Tata Motors Limited

Future Strategy & Growth Plans

India Unplugged : Walking the Talk

Kotak - Goldman Sachs Conference

September 2005

1
1. Performance
2. Commercial vehicles
Growth Drivers
Market Strategy

3. Passenger Vehicles
Growth Drivers
Market Strategy

4. Vehicle Financing
5. Financial Management
6. Subsidiaries

2
 Net Revenue and Operating Margin

Unconsolidated Rs. bn Consolidated

Rs. bn
200 195.33 20%
200 12.5% 20%
174.2 14.9%
14.2% 139.25
150 15%
150 132.2 15% 12.5%
12.5% 12.8%

9.1%
9.1% 96.1
91.0 100 10%
100 10%
79.1
75.0

50 5% 50 5%

0 0% 0 0%
FY02 FY03 FY04 FY05 FY02 FY03 FY04 FY05

Net Rev EBITDA margin Net Rev EBITDA margin

1QFY06 1QFY05 1QFY06

Net Revenue: Rs. 38.8 bn Net Revenue: Rs. 35.7bn Net Revenue: Rs. 44.6 bn
EBIDTA Margin: 12.6% EBIDTA Margin:12.0 % EBIDTA Margin:12.5 %

3
Profit after Tax

Unconsolidated Consolidated
Rs. bn Rs. bn
13 12.4
14 13.6
11 12

9 8.1 10 9.1

7 8

6
5
3.0 4 3.2
3
2
1
0
FY02 FY03 FY04 FY05
-1 FY02 FY03 FY04 FY05 -2
-0.5 -1.1
Last 3 Years CAGR of 103% Last 3 Years CAGR of 106%

1QFY06 1QFY05 1QFY06

PAT: Rs. 2.7 bn PAT: Rs. 2.2 bn PAT: Rs.2.6 bn

4
 Negative Working Capital

Inventory
Days of sale Net Working Capital
60 Days of sale
41 39 38 20
40 15
27 29 10
5 0
20 -
(5)

6
02

03

04

05

0
FY
FY

FY

FY

FY
0 (10) (6)

1Q
FY02 FY03 FY04 FY05 1QFY06 (15)
(20)
(25) (17)
(23)
Days of sale Receivables (non-HP) (30)
(35)
30
(40)
25
(40)
18
20
12
9
10
7 Negative Working Capital
Maintained
0 Calculations exclude Investible surplus and vehicle
FY02 FY03 FY04 FY05 1QFY06 financing loans

5
Strong Balance Sheet

Net Debt & D/E (on Net basis)

Rs. bn
35 0.93 1.0
29.9
30
0.8
25
0.56 0.6
20 0.15
13.9 0.4
15 11.8
10 0.2
5
0.0
0
-5 (0.9) (0.2)

-10
(0.15) (5.5) (0.02) (0.4)
FY02 FY03 FY04 FY05 1QFY06

Net Debt D/E (on Net basis) RHS

6
Optimizing Returns on Capital

ROCE ROE

45% 42% 35% 32%

40% 36% 30%
26%
35%
25%
30%
20%
25%
20% 17% 15% 12%
15% 10%
10% 5% 5%
5%
0%
0%
FY02 FY03 FY04 FY05
FY02 FY03 FY04 FY05 -5% -2%

Note : Capital Employed excludes Investible Surplus for ROE and ROCE calculation

7
1. Performance
2. Commercial vehicles
Growth Drivers
Market Strategy

3. Passenger Vehicles
Growth Drivers
Market Strategy

4. Vehicle Financing
5. Financial Management
6. Subsidiaries

8
The Indian Commercial Vehicle Industry is similar to Global CV Industry
due to its cyclic nature and low volumes

350
300 CAGR: 6%
Nos in '000

250
200
150
100
50
0
72 1
74 3
76 5
78 7
80 9
82 1
84 3
86 5
88 7
90 9
92 1
94 3
96 5
19 - 9 7

02 1
04 3
5
00 9
-7
-7
-7
-7
-7
-8
-8
-8
-8
-8
-9
-9
-9

-0
-0
-0
-9
70

98
Indian CV
Characteristics Strategy for Countering Cyclicality
Industry

Similar with Cyclical Retain high Market Share in

Global CV existing segments & enter
Industry Low Volume (in ,000s) less cyclical segments in India
Build Strong position in emerging
Dis-similar Secular long term growth trend segments in new geographies
to Global CV
Industry Early stage of road development Lower Break Even Point

9
The Indian CV Industry, which has seen an up-cycle for the last 4 years,
could be influenced by several factors
Growth Drivers
Continued road development in the next 5
years
GDP growth rate of 6% to 8%
Low interest rates and availability of finance
Possible opening of trade with Pakistan
Entry of global players would help in market
expansion
Retarding Factors
Increasing Oil price Now, $ 70/bbl.
Railways Network plans
- Separate Rail corridor for freight
- Discounts for bulk freight movement
Continuation of high increase of input prices
Development of OIL pipe-line network
10
Growth in road development activity would be the single most
important factor to move forward the Indian CV Industry

1000 Stage
900
Dramatic impact in
800
Germany
Golden
initial stage of Quadrilateral
700 road development France
UK
MHCV / m population
Truck penetration

600
Turkey
500
Spain
NSEW
4 Corridors
Portugal
400 Australia
Russia
Argentina
300 Brazil 3
200 Feeder
China
South Africa 2 Roads
100 Indonesia 1
India
0
0 0.5 1 1.5 2
Road Density
Paved Highway (km) / Area (km2)
43,000 KMs (USD 25 billion)
Source: VDA (German Automotive Association), Worldbank, DRI Automotive report

11
In coming years, domestic CV market would witness entry of
International Players with products for various segments

ITEC with M&M

Dong-Feng with ESSAR

Tata Motors is developing the
products to have matching or
superior products and with value for
MAN with Force Motors
money offerings

Daimler Chrysler

Hyundai

12
Our understanding of the Customer Segments has shaped our Product Strategy
which would enable us to offer competitive vehicles till 2010 & beyond

Tata Ace

World Truck

World Pickup

World LCV

New bus

Synergies of our In-house R & D Centre, TDCV-Korea, Hispano-Spain & external

consultancy would support in timely launch of these products

13
1. Performance
2. Commercial vehicles
Growth Drivers
Market Strategy

3. Passenger Vehicles
Growth Drivers
Market Strategy

4. Vehicle Financing
5. Financial Management
6. Subsidiaries

14
Personal Mobility is positively correlated to per capita GDP

15
Customer Habits & Market Segmentation

Sale of Cars by Price Bands

Cars priced below Rs. 500,000
account for nearly 80% of the
market. 100%

80%

Vehicles priced between Rs. 60%

Sales
300,000 500,000 form the 40%

largest segment in the passenger 20%

car market. 0%
2002 2003 2004 2005

<Rs. 300 k Rs. 300 - 500 k Rs. 500 - 700 k

Indian customers are highly Rs. 700k-1mn > Rs. 1 mn
discerning, educated and well
informed. They are price sensitive Cost of Ownership of a Basic Car
and put a lot of emphasis on value 250
for money

Monthly Costs (USD)

200
61
Preference for small cars. Small 150
cars are socially acceptable, even
amongst the well-off 100 211
150
50
Preference for fuel efficient cars
with low running costs. The Tata 0
Indica has the lowest running cost EMI Other Costs Total Monthly
at Rs 2.30 per km. Expenses

16
Key Market Drivers - Social

30% 60%
% Urbanization - 2002
50% -- 2007
Growth in urbanization 40%
27%
30%

% Households
20%
Upward migration of 24% 10%
household income levels 0%
0 5,000 10,000 15,000 20,000
21% Household Income p.a. (USD)
1981 1991 2001
Low interest rates translating
to low financing and
acquisition costs hence Reduction in Consumer Financing Rates
greater affordability.

85% of Cars are financed in

India (15% in China)

17
Indian Market Footprint

Product Segment Market Share

Mini
11.00%

UV
16.50% 3
MPV
6.20%
3 Compact
46.80%

Luxury
0.20%

Executive
0.50% 3
Premium
2.90% C1
4.00% C
11.90%

Tata Motors current product range addresses 75% of the market

18
Proposed launches in next few years

Indica Family New UV Platform

- Indica variants
- New Generation Indica Sumo Family
- Sumo Variants
Indigo Family
- Indigo SX Safari Family
- Indigo / Marina variants - Dicor
- New Generation Indigo
Crossover
Small Car

19
A customer focused field approach is under deployment

Domestic:
1. Expansion of network & penetration into smaller towns in pace
with road development
2. Customer care a competitive edge
3. Robust processes
Sales Planning (Unique and finest in the world)
Customer Relationship Management (SIEBEL Largest deployment in the world)

International Business:
1. Choosing countries with highest market potential in customer
segments conscious of overall value
2. Creating products to be amongst the top 3 players in each chosen
segment
3. Customer care a competitive edge
Low spares price
Relationship of OE & Customer

20
1. Performance
2. Commercial vehicles
Growth Drivers
Market Strategy

3. Passenger Vehicles
Growth Drivers
Market Strategy

4. Vehicle Financing
5. Financial Management
6. Subsidiaries

21
Challenges for growth of captive financiers in Indian context

Indian auto-finance industry Critical Success Factors

transitions Access to low cost
Consolidation funds
Banks focus on Better credit decisions
penetration and volumes & controls
Competition Cut intermediaries to Thin overheads with
Retail banking protect margins faster loan processing
increasingly became
NBFCs with high cost Relationship with
focus area for leading
structures became dealers and OEM
private banks
unsustainable
Large PSU banks
Dominant Phase turned aggressive-
Consolidation of NBFCs
Auto financing with banks (ALFS,
leveraging their
dominated by NBFCs Kotak, 20th Century)
network
and captive financiers Niche NBFCs / co-op
Softer interest rates
Banks were only banks continue to
fueled substantial drop
lenders to NBFCs maintain focus
in IRRs
(Sundaram, Chola)
Till 1999 1999-2003 2003-2005 2005 and beyond

Retail Banks with low CoF & wide branch network pose threat to captive financiers in
India
22
 Auto Finance Market Scenario (FY 04-05)

Retail Finance
Industry Volume
(crs)
Commercial Vehciles 320000 21000
Passenger Car 1000000 41000
Total 1320000 62000

Share of major players in the market

ICICI Bank
Others 22.6%
30.9%
Banks have dominant market
LGF share in Auto financing,
1.0%
leading NBFCs are stagnating
Chola HDFC Bank
their growth
1.9%Kotak 12.9%
2.6%
Sundaram ALFL Citi Financial Cheap CoB has become CSF
SBI Mahindra TMF
3.9% 4.5% 5.2%
5.6% for players
4.0% 4.8%

TMF is ahead of leading NBFCs in terms of disbursal

23
Tata Motors Finance: Market leader in CV, among top 3 in PC (Tata Vehicles)

Commercial Vehicles Others

ICICI
20%
20%

HDFC
TMF 11%
25% Citi
Sundaram
14%
10%

Passenger Car
ICICI
Others 33%
41%

TMF HDFC
11% 16%

24
Tata Motors Finance strategy

Realignment of TMF business sourcing channels

Dealer driven business sourcing
Direct sales agents ( DSAs)
Direct marketing for fleet customers in CV and corporate clients in PC
Marketing Service Providers to increase Feet on street

Increase presence in M&HCV fleet segment

Operating leases for high end M&HCV and for car fleet owners
Refurbishment of old vehicles
Used vehicle financing in CV and PC
Improve collection efficiency, credit control & remedial measures to reduce
overdues

25
 Focus Areas for Vehicle Financing Business

Increase penetration
Realign the marketing channel ( Dealer and Direct) to compliment each other
Consolidate the strong position in MUVs and LCVs
Increase the presence in car and Fleet segment in M&HCV
Maintain strong position in rural market ( B and C class cities)

Better risk management and improve collection efficiency

Constantly thriving for cost rationalization

IT enabled service offerings to increase operational efficiencies and provide better

service to customers

New business initiatives with higher margins

Refinance, operating leases, insurance brokerage, refurbishment

26
1. Performance
2. Commercial vehicles
Growth Drivers
Market Strategy

3. Passenger Vehicles
Growth Drivers
Market Strategy

4. Vehicle Financing
5. Financial Management
6. Subsidiaries

27
Organic Growth Plans

Rs. 60 bn capex programme to be implemented over five years

beginning April 04.
Targeted investment areas

New Product Introduction

Capacity Expansion

Enhancing ERC capabilities

Product up-gradation

Sustenance Expenditure

28
Cost Reduction Drive

Value Engineering
Target Costing
E Sourcing Rs. 10 bn cost
and Global Sourcing
reduction targeted
Supplier base rationalisation
over the next
Process Improvement
3 years
Productivity Improvement
Outsourcing

29
1. Performance
2. Commercial vehicles
Growth Drivers
Market Strategy

3. Passenger Vehicles
Growth Drivers
Market Strategy

4. Vehicle Financing
5. Financial Management
6. Subsidiaries

30
Tata Technologies 94.3% Subsidiary
Tata Technologies is a provider of Engineering & Design and enterprise services in the
field of Engineering Automation and PLM solutions to automotive and aerospace OEMs
(FY05 revenue at Rs 1.7 b)

To pursue its growth plans globally, the company has recently announced its intention of
acquiring 100% stake in a UK based company named INCAT. The following advantages
are seen with the acquisition:

Increased scale of business. Current revenue size of Rs. 1.7 billion to over Rs.6.7 billion

Access to a broader customer base in the automotive, aerospace and manufacturing industries

Wider presence in all major geographies and markets

Access to INCATs high end consulting skills and project management capabilities.

INCATs areas of Knowledge management and appropriate IPRs to provide wider product
range

31
Tata Technologies 94.3% Subsidiarycontd.

The offer price for INCAT acquisition is 220p per share which is at 4% premium
to the current market price that time. The implied market capitalisation is GBP
53.4 mn.

The exit PE for this transaction is around ~17x. INCAT is a cash positive (~ GBP
7.4 mn) company and the net cost of acquisition is GBP 46.0 mn

The integration will be completed within 100 days beginning October 2005

32
Tata Daewoo- Heavy Trucks (S. Korea) (100% Subsidiary)

Performance in 1QFY06
Margins under pressure on account of appreciation of Korean Won against the dollar to
the extent of 15% in the last twelve to fifteen months.
26% decline in in the Commercial vehicle industry in Korea during April- June 2005
TDCV maintained its market share at 29%.
Debt reduced from USD 51 mn to USD 30 mn.

Strategy
MCVs to be manufactured in S.Korea
TDCV products to be exported through TML international business channel
Operational efficiencies to be improved through cost reduction, Implementation of IT
systems and debt restructuring.
Integration with TML for product design and development

33
TELCON Construction Equipment (80% TML : 20% Hitachi JV)

Discussions with Hitachi in advanced stage for a broadbased partnership

Technology Upgradation and Product Range expansion
Larger Excavators (>200Tons),Road making equipments, Road Recycling Train,
Dumpers for Domestic & Export Market, Multi Utility Loader
Proposed Initiatives
Focus on Full Maintenance, Annual Maintenance Contract
Reconditioning and Aggregate Rebuilding
Focus on Components Export to other OEMs in the world
ICR (Integrated Cost Reduction) with Mckinsey
TOC (Theory of Constraints) from Ms.Goldratt Consulting for better inventory
management
Setting up of R&D Centre
Vendor up-gradation to help meet future challenges

34
HVAL & HVTL Heavy Axles and Transmission (100% subsidiaries)

Discussions to bring the strategic partners at an advanced stage.

HVAL/HVTL will support Tata motors in its advanced power train

implementation strategy.

Investments planned for capacity expansion, productivity, quality

improvement.

Exploring growth opportunities outside of Tata Motors.

35
Challenges Ahead

Increase in input prices to continue to put pressure

on operating margins

Rising fuel prices

Increasing competition across all vehicle segments

Uncertainty about the commercial vehicle cycle

Execution of product plans

36
Thank You

37