31 May 2016 Q4FY16 Results Update | Sector: Automobiles

Tata Motors BSE SENSEX S&P CNX CMP: INR421 TP: INR524(+24%) Buy 26,726 8,179 Bloomberg TTMT IN Equity Shares (m) 2,887.2 M.Cap.(INRb)/(USDb) 1,357.3 / 21.2

52-Week Range (INR) 483/266 1, 6, 12 Rel. Per (%) -2/-1/-9 Avg Val, INRm 3,575.2 Free float (%) 67.0

Financials & Valuations (INR b) Y/E Mar 2016 2017E 2018E Net Sales 2,755.6 3,051.0 3,389.9 EBITDA 402.4 443.3 502.7 PAT 125.2 143.8 180.9 EPS (INR) 36.9 42.3 53.3 Gr. (%) -15.5 14.9 25.8 BV/Sh (INR) 237.9 278.2 328.2 RoE (%) 18.3 16.4 17.6 RoCE (%) 14.3 12.4 13.2 P/E (x) 11.4 9.9 7.9 P/BV (x) 1.8 1.5 1.3

Estimate change TP change Rating change

Above est, driven by JLR’s higher volumes & better mix, Chery JV contribution; Upgrade EPS Consol sales at INR807b (v/s INR732b; +19% YoY). EBITDA at INR113.8b (v/s est

INR91.5b; +35% YoY). Adj. PAT at INR47b (v/s est INR39.5b; +158% YoY). JLR realization at GBP44k (v/s est GBP42k) grew 5% QoQ due to better product

mix. Adj. EBITDA margins of 16.2% (v/s est 14.2%), driven by higher volumes and favorable mix. Further, higher share in Chery JV PAT (~GBP49m) and lower tax boosted adj. PAT to GBP560m (v/s est GBP368m), up 30%.

S/A Realization grew ~5% QoQ (+10.6% YoY) to INR856k/unit (v/s est. INR865k) driven by higher M&HCV contribution. EBITDA margins at 8.1% (v/s est 8.3%), up 240bp QoQ driven by product mix and operating leverage. Higher other income and higher tax credit boosted adj. PAT to ~INR5b (v/s est ~INR617m).

Earnings call highlights: a) JLR’s product lifecycle on track with F-Pace launch starting Apr-16, XE in US in May-16 and XFL in China in 2HCY16. B) Despite stable QoQ volumes, share in Chery JV PAT grew to ~GBP49m (v/s ~GBP22m in 3QFY16). c) Provided GBP67m for airbag related recall in US. D) JLR generated FCF of ~GBP1.4b in 4QFY16 and GBP743m for FY16. e) Capex guidance for FY17 for JLR at GBP3.75b (v/s GBP3.13b in FY16) and India business at INR35-40b. f) Turned net cash at consol level with net cash of ~INR6.8b (v/s ~INR133.9b net debt in 3QFY16). S/A net debt reduced to ~INR137b (v/s ~INR151b in 3QFY16).Valuation & view: We raise our EPS for FY17/18 by 7%/2%. The stock trades at 9.2x/7.3x FY17/18E consol EPS. Maintain Buy with TP of INR524 (FY17 SOTP based).

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

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

Tata Motors

31 May 2016 2

JLR: Higher volumes and better mix drives strong performance JLR’s (ex Chery JV) wholesale volumes up 20% YoY (+9% QoQ) to 149,895 units

(v/s est ~138,531 units), driven by Jaguar volume growth of ~60% YoY to 32,193units and LandRover volume growth of 12% to 117,702 units.

Chery JV volumes were marginally lower by ~2% to ~12,532 units. Including JV,JLR volumes grew ~26% YoY (+8% QoQ) to ~162,427 units (v/s est ~155,847units).

JLR realization at GBP44k (v/s est GBP42k) grew 4.7% QoQ (-5.5% YoY) driven bybetter mix (~10pp QoQ decline XE contribution).

Net sales at GBP6.6b (v/s est. GBP5.8b) grew ~13% YoY (+14% QoQ). JLR adj. EBITDA margins at 16.2% (v/s est 14.2%) improved ~180bp QoQ (-120bp

YoY), driven by higher volumes and better mix. In 4QFY16, other expenses included GBP166m one-off expenses pertaining to a)

the recall in the U.S. of potentially faulty passenger airbags supplied by Takata(GBP67.4m), b) doubtful debts and c) previously capitalised investment.

Adj EBITDA grew ~5% YoY (+29% QoQ) to GBP1.07b (v/s est GBP825m). Higher profits of Chery JV and lower tax due to deferred tax credits boosted adj

PAT to ~GBP560m (+30% YoY, 35.5% QoQ). Total Capex and Product development spend for the quarter was GBP742m and

~GBP3.13b for FY16. JLR’s 4QFY16 FCF was GBP1.4b, with CFO of GBP2b (driven by GBP1.16b

favorable working capital). For FY16, FCF generation was ~GBP743m (v/sGBP733m in FY15).

The JV’s wholesale volumes were at 12,532 units (v/s 12,830 units in 3QFY16).JLR’s share in profit of Chery JV grew 123% QoQ to GBP49m.

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

Source: Company, MOSL

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

Source: Company, MOSL

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

23 21 21 22 24 21 22 19 20

13 14 15 16 17 15 14 14 12

16 17 15 9 13 18 22 25 28

32 33 32 34 27 29 24 25 25

4Q

14

1Q

15

2Q15

3Q15

4Q15

1Q16

2Q16

3Q16

4Q16

Defender Discovery RR Sport RR FL2/DS Evoque

24 22 22 23 18 15 7 10 15

64 53 59 61 67 42 23 37 39

7 19 15 15 14 18 13 11 9

5 6 3 1 1

4Q

14

1Q15

2Q15

3Q15

4Q15

1Q16

2Q16

3Q16

4Q16

XJ XF F-Type F-Pace Others

Tata Motors

31 May 2016 3

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

Source: Company

Exhibit 4: Share of China volumes moderate to 18% (incl JV)

22 21 21 21 21

26 25 24

30 27 28

18 17 18 19 18

1Q13

2Q13

3Q13

4Q13

1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

3Q15

4Q15

1Q16

2Q16

3Q16

4Q16

Share of China vols (%)

* Incl Chery JV volumes

Source: Company, MOSL

Exhibit 5: Premium model share at 52% levels

56 55 53

54 52

55

61

57 60 59

63

59 56

52 50

48

1Q13

2Q13

3Q13

4Q13

1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

3Q15

4Q15

1Q16

2Q16

3Q16

4Q16

Share of premium models (%)*

* RR+ RR Sport+ Evoque+ F-Type

Source: Company, MOSL

Exhibit 6: JLR realizations declines YoY on adverse product and market mix (GBP/unit)

43,5

94

42,4

58

40,1

11

43,4

33

45,2

11

45,2

46

45,7

90

44,2

24

46,4

85

46,2

42

48,0

05

46,5

48

45,2

06

43,4

60

42,0

04

43,9

91

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

1QFY

16

2QFY

16

3QFY

16

4QFY

16

Source: Company, MOSL

Exhibit 7: JLR margins impacted by higher marketing spend, manufacturing and launch expense

529

458

531

820

647

809

1,01

7

920

1,08

7

933

1,09

6

1,01

6

821

589

834

1,06

9

14.5

13.9

14.0 16.2

15.8 17.5

19.1

17.2

20.3

19.4

18.6

17.4

16.4

12.2

14.4

16.2

1QFY

13

2QFY

13

3QFY

13

4QFY

13

1QFY

14

2QFY

14

3QFY

14

4QFY

14

1QFY

15

2QFY

15

3QFY

15

4QFY

15

1QFY

16

2QFY

16

3QFY

16

4QFY

16

EBITDA (GBP m) EBITDA Margin (%)

Source: Company, MOSL

JLR: Key takeaways from the call FY17 capex at GBP3.75-3.8b.This could lead to negative FCF(doesn't include

capex of JV) Provisions for airbag related recall at GBP67.4m, which would be utilized over 1-

4 years. Tianjin port blast related reversal of provisioning at GBP56m, including

insurance claims and car available for sale. JLR’s product lifecycle on track with F-Pace launch starting Apr-16, XE in US in

May-16 and XFL in China in 2HCY16.

17 17 20 16 17 16 18 20 19 22 20 19

19 19 15 22 17 22 15 25 19 24 17 22

21 18 21 21 19 17 22 22 28 17 25 25

23 27 26 26 31 29 29 19 17 18 19 18

20 19 19 16 16 17 15 13 17 20 19 15

1Q12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

3Q

14

4Q

14

N. America UK Europe China ROW

Tata Motors

31 May 2016 4

Chery JV FY17 capex would be funded from internal cash flows. JV has debt:equity of ~1x.

Tax rate lower in FY16 due to deferred tax credit for future reduction in UK taxrate.

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

Standalone: EBITDA margins at 16 quarter high driven by CVs S/A volumes increased 5.4% YoY (+20%QoQ) to 147k units, impacted by

continued weakness in PV volumes (-26% YoY) while LCV (+13% YoY) andM&HCV volumes continue to recover, with ~27% YoY growth.

Realization grew ~5% QoQ (+11% YoY) to INR856k/unit (v/s est. INR864k perunit) driven by higher M&HCV mix.

Net sales at INR124.6b (v/s est. INR125.7b) up 16.7% YoY (+26% QoQ). EBITDA grew 1.8x at ~INR10.2b (v/s est ~INR10.5b). EBITDA margins were at

8.1% (v/s est 8.3%), increase of 240bp QoQ due to improved product mix alongwith benefit from operating leverage. Decline in RM cost (-400bp QoQ) and staffcosts (-190bp) was negated by rise in other expense (+350bp QoQ).

Further, Adj PAT was at INR5b (v/s est~INR 6.1b) as compared to a loss ofINR395m.

S/A net debt reduce to ~INR137b (v/s ~INR151b in 3QFY16).

Exhibit 8: Trend in segment mix Segment 4QFY16 4QFY15 YoY (%) 3QFY16 QoQ (%)

M&HCVs 54,011 42,535 27.0 40,763 32.5 Contribution (%) 36.8 30.5 33.3

LCVs 61,309 54,132 13.3 49,530 23.8 Contribution (%) 41.8 38.9 40.5

Total CVs 115,319 96,667 19.3 90,293 27.7 Contribution (%) 78.6 69.4 73.8

Cars 26,496 36,951 -28.3 27,802 -4.7Contribution (%) 18.1 26.5 22.7

UVs 4,950 5,652 -12.4 4,282 15.6 Contribution (%) 3.4 4.1 3.5

Total Volumes 146,766 139,270 5.4 122,377 19.9

Source: Company, MOSL

Exhibit 9: Higher M&HCV share boosts QoQ realizations

Source: Company, MOSL

Exhibit 10: Recovery at EBITDA level continues

Source: Company, MOSL

555

558

521

564

594

586

596

649

701

691

717

774

798

833

817

856

(5.7) (8.9) (9.6)

(1.6)

7.1

4.9

14.3

15.2 17.9

18.1

20.3

19.3 13.9

20.5 13.9

10.6

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

FY13 FY14 FY15 FY16

Avg. Realization Growth YoY %

7,74

4

7,33

4

2,33

8

4,02

1 2,

065

1,77

6

-3,3

78

-5,2

81 -2,1

46

-1,4

23

-4,6

40

2,99

3 4,

405

7,09

3

5,68

6 10

,217

7.3 5.9

2.2 3.6

2.3 2.0

(4.3)

(6.2)

(2.8) (1.6)

(5.1)

2.8 4.7

6.8

5.7

8.1

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

FY13 FY14 FY15 FY16

EBITDA (INR m) EBITDA Margin (%)

Tata Motors

31 May 2016 5

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

year of transition for JLR as it would have 3 unprecedented events viz a) ownengine plant for the 1st time, b) China manufacturing plant and c) entry intohigh volumes with Jaguar XE. Jaguar portfolio has potential to go up 3x involumes led by XE and Crossover F-Pace (FY16). China JV has started in 4QFY15,starting with 3 models (XF, Evoque Discovery Sport). These 3 models currentlycontribute 45-50% of China volumes, and as per management it has potential togo up 2.5x over 2-3 years on local production. Volume momentum is expectedto improve driven by Discovery Sport, Jaguar XE and Evoque (in China JV).

China growth normalizing, but transitory issues receding: JLR's transitoryissues, in the form of model phase-out and teething troubles in China JV, haveimpacted volumes by 5-8% since 3QFY15. We expect volume recovery fromtransitory issues from 3QFY16, driven by a) China Evoque ramp-up from 3QFY16,b) Discovery Sport launch in China in 3QFY16, c) New XF and XE in China from4QFY16, and d) ramp-up of new launches in other markets. Despite China'svolume growth moderation, it is still expected to outgrow other markets with 8-10% CAGR over CY14-20. JLR is expected to outperform in China, driven bystrong product pipeline, dominance in the fast growing SUV segment and dealernetwork expansion.

JLR’s profitability has many levers: Pricing pressure due to moderating growth,adverse terms of trade and increasing share of compact luxury cars are drivingnormalization of profitability in China. We expect JLR’s profitability in China tonormalize from ~25% in FY15 to ~15% by FY17, implying gross impact of ~400bp.JLR has several levers, both cyclical and structural, to dilute the impact of Chinamargin normalization. Near-term EBITDA margin drivers (~100bp savings)include a) favorable commodity prices, b) operating leverage driven by recoveryin volumes as transitory issues recede, and c) ramp-up in Chery JV. JLR hasseveral structural drivers to margins (~50bp factored in) including a) full roll-outof modular strategy, b) operating leverage driven by ramp-up in Jaguarportfolio, and c) incremental production from low-cost countries.

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

Raise EPS by 7/2%: We have raised our EPS estimate for FY17/18 by 7%/2% dueto upgrade in volumes, margins and lower tax for JLR and higher GBP/INR ratefor JLR consolidation. Also, lower tax in standalone business support earningsupgrade.

Valuation & view: The stock trades at 9.9x/7.9x FY17E/FY18E consolidated EPS.We maintain Buy on stock with TP of INR524 (FY18 SOTP based). We value JLR at3.5x EV/EBITDA and Indian business at 8x EV/EBITDA.

Tata Motors

31 May 2016 6

Exhibit 11: Revised forecast (INR b) FY17E FY18E

Key Assumptions Rev Old Chg (%) Rev Old Chg (%) Consolidated Net Sales 3,051 2,915 4.7 3,390 3,246 4.4 EBITDA 443 415 6.9 503 481 4.4 EBITDA Margins (%) 14.5 14.2 30bp 14.8 14.8 0bp Net Profit 144 135 6.9 181 177 2.4 Cons EPS 42.3 39.6 6.9 53.3 52.0 2.4 JLR (IFRS, GBP M) Volumes ('000 units) incl JV 631 615 2.6 696 678 2.6 EBITDA 3,637 3,442 5.7 4,025 3,889 3.5 EBITDA Margins (%) 14.7 14.5 10bp 15.0 15.2 -20bpNet Profit 1,568 1,458 7.6 1,797 1,740 3.3 Standalone Volumes ('000 units) 617 632 -2.3 783 802 -2.3EBITDA 42 45 -6.4 60 62 -4.6EBITDA Margins (%) 8.0 8.3 -40bp 9.2 9.4 -20bpNet Profit 9.7 9.1 6.3 23.9 23.3 2.5

Source: MOSL

Exhibit 12: TATA MOTORS: Sum-of-the-parts valuation INR B Valuation Parameter Multiple (x) FY17E FY18E

SOTP Value Tata Motors - Standalone EV/EBITDA 8.0 333 477 JLR (Adj for R&D capitalization) EV/EBITDA 3.5 934 1,032 JLR - Chery JV EBITDA Share EV/EBITDA 3.5 81 125 HV Axles EV/EBITDA 4.0 4 8 HV Transmission EV/EBITDA 4.0 3 6 Tata Technologies EV/EBITDA 4.0 21 24 Tata Daewoo EV/EBITDA 4.0 14 16 Total EV 1,391 1,688 Less: Net Debt (Ex FCCB & TMFL) 115 62 Add: Other Investments Tata Motors Finance P/BV 1 37 42 Other Associates/JVs P/BV 0.75 17 33 Tata Sons 40% discount 78 78 Total Equity Value 1,408 1,778 Fair Value (INR/Sh) - Ord Sh Fully Diluted 415 524 Upside (%) -1.4 24.5 Fair Value (INR/Sh) - DVR @ 30% discount 289 366 Upside (%) 37.4 73.6

Source: MOSL

Tata Motors

31 May 2016 7

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

Source: MOSL Source: MOSL

Exhibit 14: Comparative valuation CMP Rating TP P/E (x) EV/EBITDA (x) RoE (%) RoCE (%)

Auto OEM's (INR)* (INR) FY16E FY17E FY16E FY17E FY16E FY17E FY16E FY17E Bajaj Auto 2,609 Buy 2,905 17.3 15.1 11.1 9.8 32.7 32.2 31.6 31.0 Hero MotoCorp 3,094 Buy 3,325 17.2 14.1 11.1 9.3 40.9 40.8 39.9 40.0 TVS Motor 289 Buy 339 20.4 17.0 12.3 10.3 30.7 29.1 31.8 30.8 M&M 1,332 Neutral 1,498 17.6 14.6 13.8 12.0 15.5 15.8 13.7 14.2 Maruti Suzuki 4,073 Buy 4,525 19.8 16.2 10.0 8.4 19.2 20.3 25.8 27.2 Tata Motors 421 Buy 524 9.9 7.9 3.4 2.8 16.4 17.6 12.4 13.2 Ashok Leyland 106 Buy 124 15.8 12.4 8.7 7.0 30.8 31.4 22.6 25.3 Eicher Motors# 18,721 Buy 22,935 31.3 22.6 18.3 14.6 39.8 40.3 31.8 34.0 Auto Ancillaries Bharat Forge 748 Buy 903 21.4 16.6 11.8 9.7 21.0 23.1 14.0 16.6 Exide Industries 161 Buy 176 19.2 16.4 12.3 10.5 14.4 15.0 19.4 19.9 Amara Raja Batteries 850 Buy 975 23.8 19.6 14.7 12.3 25.9 25.4 24.5 24.3 BOSCH 22,216 Buy 24,659 42.5 31.8 27.5 23.1 18.4 21.2 26.3 28.3 # Nos. are on CY basis

8.7 11.4

8.7 9.7

0

8

16

24

32

May

-01

Jul-0

2

Sep-

03

Nov

-04

Jan-

06

Mar

-07

Apr-

08

Jun-

09

Aug-

10

Oct

-11

Nov

-12

Jan-

14

Mar

-15

May

-16

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

Negative Earnings

Cycle

1.3 2.5

1.8

2.5

0.0

1.5

3.0

4.5

6.0

May

-01

Jul-0

2

Sep-

03

Nov

-04

Jan-

06

Mar

-07

Apr-

08

Jun-

09

Aug-

10

Oct

-11

Nov

-12

Jan-

14

Mar

-15

May

-16

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

Tata Motors

31 May 2016 8

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

Expect JLR (incl JV) volume CAGR of ~20.8% led by strong growth in FY17 on introduction of Jaguar XE and F-Pace

Source: Company, MOSL

Exhibit 15: Margins to remain stable as volume ramps-up

Source: Company, MOSL

Exhibit 16: JLR’s to remain FCF positive despite high capex plans

Source: Company, MOSL

Exhibit 17: S/A business to recover on economic recovery

Source: Company, MOSL

Exhibit 18: S/A margins to improve on volume recovery

Source: Company, MOSL

Exhibit 19: EPS CAGR of 21% over FY16-18E

Source: Company, MOSL

314

372

430

471

544

631

696

29.1

18.3 15.5

9.5

15.6 16.0

10.2

FY12 FY13 FY14 FY15 FY16 FY17E FY18E

JLR volumes (incl JV; '000 units) Growth (%)

1,98

9

2,33

1

3,39

3

4,13

1

3,31

3

3,63

7

4,02

5

14.7 14.8 17.5

18.9

14.9 14.7 15.0

FY12 FY13 FY14 FY15 FY16 FY17E FY18E

EBITDA (GBP m) EBITDA margin (%)

2,50

0

2,42

9

3,42

2

3,62

7

3,08

1

3,99

7

4,40

4

-1,5

42

-2,6

09

-2,7

36

-2,6

41

-2,8

10

-3,3

38

-3,6

00

958

-180

686 986 271 659 804

FY12 FY13 FY14 FY15 FY16 FY17E FY18E

CFO Capex FCF

536

445

343

363

424

523

648

11.6

-17.0 -22.9

5.9

16.7 23.4

23.9

FY12 FY13 FY14 FY15 FY16E FY17E FY18E

Revenues (INR b) Growth (%)

37 19

(5) (8)

27 42 60

7.0

4.2

-1.4

-2.2

6.5 8.0 9.2

FY12 FY13 FY14 FY15 FY16E FY17E FY18E

EBITDA (INR b) EBITDA Margins (%)

37.0 30.9 44.1 43.6

36.9

42.3 53.3

28.3

-16.3

42.6

-1.1

-15.5

14.9

25.8

FY12 FY13 FY14 FY15 FY16E FY17E FY18E

EPS (INR) Growth (%)

Tata Motors

31 May 2016 9

Key operating metrics

Exhibit 20: Snapshot of Revenue model 000 units FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E JLR Jaguar 53 54 58 79 76 102 136 149

Growth (%) 11.8 2.0 7.0 37.2 -3.5 33.5 32.7 10.0 % of Total JLR Vols 21.8 17.2 15.5 18.4 16.3 20.0 23.8 24.5

Land Rover 191 260 314 351 394 442 496 547 Growth (%) 30.1 36.6 20.7 11.6 12.4 12.2 12.2 10.3 % of Total JLR Vols 78.2 82.8 84.5 81.6 83.7 86.8 87.2 89.9

Total Volumes 244 314 372 430 471 509 568 608 Growth (%) 25.6 29.1 18.3 15.5 9.5 8.2 11.6 7.0

ASP (GBP '000/unit) 41 43 42 45 46 44 44 44 Growth (%) 20.4 6.1 -1.3 6.3 3.0 -6.2 0.0 1.0

Net JLR Sales (GBP b) 10 14 16 19 22 22 25 27 Growth (%) 51.2 36.9 16.8 22.8 12.8 1.6 11.6 8.1

DOMESTIC MH&CVs 214 221 153 122 143 176 220 263

Growth (%) 27.5 3.4 -31.1 -19.7 16.5 23.6 24.4 20.0 LCVs 295 364 429 299 222 205 242 313

Growth (%) 26.2 23.3 17.8 -30.3 -25.8 -7.7 18.3 29.2 Total CVs 509 585 581 421 365 381 462 576

Growth (%) 26.7 14.9 -0.7 -27.5 -13.5 4.6 21.2 24.8 Total PVs 328 338 229 145 138 131 156 207

Growth (%) 23.0 3.1 -32.2 -36.5 -5.3 -5.1 19.2 32.8 Total Volumes 837 923 810 567 502 512 617 783

Growth (%) 25.2 10.3 -12.2 -30.1 -11.4 1.9 20.6 26.8 ASP (INR 000/unit) 574 581 549 605 723 828 847 828 Net S/A Sales (INR b) 480 536 445 343 363 424 523 648

Growth (%) 35.0 11.6 -17.0 -22.9 5.9 16.7 23.4 23.9

Tata Motors

31 May 2016 10

Financials and Valuations

Income Statement (INR Million) Y/E Mar 2011 2012 2013 2014 2015 2016 2017E 2018E Net Sales 1,221,279 1,656,545 1,888,176 2,328,337 2,631,590 2,755,611 3,051,016 3,389,917 Change (%) 32.0 35.6 14.0 23.3 13.0 4.7 10.7 11.1 EBITDA 178,150 237,005 265,689 374,029 421,138 402,367 443,279 502,710 EBITDA Margin (%) 14.6 14.3 14.1 16.1 16.0 14.6 14.5 14.8 Depreciation 46,555 56,254 75,693 110,782 133,886 170,142 208,868 231,962 EBIT 131,595 180,751 189,996 263,248 287,252 232,225 234,410 270,748 Product Dev. Exp. 9,976 13,892 20,216 25,652 28,752 34,804 38,120 42,388 Interest 23,853 29,822 35,533 47,338 48,615 46,234 33,585 30,993 Other Income 6,605 77 2,964 1,209 8,070 7,415 8,649 8,758 Extraordinary items 0 -1,774 -876 -2,777 -930 -18,794 0 0 PBT 104,372 135,339 136,335 188,690 217,026 139,809 171,354 206,125 Tax 12,164 -400 37,710 47,648 76,429 28,726 39,485 45,301 Tax Rate (%) 11.7 -0.3 27.7 25.3 35.2 20.5 23.0 22.0 Min. Int. & Assoc. Share -528 574 -301 1,132 734 845 -11,921 -20,063Reported PAT 92,736 135,165 98,926 139,910 139,863 110,238 143,790 180,886Adjusted PAT 92,736 119,008 99,560 141,986 140,465 125,170 143,790 180,886 Change (%) 492.4 28.3 -16.3 42.6 -1.1 -10.9 14.9 25.8

Balance Sheet (INR Million) Y/E Mar 2011 2012 2013 2014 2015 2016 2017E 2018E Share Capital 6,377 6,348 6,381 6,438 6,438 6,792 6,792 6,792 Reserves 185,338 320,638 369,992 649,597 556,181 801,035 937,892 1,107,754 Net Worth 191,715 326,985 376,373 656,035 562,619 807,827 944,684 1,114,545 Minority Interest 2,466 3,071 3,705 4,207 4,333 8,883 9,894 11,056 Debt 303,622 471,490 557,223 549,545 692,115 630,999 617,916 599,832 Deferred Tax 14,638 -23,743 -24,094 -7,748 -13,900 4,397 4,397 4,397 Total Capital Employed 512,440 777,803 913,206 1,202,038 1,245,167 1,452,105 1,576,890 1,729,830 Gross Fixed Assets 715,231 897,791 1,205,654 1,329,282 1,582,066 2,078,141 2,398,328 2,750,328 Less: Acc Depreciation 396,987 495,125 570,818 688,154 744,241 914,382 1,123,251 1,355,213 Net Fixed Assets 318,245 402,667 634,836 641,128 837,825 1,163,758 1,275,077 1,395,115 Goodwill on consolidation 35,848 40,937 41,024 49,788 46,970 48,365 48,365 48,365 Capital WIP 117,289 159,458 60,000 332,626 286,401 70,000 70,000 70,000 Investments 25,443 89,177 90,577 106,867 153,367 204,661 217,594 238,818 Current Assets 506,995 711,679 829,538 1,046,103 1,034,685 1,124,179 1,161,184 1,259,199 Inventory 140,705 182,160 209,690 272,709 292,723 333,990 342,717 390,073 Debtors 65,257 82,368 109,427 105,742 125,792 129,900 150,461 167,174 Cash & Bank 114,096 182,381 211,127 297,118 321,158 328,800 330,016 357,463 Loans & Adv, Others 186,937 264,769 299,295 370,534 295,012 331,490 337,990 344,490 Curr Liabs & Provns 491,378 626,116 742,769 974,474 1,114,081 1,213,607 1,195,329 1,281,667 Net Current Assets 15,616 85,564 86,769 71,629 -79,396 -89,428 -34,145 -22,468Total Assets 512,440 777,803 913,206 1,202,038 1,245,167 1,397,357 1,576,890 1,729,830

Tata Motors

31 May 2016 11

Financials and Valuations Ratios Y/E Mar 2011 2012 2013 2014 2015 2016 2017E 2018E Basic (INR) Fully Diluted EPS 28.8 37.0 30.9 44.1 43.6 36.9 42.3 53.3 Normalized EPS 16.5 20.9 11.3 17.8 14.1 5.9 7.0 14.2 Cash EPS 43.7 55.2 54.9 78.5 85.2 87.0 103.8 121.6 Book Value 60.1 103.0 118.0 203.8 174.8 237.9 278.2 328.2 DPS 4.0 4.0 2.0 2.0 0.0 1.0 3.0 4.0 Valuation(x) P/E 9.6 11.4 9.9 7.9 Normalized P/E 29.9 70.8 60.1 29.6 Price / Book Value 2.4 1.8 1.5 1.3 EV/Sales 0.6 0.6 0.5 0.4 EV/EBITDA 3.7 3.8 3.4 2.8 Dividend Yield (%) 0.0 0.2 0.7 1.0 Profitability Ratios (%) RoE 48.4 45.9 28.3 27.5 23.1 18.3 16.4 17.6 RoCE 25.0 29.1 17.0 19.2 15.7 14.3 12.4 13.2 RoIC 45.3 60.2 30.6 38.7 39.2 27.7 20.0 20.9 Turnover Ratios (%) Asset Turnover (x) 2.4 2.1 2.1 1.9 2.1 1.9 1.9 2.0 Debtors (No. of Days) 20 18 21 17 17 17 18 18 Inventory (No. of Days) 42 40 41 43 41 44 41 42 Leverage Ratios (%) Net Debt/Equity (x) 1.0 0.9 0.9 0.4 0.7 0.4 0.3 0.2

Cash Flow Statement (INR Million) Y/E Mar 2011 2012 2013 2014 2015 2016 2017E 2018E Adjusted EBITDA 178,150 237,005 265,689 374,029 421,138 402,367 443,279 502,710 Non cash opr. exp (inc) -34,790 -40,255 -83,053 -116,450 -139,635 -112,170 -81,972 -81,104(Inc)/Dec in Wkg. Cap. -40,484 -22,801 -680 57,744 -36,718 17,674 -54,066 15,769Tax Paid -13,912 -17,679 -22,231 -43,083 -41,940 -10,430 -39,485 -45,301Other operating activities 21,865 32,950 68,959 96,204 156,761 -15,640 1,012 1,161CF from Op. Activity 110,830 189,219 228,684 368,444 359,606 281,801 268,768 393,236(Inc)/Dec in FA & CWIP -81,128 -137,829 -187,203 -269,252 -315,396 -279,674 -320,188 -352,000Free cash flows 29,702 51,391 41,481 99,192 44,210 2,127 -51,420 41,236(Pur)/Sale of Invt 4,158 -72,976 -54,984 -36,611 -37,570 -51,294 -12,933 -21,224Others 0 0 0 0 0 0 0 0 CF from Inv. Activity -76,970 -210,804 -242,188 -305,863 -352,966 -330,968 -333,120 -373,224Inc/(Dec) in Net Worth 32,550 1,386 7 1 0 139,062 5,344 5,344Inc / (Dec) in Debt -11,677 113,054 45,082 30,092 122,288 -61,115 -13,084 -18,084Interest Paid -24,691 -33,737 -46,560 -61,706 -63,070 -46,234 -33,585 -30,993Divd Paid (incl Tax) & Others -10,195 -15,031 -15,087 -7,220 -7,204 -4,092 -12,276 -16,368CF from Fin. Activity -14,013 65,672 -16,558 -38,832 52,014 27,621 -53,601 -60,101Inc/(Dec) in Cash 19,848 44,087 -30,061 23,749 58,655 -21,545 -117,953 -40,089Add: Opening Balance 67,920 104,244 153,550 142,531 152,629 211,283 189,738 71,785Closing Balance 87,768 148,330 123,488 166,280 211,283 189,738 71,785 31,695

Tata Motors

31 May 2016 12

Corporate profile Exhibit 1: Sensex rebased

Source: MOSL/Bloomberg

Exhibit 2: Shareholding pattern (%) Mar-16 Dec-15 Mar-15

Promoter 33.0 33.0 34.3

DII 19.2 17.4 11.0

FII 22.1 23.6 47.5

Others 25.7 26.0 7.2

Note: FII Includes depository receipts Source: Capitaline

Exhibit 3: Top holders Holder Name % Holding

Life Insurance Corporation Of India 6.3

ICICI Prudential Life Insurance Company Ltd 2.1

Government Of Singapore 1.4

ICICI Prudential - Mutual Fund 1.1

NA 0.0

Source: Capitaline

Exhibit 4: Top management Name Designation

Cyrus P Mistry Chairman

Ratan N Tata Chairman Emeritus

Guenter Butschek Managing Director & CEO

Satish B Borwankar Executive Director

H K Sethna Company Secretary

Source: Capitaline

Exhibit 5: Directors Name Name

Falguni Nayar Nasser Munjee

Nusli N Wadia R A Mashelkar

Ralf Speth Subodh Bhargava

Vinesh K Jairath Ravindra Pisharody

*Independent

Exhibit 6: Auditors Name Type

Deloitte Haskins & Sells LLP Statutory

Mani & Co Cost Auditor

Source: Capitaline

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

MOSL forecast

Consensus forecast Variation (%)

FY17 42.3 43.3 -2.4

FY18 53.3 52.8 0.9

Source: Bloomberg

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

Tata Motors

31 May 2016 13

N O T E S

Tata Motors

31 May 2016 14

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