Tata Motors Limited analyst Q&A

Thank You Girish and Ramanan. So, the first question is from Amyn Pirani, JPMorgan. Exports have been growing quite sharply for you as well as other CV p eers. Is it just a low base effect or are ther e new opportunities which are opening up in terms of geographies or customer segments?

So I mean it is a combination of both, I would say post Covid, the international business was quite subdued. I think in the recent past, we've had some markets opening up. First, Nepal opened up and led to good volumes. But unfortunately, we had another level of political instability there. Therefore, Nepal is once again down. But I think Sri Lanka market has opened up now with the economy improving there. But in addition to that, we have clearly seen an improvement in Middle East as also Africa. These markets are also, therefore, leading to higher demand. So, I would say it is a combination of lower base as well as increase in some of these markets that I mentioned.

The next question is from Kapil Singh. What is the demand outlook for MHCVs and LC Vs for FY '26? And have you seen any impact because of the GST cuts on demand?

Yes. So, Kapil, I think as I said, the GST rate cut has led to a dual impact on commercial vehicle demand. First, I would say a primary or a direct impact. So, we have those B2C customers who don't necessarily take input tax credit. For them, the reduction in GST has been a direct benefit and that has led to an increase in demand. This is applicable more in LCVs and small commercial vehicles. In addition to this, the reduction in GST on spare parts, tires, etc. have also led to a reduction in their operating expenses, which will lead to improvement in TCO by almost 1%-1.5%. That is another area which is going to help. But the secondary impact on demand is this GST rate rationalization has led to general increase in consumption in many categories, which is, therefore, leading to higher production, and therefore, higher freight available, both inbound and bond, which one can see in terms of requirement of more number of vehicles increasing utilization. This increasing utilization clearly will lead to higher demand. And with respect to this, therefore, we expect in H2, across the segments, there will be a single -digit to higher single -digit growth as we go ahead. I think the Q3 has also started on a good note. So that's how we look at the demand going ahead.

On the market share, another question from Kapil Singh. There is a slight dip that we've seen in the market share across segments. What are your plans to pull this back? And how do you think of discounting in a post-GST cut scenario? Has it really come down? Page 6

Yes. So, Kapil, I think yes, in the presentation also, Ramanan mentioned that we started the quarter on the subdued note in market share. But after that, I think in trucks, that is both heavy commercial vehicles, and intermediate, light, medium commercial vehicles, both these segments, I think we have rebounded very strongly. We know that we will continue this trajectory as we go ahead. We will also be launching some of our new range of products, the model year '26 in both heavy commercial vehicles as well as intermediate light medium commercial vehicles, which will further improve the competitiveness, and this will be a very, very wide range of products that we’ll be launching, with which we are pretty confident that we should be able to continue with the strong trajectory of growth in the trucks share. As far as buses is concerned, I think there are two parts to it. In the private market, actually, we have been doing well and growing market share in both MCV and ICV buses. Where we have suffered is actually some of the tender, businesses tenders that we had lost during the last quarter of previous year. But I think in the quarter gone by, we've been able to win three good tenders, and this quantity will help us to get back the market share pretty strongly in the rest of the year . In small commercial vehicles, yes, our market share remains at the same level, at a lower leve l. But the good part is that after 18 months, we've been able to consistently for two months, retail almost 15,000 vehicles, which is a significant growth over otherwise what we were retailing. We're continuing this retail growth as we go ahead in the rest of the year, and this will, therefore, also lead to an improvement in share even in this segment. So that's the status on market share.

Next question again from Kapil Singh. We'II finish with Kapil and move on. What percentage of revenue comes from non-cyclical businesses? And what is the mix of your key subsegments and how you expect them to grow?

Kapil, thank you for that question. So, what I would say is that today the mix of noncyclical business revenue as part of the overall revenue is a healthy double digit. We expect this to grow with the growth in the digital business. I think Girish shared that as part of the business update, too. So as the digital business grows, I think this percentage only gets stronger for us.

Next questions are from Gunjan. There are a few questions in there. So maybe I'll just break it up. Can you talk a little more on the difference between CV segment and consol financials? And where is the electric bus business captured and are there any losses on that count? And what are the other businesses in consol?

So I think Gunjan, if you actually look at our safe harbor statement, we've called out the CV segment quite clearly there. There is no change in this segment versus what we were reporting earlier as part of the overall consolidated entity earlier. And to your second question in terms of the e -bus business, I think you're referring to the smart city operation. That is part of the Commercial Vehicle segment only. Page 7 That's the number that we kind of shown as part of Commercial Vehicle segment. What kind of comes in consol, as I had kind of shared this earlier in the safe harbor statement also; in addition to the Commercial Vehicles segment, this includes the un-allocable and other items, largely the corporate functions and some of the other subsidiaries and associates like ACGL, Freight Tiger . That kind of comprises from a consol standpoint. That also if you see the other details on the safe harbor statement, we have called them out there.

Another question from Gunjan. Any color on margin drivers, commodities, pricing, discounting for trucks?

I think in terms of the EBIT walk that we kind of shared if you've seen, the key driver, largely the 2% improvement in EBIT year -on-year is kind of coming from volume and favorable realization, and that's what is kind of driving the EBIT higher.

Sir, any update on Iveco? How is the acquisition being funded? How much debt have you taken it?

I think we are still at the stage in Iveco where we are securing the approvals, and we expect all the approvals to come through by around February-March. The initial round of funding, as I said in the earlier calls also, is going to be through a bridge loan. I think that has been completely tied up, and I had also touched upon that in the beginning to say that there were overwhelming response from the banking partners on that. So, our initial funding is going to be through bridge loan. Subsequently, for the refinancing of the bridge loan, we will evaluate all the options, equity, debt and at that right time we will kind of balance the equity and debt accordingly.

Sir, how are things shaping, this question is from Raghvendra Goyal of Ambit. How are things looking on the DFC front? And do you expect any material impact on MHCVs over the next three to four years?

So I, have actually given commentary on this in the earlier analyst meets also, but I will repeat. As we see, there are two dedicated freight corridors. One is Northeast and the second one Northwest. As far as Northeast is concerned, it is fully operational. Northwest is operational in parts and should get operational fully in maybe next few quarters. Now as far as Northeast is concerned, bulk of the transportation on this sector is more of bulk commodities, which is minerals and raw materials. And large part of this was anyway moving through rail. With this change, I think the movement will move from the main tracks to the dedicated freight corridor. So, impact on road transportation, therefore, for of the Northeast corridor is likely to be low. Page 8 As far as Northwest corridor is concerned, I think here, there is a significant amount of container traffic supporting export/import, and this container traffic, which happens on tractor trailers today, part of it is likely to move to the rail, which will then lead to some part of the tractor demand moving to railways. Now will this lead to a contraction in tractor segment? So, the assessment currently is no. It will reduce the likely growth rate of the tractor segment. But at the same time with the dedicated freight corridor on the Northwest side and increasing trade, this will actually lead to an increase in demand for ICVs and MCVs because the dedicated freight corridor will not be point-to-point, but will be more so to hub to hub, and therefore, to support it more of ICVs and MCVs are required. So, net-net, if one has to look at only from a volume perspective at an overall CV level, actually, DFC will lead to an increase. But within that, it will have an impact, negative impact on the tractor trailer segment.

I think Kapil has asked this, again discounting question, what is the outlook post GST cut? Yes. Sorry, Kapil we missed it. See, so let me answer it from our perspective how we have handled the discount post GST. So, we have been very, very transparent. The next day we actually passed on the entire GST benefit. And to that extent, therefore, there was a reduction in the total discount also. So absolute amount of discount has been reduced to the extent of the percentage GST reduction. But whether this milestone or this step, did it lead to a reduction in discount as a percentage of ESP , no, not because of this milestone. That is happening, but in some segments, it is due to the inherent demand/supply situation and competitiveness of the products, okay? So, I hope I've been able to answer your question now Kapil.

Our next question from Aditya. Can you explain the loss on Tata Capital fair value? Ramanan, you want to take that?

Yes. Thank you for that question, Aditya. As you may be aware, Tata Motor Finance has kind of got merged into TCL and the Board approval for that merger came around June 2024. And as part of that whole exercise, the valuation was carried out, looking at comparable peers and everything and the value was fixed. Subsequent to that, October ’25 is when Tata Capital IPO happened. The listed price on the IPO turned out to be almost 20% -25% lower than the earlier expected valuation price. Hence, as per the Accounting Standards’ requirement, we had to do a mark-to-market adjustment on this. That is the reason for the ₹ 2,000 crores of loss that has kind of come through.

Next question from Jay Kale of Elara Capital. In MHCV a lot of replacement demand was expected to kick in and drive the industry growth. Is that really playing out? And what is your assessment of the average fleet currently?

Yes. So, see, as I've said in the past, there is not much dependable and triangulated data on this particular aspect to give you a very firm response on replacement demand and what part of the demand is due to replacement. I'll tell you the reason too. See, what happens is, especially when we entered into the BS VI Page 9 regime, the retail customers, and I'm just talking of M&HCV, the retail customers, to a large extent, moved to used vehicles because they were not able to afford the new vehicles, whereas the fleet owners who buy new vehicles have been changing their vehicles in four years because of the continuous improvement in TCO of the vehicles. But will one call that as a re placement demand? No, because the fleet owners were then selling their vehicles to the retail customers. Then they were using it for their purposes. Then from a duty cycle perspective, see generally newer vehicles during the warranty period are used on long-haul routes, whereas after, say six years or so, and when the ownership changes, then they go into a short-haul route for specific distances, and that's how the vehicle application and usage continues. I think I would, therefore, rather answer your question by saying that overall fleet utilization is going up, which is what we are able to track on almost 0.9 million vehicles. That, in our view, is a very good sign, and this kind of utilization of the veh icles should, therefore, anyway, lead to demand for the newer vehicles. That's all we will answer your question, Jay.

The next question from Kumar Rakesh. Can you indicate how customer sentiment is trending? And what could be the reason it is improving or deteriorating? Some of the segments that these tippers have seen a demand impact from monsoon for the last two quarters. What was unusual this year? Do you see a risk of underlying weakness?

Yes. So, Rakesh, I think you're right, we used to share this customer sentiment data. But we are now revisiting the methodology of this data to make it more richer, and we will come back with this particular data. The second part of your question, which is tipper going down, yes, you have rightly picked it up. But Rakesh, this is absolutely seasonal . And every year I have seen in from the month of June, the tipper utilization does go down. But let me tell you, post rainy season towards the end of Q2, beginning of Q3, there is a very good improvement in tipper utilization. And actually, tipper market has picked up pretty well. That's how I will answer this question. I think Kapil has another question.

Yes. So, Kapil's question is, are the e-buses like those for PM E-Drive orders eligible for PLI? If not, what is the roadmap for localization and timelines?

Yes. So, Kapil, see, I think in electric buses or electric vehicles, we have two set of incentives. One is the demand-side incentive and second is the supply side incentive. They have no relation to each other. In demand-side incentive, there are three typ es of incentives. First is lower GST , which continues at 5%. Second is some specific states like Maharashtra have come up with further one-time benefit and incentive. Third is the PM E-drive, which you have referred to. That incentive also continues, which earlier used to be called as FAME incentive. So, these demand-side incentives are irrespective of the supply side incentive. The supply side incentive is the production -linked PLI incentive. Now production-linked incentive, yes, is dependent on the localization that one does. The PM E-drive incentive, although being the demand side, Page 10 is also dependent on localization because both are driving localization here. And for both you have to meet different set of requirements to meet theseconditions. I think the buses that we have been supplying, we are meeting all the requirements, and therefore, getting all the incentives, both demand side and supply side. I hope, Kapil, this answers your question.

Let me just have a look at if there are any other questions in the queue. Just give me a moment, please.

Jay has one question. Yes. So, Jay I think you have a question on post change of forward change mechanism from 12% to 18%. Yes. There was a confusion for some time. But I think gradually, we are moving towards a new state of equilibrium. The fleet owners are also taking advice as we understand in many cases, from OEMs, from their own advisers, GST experts, etc. and they are taking their own calls in terms of what kind of mechanism, whether FCM or RCM is what they should be taking. I think there is still a difference between what they have been taking. But gradually, we are reaching a new state of equilibrium.

So I think that's all that we have of the questions. If you have any closing remarks, and then we can close the call.

Okay. So, thank you very much for joining the call. I know I was told that there were multiple calls today. But good that you joined. I think we had a very historical milestone yesterday of the listing ceremony of Tata Motors Commercial vehicle, which will now be named as Tata Motors. We also had a very strong listing, and we are also delighted that we have followed it up with a very strong set of results today with continued growth in margins, very robust cash flows, in fact, this is the first year where w e have turned free cash positive in the H1 itself, highest ever H1 free cash flow and also a very high return on capital employed. So very happy to share those results with you. Thank you for joining. And look forward to further engagements with all of you. Thank you.