Amid widespread economic turbulence, automobile major Tata Motors (TML) is struggling with the mounting debt in its kitty. The gross debt of the company, which includes Indian automotive operation, Jaguar land Rover (JLR) and automobile lending arm Tata Motors Finance (TMF), has risen to Rs 1,24,788 crore from Rs 1,06,174 crore a year back, a jump of 17.53 per cent. The gross debt was Rs 1,17,571 crore in September 2019.
The consolidated net debt of the automotive business went up to Rs 48,282 crore compared to Rs 28,391 crore. It went up to Rs 50,065 crore in September 2019 before the slight decrease. The consolidated debt-to-equity of the automotive division increased to 0.77 from 0.47. It stood at 0.96 in September. The standalone net debt of TML's automotive business in India has increased to Rs 20,883 crore from Rs 15,658 crore a year ago. In September, the net debt was Rs 23,685 crore. Net debt-to-equity has increased to 1.14 as against 0.71 in March last year.
The holding company of Tata group, Tata Sons had infused fresh equity of Rs 6,500 crore in the December quarter and increased the promoter holding to 42.39 from 38.37. Besides, the company had raised Rs 3,500 crore through external commercial borrowing (ECB) to meet repayments, refinancing and working capital requirements.
The rise in debt is sharp at a time when the domestic auto market is going through a severe drop in sales, especially after the coronavirus outbreak and British subsidiary JLR is feeling the heat in China (it posted a net loss of 175 million pound in China joint venture in the last financial year). The consolidated revenue of the company fell 14 per cent to Rs 2.61 lakh crore in the last financial year, while the net loss reduced to Rs 11,975 crore from Rs 28,724 crore. The standalone revenue fell 36.5 per cent to Rs 43,928 crore. But the company in India has posted a loss of Rs 7,290 crore, compared to a profit of Rs 2,021 crore in the previous year. JLR's loss reduced to GBP 469 million from GBP 3.3 billon. With this, the company has posted negative free cash flow of over Rs 9,000 crore at consolidated level for the automobile business in the last two financial years.
Tata Motors Finance (TMF), the auto financing subsidiary of TML is in trouble as gross non-performing asset (NPA) has risen to 5.1 per cent, compared to 2.6 per cent in March 2019. The net NPA rose to 4.4 per cent from 1.4 per cent. With the rise in NPA, the market share of TMF has also increased to 30 per cent from 26.2 per cent. There is a 3.7 per cent reduction in the asset under management (AUM), which fell to Rs 36,881 crore from Rs 38,311 crore a year ago.
The company said that the disbursals slowed down by 32 per cent to Rs 15,029 crore led by long haul truck slowdown. So they are implementing the asset-lite strategy by selling a portion of their loan portfolio. In the last financial year, the company achieved total securitisation and assignment of Rs 9,325 crore. The lower economic growth and lockdown impact collections of the company.
However, the cost-to-income ratio reduced to 51 per cent, compared to 67 per cent in the previous year. TML has liquidity of Rs 2,643 crore in March and it raised Rs 5,200 crore in the present quarter.
The company is executing overall cost reduction across its automobile verticals. JLR has already achieved GBP 3.5 billion cost reduction and aims to achieve GBP 1.5 billion in this financial year through investment prioritisation, rationalisation of working capital and the other cost reductions, including at the manufacturing, material and manpower fronts. The Indian division looks to reduce the cost by Rs 6,000 crore, cutting down investments by Rs 3,000 crore and reducing working capital and costs by another Rs 3,000 crore