Tata Motors Eyes ‘Near-Zero’ Debt In Three Years
The Tata Group’s working on a deleveraging plan to ensure Tata Motors and JLR pare debt and turn cash positive in two years.
Tata Motors Ltd. plans to become a “near-zero debt” vehicle maker in three years, according to N Chandrasekaran.
The Tata Group—which makes cars in India under the Tata brand and owns Jaguar Land Rover—is fully committed to both the units, the group’s chairman told shareholders at the automaker’s annual general meeting on Aug. 25.
We’re working on a strategic deleveraging plan to ensure that our Indian unit and JLR pare debt, improve portfolios and turn cash positive in the next two years, he said. Tata Motors has a net automotive debt of Rs 48,000 crore.
“We’ve also set a target for Tata Motors to generate positive free cash flow from FY22 onwards,” he said, adding that investments in the automaker have halved during the ongoing financial year and it aims to manage it “tightly” in the future.
Tata Motors, he said, will also look to unlock investment in various non-core businesses. Chandrasekaran said it will focus on increasing sales and service for both JLR and domestic passenger vehicle business in the next 2-3 years.
Shares of Tata Motors rose 5.3% on the BSE following the comments at the AGM.
This comes as the firm had already announced a cost-savings programme that would free up nearly Rs 1,500 crore by the end of the ongoing fiscal, and a cash improvement programme that would save nearly Rs 6,000 crore in the years ahead.
“JLR undertook a host of initiatives to drive efficiencies so that it improves its profitability despite decreasing volumes and reduced its cash outflows compared to previous years,” Chandrasekaran said.
And the passenger vehicle business, which is now being hived off as a separate legal entity, will turn cash positive by FY23, he said.
Chandrasekaran said Tata Motors is committed to JLR’s business and isn’t seeking funding from the U.K. government.
The Indian automaker, which hasn’t provided dividends to shareholders in the last four years, said value creation and dividend is the firm’s top priority and it’s working on that. “The last 3-4 years there has been no room for us to pay the dividends.”