Jaguar Land Rover, Tata Motors’ British luxury car arm, is looking to explore 'strategic to tactical' partnerships to address its capex issues, Tata Sons’ chairman N Chandrasekaran told shareholders at the company’s 74
th annual general meeting on Tuesday.
Responding to shareholders' concerns about reports of discussions of a possible stake sale to French automaker PSA Group, Chandrasekaran clarified that the company is meeting “multiple players” to hold discussions for partnerships with JLR, and that it will explore all options that are in the interest of the company.
Chandrasekaran said that JLR is investing in developing technology to move away from internal combustion engines towards hybrids and electric vehicles, and also in the shared mobility space. JLR cut capex from 4.5 million pounds to 3.8 million in the last 12-18 months, according to Chandrasekaran.
While Tata Motors said that JLR will continue to cut capex, doing so drastically, beyond a point, will adversely impact the company’s future. Assuaging shareholders' concerns about whether JLR is a "good investment", Chandrasekaran said the way to handle the company’s capex is through partnerships, and that it’s important to hold on to the company with a long-term view.
The chairman cited the slowdown in China and supply chain uncertainties due to Brexit as the main external factors behind JLR’s misfortunes. He said that the slowdown in the Chinese market, which JLR has exposure to, has led to volumes dropping in the range of 40-50 percent, while the company has seen losses due to the calibration of the supply chain in the UK.
The Brexit deal will be decided in October.
Chandrasekaran also said that Tata Motors at home is actively looking to exit businesses in which it only has a marginal presence unless there’s a possibility of volumes growing. He said the company’s disinvestment program is on, and they are actively exiting loss-making subsidiaries and marginal businesses.
Recognising that market conditions in India are currently tough, Chandrasekaran said that Tata Motors has its operating performance despite the slowdown in demand.
Chandrasekaran said the priority for Tata Motors (standalone) is to pare its debt and bring down interest costs. The company is currently grappling with enormous interest costs due to its large debt of Rs 15,000-Rs 16,000 crore, he said.In Q1FY20, the company maintained healthy margins despite a slowdown in the CV space, and the PV business too went from an EBITDA-loss to breaking even, despite increasing costs.