1QFY2014 Result Update | Automobile

August 8, 2013

Tata Motors
Performance Highlights
Y/E March (consolidated ` cr) 1QFY14 1QFY13 Net sales 46,785 43,324 EBITDA 6,219 5,755 EBITDA margin (%) 13.3 13.3 Adjusted PAT 1,905 2,685
Source: Company, Angel Research

BUY
CMP Target Price
% chg (yoy) 4QFY13 8.0 56,002 8.1 7,802 1bp 13.9 (29.1) 3,924 % chg (qoq) (16.5) (20.3) (64)bp (51.5)

`279 `355
12 Months

Investment Period
Stock Info Sector Market Cap (` cr) Net Debt (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code

Automobile 89,751 15,067 1.2 337/224 1,049,472 2 18,665 5,519 TAMO.BO TTMT@IN

Another strong performance by JLR: Tata Motors (TTMT) reported an in-line operating performance for 1QFY2014 with Jaguar and Land Rover (JLR) once again registering a robust performance. JLR witnessed a strong margin expansion of 200bp yoy to 16.5% on the back of superior product and geography mix, favorable currency impact and also due to softening of the commodity prices. Nonetheless, the adjusted bottom-line at `1,905cr was significantly lower than our estimate of `2,683cr, owing to increase in interest (up 17.9% yoy) and depreciation expense (up 49.9% yoy) and also due to significantly higher tax-rate (39.8% as against 27.3% in 1QFY2013). The standalone performance continued its dismal run as volume and margin pressures persisted, resulting in an adjusted bottom-line (adjusted for dividend income from JLR) loss of over `400cr, higher than our expectations of a loss of `270cr. The consolidated top-line registered a healthy growth of 8% yoy to `46,785cr, in-line with our estimates of `46,989cr, driven by a strong top-line growth of 13.3% yoy at JLR (INR terms). The JLR performance was led by a healthy volume and net average realization growth of 8.6% yoy and 4.4% yoy respectively. The JLR volume growth was primarily driven by Jaguar models (up 57.8% yoy) on the back of new launches (F-type and AWD and smaller engine options for XF and XJ and XF Sportbrake). Land Rover sales however, remained flat yoy and were impacted mainly due to the phasing out of the old Range Rover Sport ahead of the introduction of the new Range Rover Sport. The standalone top-line posted a significant decline of 14% yoy following an 18.9% yoy decline in volumes. Outlook and valuation: We expect headwinds in the standalone business to continue in FY2014 due to weak macro-economic environment which is expected to continue impacting domestic volumes. Nevertheless, we expect JLR to sustain its strong performance driven by continued momentum in the global luxury vehicle market and aided further by the strong product launch pipeline and the success of the model launched in 4QFY2013. We expect JLR volumes to grow at ~13% CAGR during FY2013-15E and PAT to grow at ~15% CAGR during the same period. We retain our positive view and Buy rating on the stock with an SOTP based target price of `355.

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 34.4 12.1 46.2 7.3

Abs. (%) Sensex Tata Motors

3m (6.2) (6.6)

1yr 6.0 16.8

3yr 2.9 56.0

Key financials (Consolidated)

Y/E March (` cr) Net Sales % chg Net Profit % chg EBITDA (%) EPS (`) P/E (x) Adjusted P/E (x)* P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x) FY2012 165,654 35.6 11,497 27.1 13.5 36.2 7.7 9.8 2.7 44.3 24.5 0.6 4.5 FY2013 188,818 14.0 10,495 (8.7) 13.0 32.9 8.5 11.2 2.4 29.8 20.1 0.5 4.2 FY2014E 215,043 13.9 12,461 18.7 13.5 38.7 7.2 9.3 1.8 28.5 21.0 0.5 3.5 FY2015E 240,077 11.6 14,199 13.9 13.7 44.1 6.3 8.2 1.4 25.1 20.8 0.4 3.1

Yaresh Kothari
022-3935 7800 Ext: 6844 yareshb.kothari@angelbroking.com

Source: Company, Angel Research; Note: * adjusted for R&D spends at JLR, expensed at 80%, in-line with global peers, as against companys current rate of 15-20%

Please refer to important disclosures at the end of this report

Tata Motors | 1QFY2014 Result Update

Exhibit 1: Quarterly financial performance (Standalone)

Y/E March (` cr) Net Sales Consumption of RM (% of Sales) Staff Costs (% of Sales) Purchases of TG (% of Sales) Other Expenses (% of Sales) Total Expenditure Operating Profit OPM (%) Interest Depreciation Other Income PBT (excl. Extr. Items) Extr. Income/(Expense) PBT (incl. Extr. Items) (% of Sales) Provision for Taxation (% of PBT) Reported PAT Adj PAT Adj. PATM Equity capital (cr) Reported EPS (`)
Source: Company, Angel Research

1QFY14 9,105 5,418 59.5 747 8.2 1,192 13.1 1,641 18.0 8,999 105 1.2 319 500 1,621 907 154 753 8.3 50 6.6 703 857 9.4 643.8 2.7

1QFY13 10,586 5,835 55.1 707 6.7 1,598 15.1 1,747 16.5 9,887 700 6.6 319 429 447 398 161 237 2.2 32 13.5 205 366 3.5 638.0 1.1

% chg (yoy) (14.0) (7.1) 5.7 (25.4) (6.0) (9.0) (85.0) (0.2) 16.4 262.5 127.8 217.4 56.3 242.5 134.1

4QFY13 11,068 6,587 59.5 650 5.9 1,663 15.0 1,949 17.6 10,848 219 2.0 334 459 90 (483) 2 (485) (4.4) (173) 35.7 (312) (310) (2.8) 638.1

% chg (qoq) (17.7) (17.7) 15.1 (28.3) (15.8) (17.0) (52.0) (4.6) 8.9 1,700.2 (287.8) 7,931 (255.2) (128.9) (81.4) (325.3) (376.4)

FY2013 44,766 27,101 60.5 2,837 6.3 5,864 13.1 7,246 16.2 43,048 1,718 3.8 1,388 1,818 2,088 601 426 175 0.4 (127) (72.5) 302 728 1.6 638.1

FY2012 54,307 33,271 61.3 2,691 5.0 6,434 11.8 7,733 14.2 50,129 4,178 7.7 1,219 1,607 574 1,926 585 1,341 2.5 99 7.4 1,242 1,827 3.4 634.8 5.8

% chg (yoy) (17.6) (18.5) 5.4 (8.9) (6.3) (14.1) (58.9) 13.9 13.1 263.7 (68.8) (87.0) (228.4) (75.7) (60.2)

132.0

(1.0)

(373.9)

2.3

(60.4)

Exhibit 2: 1QFY2014 Actual vs Angel estimates - Standalone

Y/E March (` cr) Net Sales EBITDA EBITDA margin (%) Adj. PAT
Source: Company, Angel Research

Actual 9,105 105 1.2 857

Estimates 8,782 245 2.8 (270)

Variation (%) 3.7 (57.1) (164)bp -

August 8, 2013

Tata Motors | 1QFY2014 Result Update

Exhibit 3: Quarterly volume performance

Y/E March (units) M&HCV LCV Total Commercial Vehicles Utility Vehicles Cars Total Passenger Vehicles Exports (Inc Above ) Total Sales
Source: Company, Angel Research

1QFY14 32,997 83,500 116,497 7,216 29,459 36,675 11,435 153,172

1QFY13 % chg (yoy) 37,151 89,483 126,634 11,168 50,972 62,140 13,071 188,774 (11.2) (6.7) (8.0) (35.4) (42.2) (41.0) (12.5) (18.9)

4QFY13 % chg (qoq) 36,171 120,274 156,445 10,611 29,314 39,925 11,428 196,370 (8.8) (30.6) (25.5) (32.0) 0.5 (8.1) 0.1 (22.0)

FY2013 152,505 428,643 581,148 48,583 180,355 228,938 50,831 810,086

FY2012 % chg (yoy) 221,297 363,890 585,187 56,138 265,254 321,392 63,078 906,579 (31.1) 17.8 (0.7) (13.5) (32.0) (28.8) (19.4) (10.6)

Standalone performance continues to disappoint: The standalone business continued reporting disappointing performance on account of sharp decline of 18.9% yoy in volumes. This coupled with higher levels of discounts and marketing spends and lower utilization levels resulted in the EBITDA margin collapsing to 1.2% leading to an 85% fall in operating profit. The standalone adjusted bottom-line stood at `857cr primarily due to higher other income which came in at `1,621cr (as against `447cr in 1QFY2013) boosted by dividend income of 150mn from JLR. However, adjusting for the JLR dividend income, the standalone adjusted bottom-line posted a loss of over `400cr, higher than our expectation of a loss of `270cr.

Exhibit 4: Weakness in volumes persists

(units) 300,000 250,000 200,000 150,000 6.1 4.1 Total volume 21.6 18.5 7.0 (2.1) (10.2) (29.9) (18.9) yoy growth (RHS) (%) 30.0 20.0 10.0 0.0 (10.0) (20.0) (30.0) (40.0)

Exhibit 5: Net average realization up 5.9% yoy

(`) 700,000 600,000 500,000 400,000 300,000 (4.8) (5.4) (4.3) (7.1) (10.1) (11.6) 5.2 Net average realisation/unit 8.1 yoy growth (RHS) 5.9 (%) 10.0 5.0 0.0 (5.0)

192,848

206,622

227,110

280,000

188,774

221,090

203,852

196,370

153,172

599,407

623,660

583,975

582,040

556,784

560,697

516,485

556,973

50,000 0

200,000 100,000 0

589,900 1QFY14

100,000

(10.0) (15.0)

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

Source: Company, Angel Research

Source: Company, Angel Research

The standalone top-line posted a significant decline of 14% yoy to `9,105cr due to an 18.9% yoy decline in volumes. The net average realization however improved 5.9% yoy, primarily due to a better product-mix in favor of medium and heavy commercial vehicles (MHCV). The standalone volumes were impacted due to a 41% yoy decline in passenger vehicle (PV) volumes following increased competition and 8% yoy decline in commercial vehicle (CV) volumes led by slowdown in economic activity. The Management has indicated that the outlook for MHCV volumes remains bleak and expects them to recover only once the economic environment in the country improves. The Management highlighted that wholesale volumes were significantly lower than retail volumes in CV and PV segments during the quarter as the company aligned the inventory levels in-line with market demand.

August 8, 2013

4QFY13

Tata Motors | 1QFY2014 Result Update

Exhibit 6: EBITDA margin remains at low levels

(%) 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 8.3 6.7 6.4 9.1 6.6 5.2 1.4 2.0 1.2 71.2 EBITDA margin 74.3 74.3 73.9 70.2 Raw material cost/sales 76.1 74.8 74.5 72.6

Exhibit 7: Bottom-line aided by JLR dividend

(` cr) 1,400 1,200 1,000 800 600 400 200 0 (200) (400) (600) Net profit (LHS) Net profit margin (RHS) 9.0 4.2 1.9 9.4 (%) 12.0 10.0 8.0 6.0 4.0 2.0 0.0 (2.0) (4.0) (6.0) (8.0)

3.4

3.1

3.5

1,122

399

695

396

257

366

(450)

(4.2)

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

(324)
(2.9)

Source: Company, Angel Research

Source: Company, Angel Research

Exhibit 8: Quarterly performance (Consolidated)

Y/E March (` cr) Net Sales Consumption of RM (% of Sales) Staff Costs (% of Sales) Purchase of Goods (% of Sales) Other Expenses (% of Sales) Total Expenditure EBITDA EBITDA margin (%) Interest Depreciation Other Income PBT (excl. Extr. Items) Exceptional Items PBT (incl. Extr. Items) (% of Sales) Provision for Taxation (% of PBT) PAT PATM Minority Interest Associate Companies Profit PAT after MI Adjusted PAT Equity shares (cr) Reported EPS (`) Adjusted EPS (`)
Source: Company, Angel Research

1QFY14 46,785 26,746 57.2 4,461 9.5 2,139 4.6 7,219 15.4 40,565 6,219 13.3 948 2,348 182 3,106 179 2,927 6.3 1,164 39.8 1,763 3.8 20 (17) 1,726 1,905 643.8 5.4 5.9

1QFY13 43,324 24,835 57.3 3,790 8.7 2,914 6.7 6,030 13.9 37,569 5,755 13.3 804 1,566 239 3,623 441 3,183 7.3 869 27.3 2,314 5.3 28 (41) 2,245 2,685 638.0 7.0 8.4

% chg (yoy) 8.0 7.7 17.7 (26.6) 19.7 8.0 8.1 17.9 49.9 (23.6) (14.3) (8.0) 34.0 (23.8) (28.3) (59.1) (23.1) (29.1) (23.8) (29.7)

4QFY13 56,002 32,090 57.3 4,422 7.9 3,089 5.5 8,599 15.4 48,200 7,802 13.9 967 2,339 177 4,673 (21) 4,694 8.4 883 18.8 3,812 6.8 18 152 3,945 3,924 638.1 12.4 12.3

% chg (qoq) (16.5) (16.7) 0.9 (30.7) (16.0) (15.8) (20.3) (1.9) 0.4 2.7 (33.5) (37.6) 31.9 111.5 (53.8) 11.1 (111.2) (56.3) (51.5) (56.6) (51.9)

FY2013 188,818 108,569 57.5 16,584 8.8 11,752 6.2 27,365 14.5 164,270 24,547 13.0 3,553 7,569 812 14,236 603 13,633 7.2 3,771 27.7 9,862 5.2 84 114 9,893 10,495 638.1 31.0 32.9

FY2012 165,654 98,262 59.3 12,298 7.4 11,206 6.8 21,577 13.0 143,343 22,311 13.5 2,982 5,625 662 14,365 832 13,534 8.2 2,811 20.8 10,723 6.5 82 25 10,666 11,497 638.0 33.4 36.0

% chg (yoy) 14.0 10.5 34.8 4.9 26.8 14.6 10.0 19.2 34.6 22.6 (0.9) 0.7 34.2 (8.0) 1.6 356.6 (7.2) (8.7) (7.3) (8.7)

August 8, 2013

1QFY14

857

Tata Motors | 1QFY2014 Result Update

Exhibit 9: 1QFY2014 Actual vs Angel estimates Consolidated

Y/E March (` cr) Net Sales EBITDA EBITDA margin (%) Adj. PAT
Source: Company, Angel Research

Actual 46,785 6,219 13.3 1,905

Estimates 46,989 6,356 13.5 2,683

Variation (%) (0.4) (2.2) (23)bp (29.0)

JLR steers the consolidated results once again: The consolidated top-line registered a healthy growth of 8% yoy to `46,785cr, in-line with our estimates of `46,989cr, driven by a strong top-line growth of 13.3% yoy at JLR (INR terms). The JLR performance was driven by a healthy volume and net average realization growth of 8.6% yoy and 4.4% yoy respectively. The JLR volume growth was primarily driven by Jaguar (up 57.8% yoy) on the back of the new launches (F-type and AWD and smaller engine options for XF and XJ and XF Sportbrake). Land Rover sales however, remained flat yoy and were impacted mainly due to the phasing out of the old Range Rover Sport ahead of the introduction of the new Range Rover Sport. The standalone top-line posted a significant decline of 14% yoy following an 18.9% yoy decline in volumes.

Exhibit 10: Top-line growth driven by JLR

(` cr) 60,000 50,000 40,000 30,000 20,000 23.0 30.1 25.8 19.9 1.8 10.0 8.0 Net sales (LHS) 44.0 44.3 Net sales growth (RHS) (%) 50.0 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0

33,289

36,198

45,260

50,908

43,324

43,403

46,090

56,002 4QFY13

10,000 0

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

Source: Company, Angel Research

On the operating front, the consolidated EBITDA margin stood at 13.3% (flat yoy), broadly in-line with our estimates of 13.5%. The benefit of softening of commodity prices was mitigated by sharp increase in staff cost (due to higher pension expense) and other expenditure (due to higher marketing expenses). The performance was led by JLR with EBITDA margin at 16.5%, ahead of our expectations of 15.4% and driven by a richer product-mix and favorable exchange rate movement. The standalone operations on the other hand continued to witness margin pressure (down 83bp qoq to 1.2%) on account of increased discounts and marketing spends in the PV and MHCV businesses and lower utilization levels.

August 8, 2013

1QFY14

46,785

Tata Motors | 1QFY2014 Result Update

Exhibit 11: EBITDA margin in-line with estimates

(%) 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 12.7 12.4 15.1 13.2 13.3 12.3 12.3 13.9 13.3 66.3 EBITDA margin 67.2 66.4 66.0 64.1 Raw material cost/sales 64.7 64.8 62.8 61.7

Exhibit 12: Adjusted net profit at `1,905cr

( ` cr) 4,500 4,000 3,500 3,000 2,500 2,000 1,500 6.2 Net profit (LHS) 7.9 6.4 7.0 6.2 4.8 3.9 4.1 7.0 Net profit margin (RHS) (%) 9.0 8.0 7.0 6.0 5.0 4.0 3.0

2,057

2,316

3,570

3,555

2,685

2,085

1,801

3,924

500

1,905 1QFY14

1,000 0

2.0 1.0 0.0

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

Source: Company, Angel Research

Source: Company, Angel Research

The adjusted net profit declined 29.1% yoy despite an 8.1% increase in operating profit primarily due to increase in depreciation and interest expense and also due to a higher tax-rate. JLRs bottom-line grew strongly by 28.9% yoy to 304mn driven by strong operating performance which although was partially offset by higher depreciation expense (due to amortization of the expenses for the newly launched models) as well as higher finance expense. The standalone adjusted bottom-line stood at `857cr aided by other income of `1,621cr (as against `447cr in 1QFY2013) and dividend income of 150mn from JLR. Adjusting for the JLR dividend income, the standalone adjusted bottom-line posted a loss of over `400cr, higher than our expectation of a loss of `270cr.

Exhibit 13: JLR Income statement

( mn) Volume (units) Net realization () Net sales Operating profit OPM (%) PBT PAT 1QFY14 90,620 45,211 4,097 675 16.5 415 304 1QFY13 83,452 43,596 3,638 527 14.5 333 236 24.7 28.9 % chg (yoy) 8.6 3.7 12.6 28.1 4QFY13 116,340 43,433 5,053 856 16.9 508 378 (18.3) (19.6) % chg (qoq) (22.1) 4.1 (18.9) (21.1) FY2013 372,062 42,421 15,783 2,337 14.8 1,676 1,216 FY2012 314,428 42,972 13,512 1,989 14.7 1,507 1,481 11.2 (17.9) % chg (yoy) 18.3 (1.3) 16.8 17.5

Source: Company, Angel Research

Exhibit 14: 1QFY2014 Actual vs Angel estimates JLR

Y/E March ( mn) Net Sales EBITDA EBITDA margin (%) Reported PAT
Source: Company, Angel Research

Actual 4,097 675 16.5 304

Estimates 4,191 645 15.4 330

4QFY13

Variation (%) (2.2) 4.7 109bp (7.9)

JLR sustains its strong performance: JLR registered a strong revenue growth of 12.6% yoy to 4,097mn driven by a healthy volume growth of 8.6% yoy and 3.7% yoy growth in net average realization. Jaguar volumes grew at an impressive rate of 57.8% yoy aided by the success of the smaller engine variants of the XF and XJ

August 8, 2013

Tata Motors | 1QFY2014 Result Update

and XF Sportbrake. Land Rover volumes on the other hand remained flat yoy due to phasing out of the old Range Rover Sport. According to the Management, the initial response to the new Range Rover Sport is positive and is confident of achieving sales of 60,000 units in FY2014. Geographically, the volume growth in 1QFY2014 was driven by UK (~18% of JLR volumes) and Asia Pacific (~7% of JLR volumes) which registered an outstanding growth of 25.7% yoy and 58.3% yoy respectively. Europe volumes however, reported a marginal decline of 0.6% yoy.

Exhibit 15: JLRs quarterly performance - Wholesale

(units) Jaguar Land Rover 95,177 100,000 83,903 90,000 79,785 72,043 71,678 71,050 80,000 67,610 70,000 54,694 50,747 60,000 50,000 40,000 21,163 18,577 30,000 15,272 14,118 11,774 15,043 20,000 11,343 13,306 9,832 10,000 0

Exhibit 16: JLRs performance Wholesale

(units) 30,000 25,000 20,000 15,000 10,000 5,000 Asia Pacific North America China Region UK Europe Rest of the world

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

Source: Company, Angel Research

Source: Company, Angel Research

JLRs EBITDA margin improved 200bp yoy to 16.5%, ahead of our expectations of 15.4%, aided by a richer product and geography mix and also due to favorable exchange rate movement. Employee expense as a percentage of sales however, increased by 50bp yoy due to higher pension expenses. Other expenditure as a percentage of sales too increased by 130bp yoy due to higher marketing spends. As a result, JLR reported a 28.1% yoy growth in operating profit to 675mn. JLRs bottom-line grew strongly by 28.9% yoy to 304mn driven by strong operating performance, although the same was partially offset by a higher depreciation expense as well as higher finance expense. During the quarter, JLR reported a forex loss of 30mn pertaining to translation charges on foreign denominated debt. According to the Management, JLR has not witnessed any inventory buildup in China and inventory levels in most markets remain under control with average inventory levels of 30 to 45 days. Further, the Management indicated that variable incentives for JLR have declined sequentially and are likely to trend downwards going ahead with the new Range Rover Sport being launched. The company capitalized 242mn towards R&D expenditure in 1QFY2014, while total R&D spends stood at 292mn. JLRs capital expenditure for the quarter stood at 266mn. JLR reported negative free cash flow (FCF) of 341mn during the quarter led by higher capital expenditure and product development costs (amounting to 558mn in total) and also due to unfavorable working capital cycle (seasonal impact). However, the Management expects working capital to remain flat in FY2014.

August 8, 2013

1QFY14

Tata Motors | 1QFY2014 Result Update

Investment arguments
JLR to register a strong ~13% volume CAGR over FY2013-15E: The global luxury vehicle market has managed to post a healthy volume growth of ~10% in FY2013 despite a challenging macro environment. Volumes of the top four players (Audi, BMW, Mercedez Benz and JLR) continue to hold up well, aided by strong growth in Asia/Pacific and North America, though the volumes in China softened in 1QFY2014. We expect JLR to deliver an ~13% volume CAGR over FY2013-15E on the back of the strong product launches that are lined up in FY2014 (expected to launch 8 new refreshes/models in FY2014) and the success of the model launched in 4QFY2013. Additionally, a favorable market mix (China's contribution increased from 11% in FY2011 to 21% in FY2013) and sourcing from low-cost countries will enable JLR to maintain its margins in the range of 15-15.5% in FY2014. Domestic business to remain under pressure: While we expect the commercial vehicle (CV) business to stage a recovery with the revival in the domestic industrial activity, the PV segment is likely to remain under pressure led by weak product offerings amid rising competition. Further, led by higher discounts and promotional expenses, we expect the standalone profitability to remain under pressure.

Outlook and valuation

We expect headwinds in the standalone business to continue in FY2014 due to weak macro-economic environment which is expected to continue impacting domestic volumes. Nevertheless, we expect JLR to sustain its strong performance driven by continued momentum in the global luxury vehicle market and aided further by the strong product launch pipeline and the success of the model launched in 4QFY2013. We revise our earnings estimates upwards for JLR due to continued strong performance leading to 6-7% upward revision in consolidated earnings for FY2014/15.

Exhibit 17: Change in estimates (consolidated)

Y/E March Net sales (` cr) OPM (%) EPS (`) Earlier estimates FY2014E 215,016 13.3 36.2 FY2015E 237,404 13.6 41.5 Revised estimates FY2014E 215,043 13.5 38.7 FY2015E 240,077 13.7 44.1 % chg FY2014E 0.0 25bp 7.0 FY2015E 1.1 10bp 6.4

Source: Company, Angel Research

We expect JLR volumes to grow at ~13% CAGR over FY2013-15E and PAT to grow at ~15% CAGR during the same period. We retain our positive view and Buy rating on the stock with an SOTP based target price of `355. We have valued the standalone business at `33/ share, at 12x FY2015E earnings. We value JLR at 6.5x FY2015E earnings at `292/ share. The embedded value of the subsidiaries and investments works out to `30/ share.

August 8, 2013

Tata Motors | 1QFY2014 Result Update

Exhibit 18: SOTP valuation

Particulars Standalone JLR Key subsidiaries and others Target price
Source: Company, Angel Research

Parameter FY2015E (12x P/E) FY2015E (6.5x PAT)

Value/ Share (`) 33 292 30 355

Exhibit 19: Peer valuation Global luxury car manufacturers

P/E (x) FY14E BMW Daimler 9.1 11.5 FY15E 8.8 9.9 P/B (x) FY14E 1.4 1.3 FY15E 1.3 1.2 EV/EBITDA (x) FY14E 8.2 9.0 FY15E 7.9 9.0 EV/Sales (x) FY14E 1.3 1.1 FY15E 1.3 1.0

Source: Company, Angel Research

Key downside risk to our estimates: Lower-than-expected growth in JLR due to uncertainty in key markets (Europe, UK, China and US) will negatively affect our volume growth estimates. Further, softening of domestic interest rates poses an upside risk to our domestic volume estimates.

Exhibit 20: Key assumptions

Y/E March (units) M&HCV LCV Total CV UV Cars Nano Total PV Exports (Inc Above ) Total volume JLR volume
Source: Company, Angel Research

FY2010 167,828 233,697 401,525 34,124 176,683 30,353 241,160 34,140 642,685 193,982

FY2011 209,521 287,462 496,983 43,070 192,831 70,432 306,333 58,042 803,316 243,621

FY2012 221,298 363,891 585,189 56,138 190,728 74,526 321,392 62,890 906,581 314,433

FY2013 152,505 428,643 581,148 48,583 126,341 54,014 228,938 50,831 810,086 372,062

FY2014E 154,030 441,502 595,532 46,154 120,024 32,408 198,586 46,765 794,119 424,151

FY2015E 172,514 476,822 649,336 53,077 134,427 37,270 224,773 53,779 874,110 475,049

Exhibit 21: Angel vs consensus forecast

Angel estimates FY14E Total op. income (` cr) EPS (`) 215,043 38.7 FY15E 240,077 44.1 Consensus FY14E 215,400 38.3 FY15E 242,700 44.4 Variation (%) FY14E (0.2) 1.1 FY15E (1.1) (0.5)

Source: Bloomberg, Angel Research

August 8, 2013

Tata Motors | 1QFY2014 Result Update

Exhibit 22: One-year forward EV/EBITDA

( ` cr) 300,000 250,000 200,000 150,000 100,000 50,000 0 EV (` cr) 2x 4x 6x 8x

Exhibit 23: Tata Motors vs Sensex

300 250 200 150 100 50 0 Tata Motors Sensex

Feb-11

Feb-12

Sep-07

Sep-08

Sep-09

Aug-10

Aug-11

Aug-12

Feb-13

Mar-08

Mar-09

May-06

May-07

Source: Company, Angel Research

Aug-13

Apr-03

Apr-04

Apr-05

Source: Company, Angel Research

Exhibit 24: Automobile - Recommendation summary

Company Ashok Leyland Bajaj Auto Hero MotoCorp Maruti Suzuki Mahindra & Mahindra Tata Motors TVS Motor Reco. Buy Buy Accumulate Buy Buy Buy Buy CMP Tgt. price (`) (`) 12 1,771 1,830 1,334 843 279 30 22 2,099 2,048 1,648 1,103 355 35 Upside (%) 79.7 18.5 12.0 23.5 30.8 27.4 17.0 P/E (x) FY14E 32.6 14.8 16.5 14.1 13.3 7.2 6.0 FY15E 6.7 12.7 12.5 12.1 11.9 6.3 5.1 EV/EBITDA (x) FY14E 5.4 10.1 8.4 6.2 7.0 3.5 1.9 FY15E 3.3 8.2 7.2 5.4 5.7 3.1 1.3 RoE (%) FY14E 2.3 38.9 40.1 14.4 23.2 28.5 18.1 FY15E 11.0 36.5 42.1 14.6 21.8 25.1 18.5 FY13-15E EPS CAGR (%) 74.4 15.3 17.5 17.8 13.8 15.8 15.3

Source: Company, Angel Research

Company background
Tata Motors (TTMT) is the largest commercial vehicle manufacturer in India with a domestic market share of ~60% and ~57% in the MHCV and LCV segments respectively. The company is also India's third largest PV manufacturer, with a domestic market share of ~10%. The company operates from its plants in Jamshedpur, Pune, Lucknow, Sanand, Pantnagar and Dharwad. TTMT acquired UK based luxury car manufacturer Jaguar Land Rover (JLR) in June 2008; it now accounts for ~72% of its consolidated revenue.

August 8, 2013

Mar-10

Jun-08

Jun-09

Jun-10

Aug-13

Apr-07

Jul-11

Jul-12

10

Tata Motors | 1QFY2014 Result Update

Profit and loss statement (Consolidated)

Y/E March (` cr) Total operating income % chg Total expenditure Net raw material costs Other mfg costs Employee expenses Other EBITDA % chg (% of total op. income) Depreciation & amortization EBIT % chg (% of total op. income) Interest and other charges Other income Recurring PBT % chg Extraordinary income/ exp. PBT (reported) Tax (% of PBT) PAT (reported) Profit in earnings of asso. Minority interest (MI) PAT after MI ADJ. PAT % chg (% of total op. income) Basic EPS (`) Adj. EPS (`) % chg FY2010 30.5 61,495 3,452 8,943 10,857 7,772 414.9 8.4 3,887 3,885 4.2 2,465 1,058 2,478 (1,045) 3,523 1,006 28.6 2,517 85 30 2,571 1,526 1.6 9.0 5.3 FY2011 32.0 FY2012 35.6 FY2013 FY2014E FY2015E 14.0 13.9 11.6 92,519 122,128 165,654 188,818 215,043 240,077 84,747 105,310 143,343 164,270 186,012 207,306 79,008 109,468 120,321 135,477 151,968 4,509 9,343 12,450 16,817 116.4 13.8 4,656 12,162 213.1 10.0 2,385 429 10,206 311.9 (231) 10,437 1,216 11.7 9,221 101 49 9,274 9,043 492.6 7.4 29.2 28.5 432.8 5,440 12,298 16,137 22,311 32.7 13.5 5,625 16,686 37.2 10.1 2,982 662 14,365 40.8 832 13,534 2,811 20.8 10,723 25 82 10,665 11,497 27.1 6.9 33.6 36.2 27.1 6,250 16,584 21,115 24,547 10.0 13.0 7,569 16,978 1.8 9.0 3,553 812 14,236 (0.9) 603 13,633 3,771 27.7 9,862 114 84 9,893 10,495 (8.7) 5.6 31.0 32.9 (9.2) 7,311 19,139 24,085 29,031 18.3 13.5 8,729 20,302 19.6 9.4 3,930 909 17,280 21.4 17,280 4,838 28.0 12,442 114 95 12,461 12,461 18.7 5.8 38.7 38.7 17.7 8,163 21,607 25,568 32,770 12.9 13.7 10,281 22,490 10.8 9.4 3,792 1,018 19,715 14.1 19,715 5,520 28.0 14,195 114 110 14,199 14,199 13.9 5.9 44.1 44.1 13.9

August 8, 2013

11

Tata Motors | 1QFY2014 Result Update

Balance sheet statement (Consolidated)

Y/E March (` cr) SOURCES OF FUNDS Equity share capital Reserves & surplus Shareholders Funds Minority interest Total loans Deferred tax liability Other long term liabilities Long term provisions Total Liabilities APPLICATION OF FUNDS Gross block Less: Acc. depreciation Net Block Capital work-in-progress Goodwill Investments Long term loans and adv. Other noncurrent assets Current assets Cash Loans & advances Other Current liabilities Net current assets Misc. exp. not written off Total Assets 63,823 34,232 29,590 8,916 3,423 2,219 42,446 8,743 15,199 18,503 41,721 725 44,873 71,463 39,699 31,764 11,457 3,585 2,544 9,818 332 40,881 11,410 8,875 20,596 42,019 (1,138) 58,362 89,779 49,512 40,267 15,946 4,094 8,918 13,658 575 56,935 18,238 12,244 26,453 62,526 (5,591) 77,865 102,571 51,505 51,066 18,418 4,102 9,058 15,465 1,024 66,464 21,113 13,440 31,912 74,674 (8,209) 90,924 122,945 60,234 62,711 22,130 4,102 10,204 15,465 1,024 68,314 20,912 13,978 33,423 81,910 (13,596) 102,041 144,799 70,515 74,284 26,064 4,102 11,405 15,465 1,024 71,139 18,209 15,605 37,325 89,431 (18,292) 114,053 571 7,827 8,398 214 35,108 1,154 44,873 635 18,537 19,171 247 30,362 1,464 2,293 4,826 58,362 635 32,064 32,699 307 38,704 (2,374) 2,298 6,232 77,865 638 36,999 37,637 370 43,722 (2,409) 3,284 8,319 90,924 644 49,111 49,754 370 42,722 (2,409) 3,284 8,319 102,041 644 62,623 63,267 370 41,222 (2,409) 3,284 8,319 114,053 FY2010 FY2011 FY2012 FY2013 FY2014E FY2015E

Note: Cash includes bank balances with maturity of more than 3 months but less than 12 months

August 8, 2013

12

Tata Motors | 1QFY2014 Result Update

Cash flow statement (Consolidated)

Y/E March (` cr) Profit before tax Depreciation Change in working capital Others Other income Direct taxes paid Cash Flow from Operations (Inc.)/Dec. in fixed assets (Inc.)/Dec. in investments Other income Others Cash Flow from Investing Issue of equity Inc./(Dec.) in loans Dividend paid (Incl. Tax) Others Cash Flow from Financing Inc./(Dec.) in cash Opening Cash balances Closing Cash balances
months

FY2010 3,523 3,887 5,099 (1,448) (1,058) (1,006) 8,997 (962) 1,058 (4,051) (7,690) 1,405 135 365 (938) 2,842 4,148 4,121 6,530

FY2011 10,206 4,656 4,048 (6,024) (429) (1,216) 11,240 (325) 429 3,053 4,700 (4,746) 1,002 2,357 (1,401) 2,816 6,530 9,345

FY2012 14,365 5,625 2,280 (414) (662) (2,811) 18,384 (962) 662 4,151 (164) 8,342 1,481 (3,092) 6,567 5,998 9,345 15,343

FY2013 FY2014E FY2015E 14,236 7,569 2,279 2,560 (812) (3,771) 22,062 (140) 812 (8,289) 145 5,018 1,489 (8,308) (1,656) (2,474) 15,343 12,869 17,280 8,729 5,272 (909) (4,838) 25,534 (1,146) 909 343 (1,000) 753 (1,410) (200) 21,113 20,912 19,715 10,281 2,063 (1,018) (5,520) 25,521 (1,201) 1,018 (1,500) 753 (2,253) (2,703) 20,912 18,209

(3,736) (10,181) (22,805) (15,263) (24,087) (25,787)

(7,023) (18,954) (22,881) (24,324) (25,971)

Note: Closing cash excludes bank balances with maturity of more than 3 months but less than 12

August 8, 2013

13

Tata Motors | 1QFY2014 Result Update

Key ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value Dupont Analysis EBIT margin Tax retention ratio Asset turnover (x) ROIC (Post-tax) Cost of Debt (Post Tax) Leverage (x) Operating ROE Returns (%) ROCE (Pre-tax) Angel ROIC (Pre-tax) ROE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) WC cycle (ex-cash) (days) Solvency ratios (x) Net debt to equity Net debt to EBITDA Interest Coverage (EBIT / Int.) 2.9 3.1 1.6 0.9 1.0 5.1 0.4 0.5 5.6 0.4 0.6 4.8 0.2 0.4 5.2 0.2 0.4 5.9 1.5 44 24 134 (22) 1.8 38 20 110 (31) 2.1 36 16 123 (40) 2.0 38 19 129 (51) 1.9 37 18 125 (54) 1.8 36 18 122 (54) 8.9 11.5 21.3 23.6 27.5 65.6 24.5 33.0 44.3 20.1 28.0 29.8 21.0 28.6 28.5 20.8 26.6 25.1 4.2 0.7 2.6 7.9 5.0 3.7 18.7 10.0 0.9 3.1 27.6 6.4 1.5 58.6 10.1 0.8 3.5 27.9 6.8 0.5 39.2 9.0 0.7 3.4 22.1 6.2 0.4 27.7 9.4 0.7 3.3 22.2 6.5 0.3 26.7 9.4 0.7 3.1 20.9 6.5 0.2 23.8 5.3 5.3 19.0 3.0 25.9 21.6 24.1 36.3 4.0 60.0 36.2 40.3 53.9 4.0 102.8 32.9 32.9 56.6 2.0 117.8 38.7 38.7 65.8 2.0 154.4 44.1 44.1 76.0 2.0 196.4 52.1 14.7 9.7 1.1 1.1 13.3 2.3 12.9 7.7 4.7 1.4 0.8 6.2 1.8 7.7 5.2 2.7 1.4 0.6 4.5 1.3 8.5 4.9 2.4 0.7 0.5 4.2 1.1 7.2 4.2 1.8 0.7 0.5 3.5 1.0 6.3 3.7 1.4 0.7 0.4 3.1 0.9 FY2010 FY2011 FY2012 FY2013 FY2014E FY2015E

August 8, 2013

14

Tata Motors | 1QFY2014 Result Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

DISCLAIMER
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Pvt. Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Pvt. Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Pvt. Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Pvt. Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Pvt. Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Pvt. Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Pvt. Limited and its affiliates may have investment positions in the stocks recommended in this report.

Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

Tata Motors No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns):

Buy (> 15%) Reduce (-5% to -15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

August 8, 2013

15