and amortization expenses is mainly due to unfavorable foreign currency translation from GBP to Indian rupees of Rs.13,670 million. This is further increased due to Job 1 programs in the year, Velar and 20MY Range Rover & Range Rover sport at Jaguar Land Rover and at TML by Rs.2,030 million due to Capitalization of Altroz and BSVI projects.

 

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Other Expenses

Other expenses decreased by 21.7%, which is partially offset by an unfavorable foreign currency translation of GBP to Indian rupees of Rs.29,606 million pertaining to Jaguar Land Rover. The major components of expenses are as follows:

 

                          Percentage of
Total Revenue
 
     Year ended March 31,      % Change      Year ended March 31,  
     2021      2020      2021      2020  
     (Rs. in millions)                       

Freight and transportation expenses

     57,158        64,843        (11.9      2.3        2.5  

Works operation and other expenses

     189,167        253,777        (25.5      7.6        9.8  

Publicity

     43,846        76,142        (42.4      1.8        2.9  

Allowance for trade and other receivables, and finance receivables

     10,080        8,131        24.0        0.4        0.3  

Warranty and product liability
expenses

     76,819        109,012        (29.5      3.1        4.2  

Research and product development cost

     52,266        41,885        24.8        2.1        1.6  

Stores, spare parts and tools consumed

     12,791        15,007        (14.8      0.5        0.6  

Processing charges

     9,657        10,700        (9.8      0.4        0.4  

Power and fuel

     11,129        12,649        (12.0      0.4        0.5  

Repairs to building and plant and machinery

     4,282        5,854        (26.8      0.2        0.2  

Insurance

     3,362        3,339        0.7        0.1        0.1  

Total

     470,557        601,339        (21.7      19.0        23.2  

 

  1.

Freight and transportation expenses decreased by 11.9% in Fiscal 2021. This is partially offset by an unfavorable currency translation of Rs.370 million from GBP to INR. At Jaguar Land Rover freight and transportation expenses decreased by 18.3% from GBP611 million in Fiscal 2020 to GBP499 million in Fiscal 2021, mainly due to lower sales volumes. At Tata Motors standalone level, expenses decreased by 26.2% from Rs.10,660 million in Fiscal 2020 to Rs.7,870 million in Fiscal 2021 on account of lower production, mainly for commercial vehicles.

 

  2.

Works operation and other expenses mainly relate to volume-related expenses at Jaguar Land Rover and Tata Motors Limited. On absolute terms, the expenses decreased to Rs.193,331 million in Fiscal 2021 from Rs.253,777 million in Fiscal 2020, mainly on account of miscellaneous contract job/outsourcing expenses decreased due to the COVID-19 pandemic lockdown. Engineering expenses decreased by 49.7% to Rs.33,084 million in Fiscal 2021, compared to Rs.65,724 million in Fiscal 2020. These expenses represented 1.3% and 2.5% of our total revenues in Fiscal 2021 and Fiscal 2020, respectively, and are attributable mainly to decreased expenditure at Jaguar Land Rover. A significant portion of these costs are capitalized and shown under the line item “expenditure capitalized” discussed below.

 

  3.

Publicity expenses were 1.8% and 2.9% of our total revenues in Fiscal 2021 and Fiscal 2020, respectively. The publicity expenses at Jaguar Land Rover decreased to GBP397 million (2.0% of the revenue) in Fiscal 2021 compared to GBP733 million (3.2% of revenue) in Fiscal 2020. Marketing activity was limited early in the year due to the ongoing impact of the COVID-19 pandemic, though routine product and brand campaigns increased expenditure through to the end of March 31, 2021, particularly in China, US, and UK. In addition to routine product and brand campaigns, we incurred expenses relating to new product introduction campaigns in Fiscal 2021, mainly the new Land Rover Defender at Jaguar Land Rover, and the new Safari at our Tata Motors India operations.

 

  4.

The allowances for finance receivables related to Vehicle Financing segment. These mainly reflect provisions for the impairment of vehicle loans of Rs.9,579 million for Fiscal 2021 compared to Rs.6,602 million in Fiscal 2020. The increase was mainly on account of additional management overlay provisions carried on account uncertainty involved due to the second wave of the COVID-19 pandemic. The allowances for trade receivables were Rs.500 million in Fiscal 2021, compared to Rs.1,529 million in Fiscal 2020, due to better collections.

 

  5.

Warranty and product liability expenses represented 3.1% and 4.2% of our total revenues in Fiscal 2021 and Fiscal 2020, respectively. The warranty expenses at Jaguar Land Rover decreased to GBP706 million (3.6% of the revenue) in Fiscal 2021 compared to GBP1,131 million (4.9% of revenue) in Fiscal 2020, mainly due to increased retailer guidance, guided diagnostics enhancement, proactive issue detection, prioritization and resolution coming from charge+ initiatives, significant quality improvements in vehicles and the implementation of other business enhancement activities. For Tata Motors’ Indian operations, these represent 0.9% and 1.2% of the revenue for Fiscal 2021 and Fiscal 2020, respectively, due to quality improvements and product mix.

 

  6.

Research and product development costs represent research costs and costs pertaining to minor product enhancements, refreshes and upgrades to existing vehicle models. These represented 2.1% and 1.6% of total revenues for Fiscal 2021 and Fiscal 2020, respectively.

Restructuring cost at JLR—Assets write-downs, employees and third party obligations

The Reimagine strategy was approved by the JLR board on February 11, 2021, and targets the production of more sustainable and fully-electric luxury vehicles including the goal of having a fully-electric fleet of luxury vehicles by the end of the decade and 100% of sales from pure battery electric vehicles by 2036, as well as striving toward achieving net zero carbon emissions across its supply chain, among other environmentally driven strategies by 2039. This revised strategy, particularly the cancellation of the MLA-Mid architecture, resulted in a charge being recognized comprising: (a) asset write-downs of GBP952 million (Rs.96,061 million) in relation to models cancelled, and (b) restructuring costs of GBP534 million (Rs.53,882 million), including costs of GBP526 million (Rs.53,123 million) accruals to settle legal obligations on work performed to date and provisions for redundancies and other third party obligations and defined benefit past service cost of GBP8 million (Rs.759 million). The related liability on the balance sheet date has been accrued under restructuring provisions GBP194 (Rs.19,550 million), accounts payable GBP245 million (Rs.24,730 million) and employee related and other provisions GBP88 million (Rs.8,843 million) as at March 31, 2021.

 

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Impairment /(reversal of impairment) losses in Passenger Vehicle business

As at March 31, 2020, the Company assessed the recoverable value of Passenger vehicle business of Tata Motors Limited, which represent a single CGU, due to refresh of its strategy in response to change in market conditions on account of various factors (economic environment, demand forecasts etc.) including the COVID-19 pandemic. The recoverable value determined by Fair Value less Cost of Disposal was lower than the carrying value of the CGU and this resulted in an impairment charge of Rs.4,455 million for Fiscal 2020. As at March 31, 2021, the Company identified certain triggers for reversal of the previously recorded impairment based on both external and internal indicators. Accordingly, the Company reassessed its estimate and determined the recoverable value for this CGU considering the significant improvement in absolute and relative performance and outlook of the business when compared with the assumed performance at the time when the impairment loss was recorded. Based on this reassessment, the Company has reversed the initially recognized impairment for this CGU.

Provision/(reversal of provision) for onerous contracts

During the year ended March 31, 2020, a provision had been recognized for certain supplier contracts ranging from five to ten years, which had become onerous, as the Company estimated that it will procure lower quantities than committed and the costs will exceed the future economic benefit. As at March 31, 2021, the Company has reassessed the onerous provision created and based on the revised volume outlook a reversal of provision aggregating Rs.7,770 million have been accounted. During the year the Company has also made provision for estimated supplier claims of Rs.1,140 million, which are under negotiations with supplier.

Impairment losses of assets in subsidiaries

As a result of change in market conditions and demand forecast, we performed an impairment assessment for assets forming part of wholly-owned subsidiaries Tata Motors European Technical Centre PLC and Trilix S.r.l. The recoverable amount of these assets were estimated to be lower than their carrying value and this resulted in impairment charges of Rs.2,975 million and Rs.557 million in TMETC and Trilix, respectively, during the year ended March 31, 2020.

Expenditure capitalized

Expenditure capitalized represents employee costs, stores and other manufacturing supplies and other work expenses incurred mainly toward product development projects. Considering the nature of our industry, we continually invest in the development of new products to address safety, emission and other regulatory standards. The expenditure capitalized decreased by 26.6%. This decrease includes favorable foreign currency translation impact from GBP to Indian rupees of Rs.8,524 million pertaining to Jaguar Land Rover.

Loss/(gains) on sale/write-off of assets and others (net)

We recorded a loss on sale of assets and assets written off of Rs.3,095 million in Fiscal 2021, compared to a loss of Rs.3,132 million in Fiscal 2020.

Other (income)/loss (net)

There were Rs.42,368 million in other income in Fiscal 2021, compared to Rs.16,009 million from Fiscal 2020.

 

   

The gain on change in the fair value of commodity derivatives was Rs.13,821 million in Fiscal 2021, compared to Loss of Rs.6,882 million in Fiscal 2020, mainly at Jaguar Land Rover.

 

   

MTM gain on investments fair valued through profit or loss of Rs.199 million in Fiscal 2021, compared to a loss of Rs.3,891 million in Fiscal 2020. Loss in Fiscal 2020 was primarily driven by fair value reduction of Lyft investment at Jaguar Land Rover.

 

   

Miscellaneous income decreased by 7.0% to Rs.13,916 million in Fiscal 2021, from Rs.14,958 million in Fiscal 2020.

 

   

Incentives were Rs.12,476 million in Fiscal 2021, compared to Rs.9,739 million in Fiscal 2020. Government incentive includes exports and other incentives of Rs.4,453 million and Rs.8,022 million received by foreign subsidiaries on Tax credit on qualifying expenditure for research and development in Fiscal 2021.

 

   

Profit on sale of investments measured at fair value through profit or loss is Rs.1,773 million in Fiscal 2021, compared to Rs.1,873 million in Fiscal 2020.

 

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For further details see Note 34 to our consolidated financial statements included elsewhere in this annual report on Form 20-F.

Foreign exchange (gain)/loss (net)

We had a net foreign exchange gain of Rs.18,293 million in Fiscal 2021, compared to a loss of Rs.16,985 million in Fiscal 2020.

 

   

Jaguar Land Rover recorded an exchange gain of Rs.18,843 million in Fiscal 2021, compared to a loss of Rs.12,118 million in Fiscal 2020. There was a net exchange gain on senior notes and other borrowings of GBP314 million in Fiscal 2021, compared to a loss of GBP135 million in Fiscal 2020, due to the British pound strengthening against the U.S. Dollar and Euro in Fiscal 2021. There is a gain of GBP182 million in Fiscal 2021, compared to a loss of GBP137 million in Fiscal 2020, due to fluctuations in foreign currency exchange rates on derivatives contracts that are not hedge accounted and natural hedges of debt, mainly reflecting a stronger U.S. dollar and Euro. Furthermore, this also includes a loss on revaluation of other assets and liabilities of GBP2 million in Fiscal 2021, compared to a loss of GBP23 million in Fiscal 2020.

 

   

For our India operations, we incurred a net exchange loss of Rs.254 million in Fiscal 2021, compared to a loss of Rs.2,372 million in Fiscal 2020, mainly attributable to foreign currency denominated borrowings.

 

   

There was a net exchange loss on revaluation of foreign currency loans at our subsidiary TML Holdings Pte. Limited of Rs.252 million in Fiscal 2021 compared to Rs.2,531 million in Fiscal 2020.

Interest income

Interest income decreased to Rs.4,925 million in Fiscal 2021, compared to Rs.11,697 million in Fiscal 2020, mainly due to decreased in short-term fixed deposit at both Tata Motors Limited and Jaguar Land Rover. Further, at Tata Motors Limited, most of the dealers were Cash and carry, reducing the credit period.

Interest expense

Our interest expense (net of interest capitalized) increased by 11.4% to Rs.80,840 million in Fiscal 2021 from Rs.72,553 million in Fiscal 2020. As a percentage of total revenues, interest expense represented 3.3% and 2.8% in Fiscal 2021 and Fiscal 2020, respectively. The interest expense for Jaguar Land Rover was GBP251 million (Rs.24,530 million) in Fiscal 2021, compared to GBP209 million (Rs.18,864 million) in Fiscal 2020. The increase in interest expense primarily reflects interest accrued on increased indebtedness which included the RMB5 billion China loan completed in June 2020, the US$700 million 7.75% 5 year senior notes issued in October 2020 and the US$650 million 5.875% 7-year senior notes issued in December 2020. For Tata Commercial Vehicles and Tata Passenger Vehicles, interest expense increased by 5.4% to Rs.56,691 million in Fiscal 2021 from Rs.53,787 million in Fiscal 2020, mainly due to higher borrowings and lower interest capitalization and warranty discounting. For the Vehicle Financing business, interest expense decreased by 7.4% to Rs.28,515 million in Fiscal 2021 from Rs.30,793 million in Fiscal 2020, mainly due to lower cost of borrowings. See Item 5.B “Operating and Financial Review and Prospects—Liquidity and Capital Resources” of this annual report on Form 20-F for additional details on our debt financing arrangements.

Share of (profit)/loss of equity accounted investees and non-controlling interests in consolidated subsidiaries, net of tax

In Fiscal 2021, our share of profit of equity-accounted investees reflected a loss of Rs.3,789 million, compared to a loss of Rs.10,000 million in Fiscal 2020. Our share of loss (including other adjustments) in the China Joint Venture in Fiscal 2021 was Rs.3,626 million, compared to a loss of Rs.10,163 million in Fiscal 2020. The decrease in losses was mainly due to increase in sales volumes and better business performance.

The share of non-controlling interests in consolidated subsidiaries were decreased slightly to Rs.563 million in Fiscal 2021 from Rs.956 million in Fiscal 2020.

 

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Income Taxes

Our income tax expense is Rs.25,411 million in Fiscal 2021 from tax expense of Rs.3,645 million in Fiscal 2020, resulting in consolidated effective tax rates of 21.8% and 3.3%, for Fiscal 2021 and Fiscal 2020, respectively.

Tax rates applicable to individual entities decreased from 23.8% in Fiscal 2020 to 19.4% in Fiscal 2021, mainly on account of few subsidiaries and Joint Operations opting for lower tax regime. There is significant increase in tax expense as referred to above due to the following reasons:

 

   

During the year Fiscal 2021, deferred tax assets not recognized of Rs.39,659 million (Fiscal 2020: Rs.28,517 million) mainly comprises of Jaguar Land Rover Rs.27,186 million (Fiscal 2020: Rs.755 million) and TML Rs.10,716 million (Fiscal 2020: Rs.25,817 million) due to uncertainty of future taxable profits. Further, the Minimum Alternate Tax credit of Rs.719 million (Fiscal 2020: Rs.216 million) has not been recognized in the case of few Subsidiaries and Joint Operations due to uncertainty of realization.

 

   

During the year, there is tax charge on Undistributed Earnings of Subsidiaries amounting to Rs.3,109 million in Fiscal 2021, compared to tax credits of Rs.856 million arising out of losses in Fiscal 2020.

 

   

Additional cost in deduction for patent, research and product development cost of Rs.17 million in Fiscal 2021, compared to additional deduction of Rs.2,816 million in Fiscal 2020, was mainly due to non-availability of weighted deduction u/s 35(2AB) of the Act on R&D expenditure with effect from April 1, 2020, applicable for Fiscal 2021, which was being claimed in Tata Motors Limited on a standalone basis.

 

   

During the year, Jaguar Land Rover has written down its tangible assets under construction of Rs.4,296 million, which does not qualify for tax relief, compared to Nil in Fiscal 2020.

For further details see Note 20 to our consolidated financial statements included elsewhere in this annual report on Form 20-F.

Net income

Our consolidated net loss in Fiscal 2021, excluding shares of non-controlling interests, is Rs.142,701 million from a loss of Rs.113,940 million in Fiscal 2020. The increase in net loss is mainly the result of the following factors:

 

   

A loss before other income, interest and tax for Jaguar Land Rover of Rs.104,041 million in Fiscal 2021, compared to loss of Rs.6,657 million in Fiscal 2020. The increase in losses was mainly attributable to the Reimagine strategy charge of Rs.149,943 million in the fourth quarter of Fiscal 2021.

 

   

Earnings Before Other Income, Interest and Tax for Vehicle Financing amounted to Rs.26,962 million in Fiscal 2021, compared to Rs.25,766 million in Fiscal 2020. This is mainly due to increase in average loan book and upfront recognition of excess interest spread on the direct assignment transaction undertaken during Fiscal 2021.

 

   

Losses before other income, interest and tax for Tata Commercial Vehicles amounted to Rs.6,059 million in Fiscal 2021, compared to a loss of Rs.7,643 million in Fiscal 2020, primarily due to lower volumes and product mix.

 

   

Losses before other income, interest and tax for Tata Passenger Vehicles amounted to Rs.11,019 million in Fiscal 2021, compared to Rs.44,833 million in Fiscal 2020, due to increased sales volume in cars and Utility Vehicle segment.

Recent Accounting Pronouncements

Please refer to Note 2(y) to our consolidated financial statements included elsewhere in this annual report on Form 20-F for yet-to-be-adopted accounting pronouncements as of March 31, 2021.

Critical Accounting Policies

The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income, expenses and disclosures of contingent assets and liabilities as of the date of this annual report on Form 20-F and the reported amounts of revenues and expenses for the years presented. The actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis and on each balance sheet date. Revisions to accounting estimates are recognized in the period in which the estimate is revised and future periods are affected.

 

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In particular, information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements are included in the following notes:

Impairment of Goodwill

CGUs to which goodwill is allocated are tested for impairment annually on each balance sheet date, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the CGU is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to that unit and then to the other assets of the unit pro rata on the basis of carrying amount of each asset in the unit. Goodwill impairment loss recognized is not reversed in the subsequent period. Please refer to Note 15 to our consolidated financial statements included elsewhere in this annual report on Form 20-F for assumptions used for goodwill impairment.

Impairment

Property, plants and equipment and intangible assets

On each balance sheet date, we assess whether there is any indication that any property, plants and equipment and intangible assets with finite lives may be impaired. If any such impairment exists, the recoverable amount of an asset is estimated to determine the extent of impairment, if any. Where it is not possible to estimate the recoverable amount of an individual asset, we estimate the recoverable amount of the CGU to which the asset belongs.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually on each balance sheet date, or earlier if there is an indication that the asset may be impaired.

The recoverable amount is the higher of fair value less costs to sell and VIU. In assessing VIU, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. If this occurs, an impairment loss is recognized immediately in the income statement. Please refer to Notes 17 and 18 to our consolidated financial statements included elsewhere in this annual report on Form 20-F for assumptions used for impairment for Jaguar Land Rover and Passenger Vehicle Business.

Finance receivables

We provide allowances for losses on portfolio of finance receivables on the basis of expected future collection from receivables. The future collections are estimated on the basis of past collection trends, which are adjusted for changes in current circumstances, as well as expected changes in collection based on expectations with respect to certain macro-economic factors, such as GDP growth, fuel price and inflation as well as management judgement regarding qualitative factors, including economic uncertainty, observable changes in portfolio performance, and other relevant factors.

Capitalization of Internally Generated Intangible Assets

We undertake significant levels of research and development activities, and for each vehicle program, periodic review is undertaken. We apply judgement in determining at what point in a vehicle program’s life cycle that recognition criteria under accounting standards are satisfied.

Product Warranty

Vehicle warranties are provided for a specified period of time. Our vehicle warranty obligations vary depending upon the type of the product, geographical location of its sale and other factors.

The estimated liability for vehicle warranties is recorded when the products are sold or when new warranty programs are initiated. These estimates are established using historical information on the nature, frequency and average cost of warranty claims and management estimates regarding possible future warranty claims, customer goodwill and recall complaints. The timing of outflows will vary depending on when warranty claims will arise, being typically up to six years and for batteries in Electric Vehicles the warranty period is typically up to eight years.

We also have back-to-back contractual arrangements with our suppliers in the event that a vehicle fault is proven to be a supplier’s fault. Estimates are made of the expected reimbursement claims based upon historical levels of recoveries from supplier, adjusted for inflation and applied to the population of vehicles under warranty as at the balance sheet date. Estimated supplier reimbursements are recognized as separate assets. Actual claims incurred in the future may differ from our original estimates, which may materially affect warranty expenses.

 

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Employee Benefits

Employee benefit costs and obligations are dependent on assumptions used in calculating such amounts. These assumptions include salary increases, discount rates, health care cost trend rates, benefits earned, interest costs, expected return on plan assets, mortality rates and other factors.

While we believe that the assumptions used are appropriate, differences in actual experience or changes in assumptions may affect our employee benefit costs and obligations.

Please refer to Note 36 to our consolidated financial statements included elsewhere in this annual report on Form 20-F for information on the assumptions made in connection with employee benefits.

Recoverability/Recognition of Deferred Tax Assets

Deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the carrying values of assets and liabilities and their respective tax bases, and unutilized business loss and depreciation carry-forwards and tax credits. Such deferred tax assets and liabilities are computed separately for each taxable entity and for each taxable jurisdiction. Deferred tax assets are recognized to the extent that it is probable that future taxable income will be available against which the deductible temporary differences, unused tax losses, depreciation carry-forwards and unused tax credits could be utilized.

B. Liquidity and Capital Resources

We finance our capital expenditures and research and development investments through cash generated from operations, cash and cash equivalents, and debt and equity funding. We also raise funds through the sale of investments, including divestments in stakes of subsidiaries on a selective basis.

The key element of the financing strategy is maintaining a strong financial position that allows us to fund our capital expenditures and research and development investments efficiently even if earnings are subject to short-term fluctuations. Our treasury policies for liquidity and capital resources are appropriate for automotive operations and are set through business specific sensitive analysis and by benchmarking our competitors. These are reviewed periodically by the Board.

Principal Sources of Funding Liquidity

Our funding requirements are met through a mixture of equity, convertible or non-convertible debt securities and other long- and short-term borrowings. We access funds from debt markets through commercial paper programs, convertible and non-convertible debentures, and other debt instruments. We regularly monitor funding options available in the debt and equity capital markets with a view to maintaining financial flexibility. See Note 39 to our audited consolidated financial statements included elsewhere in this annual report on Form 20-F for additional disclosures on financial instruments related to liquidity, foreign exchange and interest rate exposures and use of derivatives for risk management purposes.

The following table sets forth our short- and long-term debt position:

 

     As of March 31,  
     2021      2020  
     (Rs. in millions)  

Short-term debt (excluding current portion of long-term debt)

     216,628        163,625  

Current portion of long-term debt

     211,289        191,324  

Long-term debt net of current portion

     931,020        833,048  
  

 

 

    

 

 

 

Total Debt