Tata Motors Limited

Vijay Somaiya - Chandrasekaran Ramakrishnan - President, Chief Financial Officer and Member of Corporate Steering Committee

Kapil Singh - Nomura Securities Co. Ltd., Research Division Binay Singh - Morgan Stanley, Research Division Pramod Kumar - Goldman Sachs Group Inc., Research Division Jamshed Rustom Dadabhoy - Citigroup Inc, Research Division Jinesh K.

Gandhi - Motilal Oswal Securities Limited, Research Division Sahil Kedia - Barclays Capital, Research Division Govindarajan Chellappa - Jefferies LLC, Research Division Sonal Gupta - UBS Investment Bank, Research Division

Hello, everyone. Thanks for joining the call.

We have with us today, the Group CFO of Tata Motors, Mr. C.

Ramakrishnan; Mr. Vijay Somaiya, Head of Investor Relations and the IR team.

Sir, I'll hand the call over to you for presentation.

Thank you, everyone, for taking out time and joining the call. Thank you, Kapil.

I am Vijay Somaiya. Let me take you through the financial highlights for the Q3 FY '15.

Starting with the consolidated financials. The net revenue for Q3 came in at around INR 70,000 crores, compared to almost INR 63,900 crores similar quarter last year.

EBITDA was slightly lower at 15.4% as compared to 16.6% last year. The profit after tax was close to INR 3,600 crores as compared to INR 4,800 crores the previous year.

For the 9 months financial FY '15. The net revenue came in at INR 1,95,000 crores as compared to INR 1,67,500 crores.

EBITDA was 16.8% as compared to 15.9% last year. And profit after tax came in at INR 12,270 crores as compared to INR 10,000 crores last year.

The net automotive debt equity as of 31st December 2014 on a consolidated basis is 0.15. Moving over to Tata Motors Group India business.

The revenue for third quarter was INR 9,000 crores as compared to INR 7,770 crores in the previous quarter. EBITDA was negative, minus 8.5% as compared to minus 4.3% the last quarter and profit after tax came in at negative INR 2,123 crores as compared to INR 1,250 crores last year.

The EBITDA this year has been impacted by the provision, of which we had taken for Singur, amounting to around INR 310 crores because of the uncertainty in the legal case. And you may also recollect that in the Q3 of FY '14, we had done a divestment of overseas subsidiaries from India to the Singapore holding company, which had resulted in significant profit, and that is why the profit after tax was on the positive side.

So the 2 quarters are not exactly comparable. For the 9 months FY '15, the revenues at the India business came in at INR 25,500 crores, almost flat compared to last year.

The EBITDA margin is at minus 4.5% as compared to 0.2% last year and profit after tax for the 9 months came in at minus INR 3,575 crores as compared to INR 1,150 crores last year. The net debt equity as of 31st December in the India business is 1.22 greater than 1:1.

Moving over to Tata Motors Group Jaguar Land Rover business. The amounts are in GBP million.

The revenue for third quarter FY '15 came in at GBP 5.8 billion as compared to GBP 5.3 billion previous quarter. EBITDA was slightly lower at 18.6% as compared to 19.1% earlier and profit after tax was also lower at GBP 593 million as compared to GBP 619 million last year.

For the 9 months year-to-date. The net revenues came in at GBP 16 billion as compared to GBP 14 billion last year.

EBITDA was slightly higher, 19.4% as compared to 17.6% previous year and the profit after tax was GBP 1.7 billion as compared to GBP 1.4 billion. Because the net debt equity is negative 0.24, because JLR has cash of almost GBP 4 billion on their balance sheet.

Moving over to India business on the commercial vehicles side. We have seen growth in M&HCV industry.

The volumes for Tata Motors grew by almost 42 -- 43% on a year-on-year basis and our market share at 57.7% in Q3. This has been supported because of the positive business sentiment, the firm freight rates, improved freight availability, lower fuel price, easing of inflation and improved profitability of our operators and also because of the early kick in of replacement cycle kicking in.

The light commercial vehicle business, mainly small commercial vehicles, still continues to be impacted because of the low transportation tonnage and the overcapacity of vehicles. And also because of constrained financing environment.

The variable marketing expenses of commercial vehicles continued to remain high in the industry. And in this quarter, we have launched Prima trucks in Nepal and the Ultra range of trucks in Sri Lanka.

Moving over to passenger vehicles of the India business. The passenger vehicle industry saw a growth of 4.3% in Q3 as compared to last year, on the back of low vehicle ownership cost due to reduction in fuel prices, improvement in the environment GDP and for Tata Motors, passenger vehicles grew 4.6% and the car segment grew much stronger at 16.9%, on the back of launch of ZEST, which we had launched in the month of August.

After almost 8 quarters, we also saw our share increase in market share for car segment, which increased by 60 basis points to 6.5%. Our ZEST has won multiple awards in the compact segment since the launch in the month of August.

Moving over to Jaguar Land Rover business. The wholesale volumes for the quarter came in at 122,000 units and the retail volumes at 111,500 units.

The EBITDA for the quarter was GBP 1 billion, and it was reflecting an increase in wholesale volume compared to the previous quarter, solid product mix on the back of Range Rover and Jaguar F-TYPE sales and a strong market mix with sales growing in U.K. and China and also, a favorable foreign exchange, which was impacted by the existing hedge book, mark-to-market and the realized losses on the existing hedge book.

The profit before tax came in at GBP 685 million, which was lower Y-o-Y by GBP 157 million, because of the unfavorable reevaluation of foreign currency debt and hedges and higher depreciation and amortization charges. We have continued to invest for the future and the cumulative spend for 9 months in this financial year is close to GBP 2.3 billion.

Post investment spending, we are still free cash flow positive for the 9 months at around GBP 456 million. And as I said earlier, we have cash and financial deposits, which are close to GBP 4 billion and undrawn committed lines at around GBP 1.48 billion, which are there.

We have started -- we will start the retail sales of Discovery Sport and the China JV Evoque in the fourth quarter of this financial year, and the XE will go into and sale from the first quarter of next financial year. I will not go through the pie chart, which depicts the different share of volumes for this quarter as compared to Y-o-Y last year.

Moving ahead. India business way forward.

The improved economic outlook and business environment is expected to accelerate the sales in next financial year FY '16. On the commercial vehicles side, we have already started seeing the impact on the M&HCV growth, which is expected to be -- which is expected to consolidate in FY '16.

A small commercial vehicles segment, which has been impacted by financing, we expect the recovery to start happening from second half of next year FY '16. JNNURM -- JNNURM Phase 2 continues to drive bus volumes in M&HCV vehicles, and we have a very wide and compelling product range and have plans for launching several new products in Prima and Ultra range of products and in our commercial vehicles and in pickups, Super Ace Mint and Ace Mega, which will provide a strong foundation for future growth.

The growth in exports will continue to be in high focus. In passenger car business, the new products and mid-cycle enhancements will drive growth for us.

It would be a full year for Tata ZEST and Tata BOLT. The recent launches, Nano Twist, Vista VXTech and the all new Tata ARIA will support the volume growth.

We have plans for new generation models, which will drive growth on the back of the launches of ZEST and BOLT. The product strategy for PCBU has already been defined till the year 2020, and we plan to launch 2 new vehicles every year.

And we will continue to avail opportunities for extending to the export market. Moving forward to the Jaguar Land Rover way forward.

2015, '16 is an important and exciting year for JLR with major developments including the launch of new products like Discovery Sport, Jaguar XE in that space. Also the launch of the new engine plant in U.K, which will produce the Ingenium engines.

And as already said, we have also launched the joint venture with Chery in China, and the Evoque will start dispatches to the consumers in Q4 of this year. And we have plans to launch 2 more products in the China JV over the next 18 months.

These developments are expected to support the future growth and profitability of JLR with strong EBITDA margins. However, the EBITDA margins for the coming year 2015-'16 could be slightly lower than the current financial year.

Because of the startup of the China JV, as you are aware, it's a 50-50 joint venture, so JLR would accrue only 50% of the JV profits. Since we are launching the new engine factory in the new China plant and the XE, we would have model mix and launch costs associated with the new products.

And the market conditions across the world are mixed. As you are aware, Russia and Brazil are underperforming, while U.S, U.K.

and China still continue to grow. However, JLR is very confident of significant volume growth in 2015- '16, with the launch of new products.

Moving over to the next page. JLR strategy have continues to invest substantially in future products, technologies and capacities.

For 2014-'15, earlier, we had indicated that our CapEx and product development spend would be somewhere around GBP 3.5 billion to GBP 3.7 billion. At this point of time, we expect this to be slightly lower, close to GBP 3 billion to GBP 3.2 billion.

For next year 2015-'16, we expect the spend to be similar to this financial year, in the range of GBP 3.6 billion to GBP 3.8 billion. Because of our investments in product development expenses and the launch of new products, we expect the depreciation and amortization charge will catch up over the ensuing years.

The strategy for JLR is to continue to drive strong operating cash flows to fund investments and for 2014-'15, after spending GBP 3 billion to GBP 3.2 billion, we expect the net free cash flow to be positive. For 2015-'16, because we are speaking of slightly higher investment and because of the launch cost and the mix effect, we might be free cash flow negative.

However, we are supported by GBP 4 billion of cash and cash equivalents on the balance sheet and undrawn credit lines of around GBP 1.5 billion, which would support the investment plans. With this, I would stop, and we would be happy to take any questions that you may have.

My first question is basically on your guidance that you're guiding for JLR that the margins will be slightly weaker next year versus this year. Are you taking into account the currency, like what kind of currency assumptions are you taking in?

Because currency should be fairly favorable for you next year.

Currency is a nonfactor. I think the general guidance, while there will be volume and richer mix and newer products as well as the top line and the product performance and the business performance is considered to be exciting.

If you are cautioned because of the year in which we will be next year, due to the startup and rampup of many of these major activities, so in this, I will say the currency assumption if you take it as constant, there would be pressure on the margins.

So when you say constant, you mean currency remains where it is today and the head is rolled from there on? Not what it is the average of 2015 -- FY '15?

Yes. I think it's [indiscernible].

I think I would say on average, if it remains at '14-'15 and '15-'16 levels, on a comparable basis...

Okay. Okay.

Okay. And then secondly, on the JLR margins.

This time, where are the incentive being added from U.K., we've been talking about?

We have received the incentive from China, which is around GBP 54 million this quarter.

How big is that?

It is above EBITDA.

Okay. Like, what is the nature of this incentive?

It comes once every year in one quarter?

Yes. It comes once every -- once a quarter, every year.

You are right.

Okay. Okay.

And then lastly, just on the India business apart from the Singur expenses, is there any one-off expense from the ZEST launch or something because the other expenses seem pretty sizeable. Is it mainly car launch expense or, it's because of the mix being slightly more adverse or more serious.

Could you throw some light on that?

More than mix or business issue, I think it is more a question of -- more the effect of one-time provisions. The bigger sort of that was -- comparing between 2 quarters, this quarter and the previous year's quarter.

The Singur of course is a major provision. And we also have additional one-time provisions for receivables and write-offs and inventories and so on.

The effect of launches, et cetera, would be there in the quarter but much less, not really material. But the one-off items had been slightly crowded in this quarter.

My first question pertains to your China business. As you roll forward Evoque into the market through the JV, how are you reading the demand environment in China, especially for imported brands?

Because what we learned is few of the other imported -- few other brands are actually indicating that demand for imported models could be kind of flattish for the year. So how are you looking at for your portfolio on the import basis?

From an order retail and market footprint point of view, the JLR brand vehicle supply from U.K. or from the China production, overall I think the market footprint in the retail section of JLR, I think will see a strong growth.

The demand continues to be quite favorable for new product lineup that we have.

Okay. But would you like to quantify what are the calendar year growth we will be looking for in China?

Beyond saying that we remain positive and confident about it, I wouldn't want to give a number.

Sounds good. And the second question pertains to your exponential line in the JLR result.

If you can just help us walk through what are the quantum of gains and losses on the ForEx side -- on the realized side. That will be very helpful.

Sure. If you look at Q3 FY '15 compared to Q2 FY '15, which is there on a quarterly basis running quarter -- as a running quarter business, the net impact on exchange fluctuation is close to adverse GBP 140 million above EBITDA.

Okay. Around GBP 140 million.

And last quarter, we had a favorable impact, right -- net impact?

Last quarter meaning the previous quarter?

Yes. The Q2.

Sorry. Sorry.

I'm referring to Q2.

Q2 FY '15 was a positive impact, close to GBP 120 million. In Q3 FY '15, the impact is minus GBP 20 million, so you should look at the swing, it is GBP 140 million adverse.

Okay. Sorry.

Apologies for this but I'm just going through the notes on the last quarterly call. In other expenditure, you had talked about GBP 80 million realized gain on hedges and $30 million -- GBP 30 million realized loss on the balance sheet items.

We are talking about EBITDA. So on the loan side, it will be below EBITDA.

Okay. So you're saying between the quarters, there is a GBP 140 million swing with minus GBP 20 million being in this quarter and there was GBP 120 million positive last quarter?

Yes. This is above EBITDA.

And let me speak to you of what happened below EBITDA, which is there. So below EBITDA, Q2 of FY '15, there was an adverse exchange fluctuation of GBP 85 million.

In Q3 of FY '15, we have an adverse exchange fluctuation of GBP 137 million. For the net delta, there is minus GBP 52 million.

If you compare both above EBITDA and below EBITDA, the bottom line impact is as what I have spoken about.

Okay. And so finally, where is this incentive being routed?

The China incentive? Is it being which line item?

It will be in other expenses.

So just to clarify. You mentioned that if you'll have a constant currency, year-on-year between FY '15 and FY '16 in JLR, the margins will be under pressure.

So what I wanted to check is when you mean average currency, you're taking the full run through all the way from the first quarter to the fourth quarter? Or are you looking at the currency as it is today?

The guidance is the performance of '14, '15 compared to '15-'16. Difficult to get into a detailed calculation and weighted average impact and constant impact at a point of time.

In general compared to '14-'15 and '15-'16, currency remaining same between the 2 years. While there will be ...

So how much will the swing be? Like how much compression do we expect and can we expect that in fiscal year '17, this reverses because it will be one-off due to startup costs, et cetera?

There will be 2, 3 impacts. One is the startup of China production and the rampup in China, the full volumes gets shifted from U.K.

production to China production. And whatever the share of the JV profit in the JLR U.K, we will consolidate it at the PBT level -- at the EBITDA level.

And the startup and the rampup of the engine production in the new car from the launch that is happening in '15-'16. We expect there'll be an offset in terms of overall growth in volumes and the demand of the new product in terms of pricing and demand pull.

It's difficult to give a range, but in general I thought it's only fair to say that these impacts will happen in '15-'16, and we should be prepared for that. [indiscernible] number forecast, which we never do.

Sure. So what has led to the sharp deceleration in the CapEx spend?

You've said that certain projects were deferred and even next year. I mean, if you just look at the CapEx to sale.

This year is looking quite moderate vis-à-vis what we expected going into the beginning of this year and even next year at 3.6 to 3.8. There does seem to be a deceleration.

So what is happening -- what has led to this change in CapEx outlook?

This year, at the beginning of the year, we had indicated about 3.5 to 3.7 as the range in which the capital expenditures would be for '14-'15 financial year. More the -- it's not so much the deferment of projects, if you remember, there is also an impact and more of an impact in terms of timing of the commitments and the cash flow.

It's more of that effect rather than any retiming or postponement or delay. So we expect that you will end up at about 3.2 or so instead of 3.5, 3.7 range that we had indicated year-on-year.

Yes, definitely it is lower, but more on accounts of timing and commitments and cash flow impact. All this year, I think we've been saying even at the beginning of the year, we said that it'll be between 3.5 to 3.7 for '14-'15, and we expect it will continue at that level for the next 2, 3 years.

So for the following year, that is '15-'16 financial year, we're still saying 3.5, 3.6 or whatever, 3.7. I don't think there's any deduction that we are guiding now for the next year.

Okay. Okay.

So, and just on the domestic business. If you look at the business on a rolling quarter basis, it looks like the gross margin has shrunk quite meaningfully.

Could you shed some light, especially on the new passenger vehicle rollouts because I was under the impression that there were to be vendor discounts and cost-reduction initiatives, which would flow through the new platforms. So could you just give us some indication on when you expect some concrete improvements to happen on the domestic business, please?

As I said, I think the significant overall financial performance and bottom line performance improvements, I think, should start happening from next year. On account of 2 key reasons, you've seen some early signs as we said in the earlier calls and also a short while ago in the press conference.

We've seen some early signs of smart recovery and volume growth in medium and heavy segments at this point of time. It has not yet percolated to a small commercial vehicles and other segments, which are also fairly large in numbers.

Passenger vehicles, we have seen a good beginning with ZEST and BOLT. The numbers are still -- ZEST, we have launched in August, September and BOLT has just been launched.

As the volumes ramp up and growth happens, triggered by these products and more products to follow of the new platform in the next year. As you will see some signs of positive impact on the bottom line from next fiscal onwards or perhaps even January-March quarter is likely to be a good volume quarter for industry in general in any year.

Perhaps this quarter to [indiscernible], maybe more fully from next financial year, I think we should see some recovery in the financial performance.

My question pertains to domestic business and that expenses you indicated there are some one-time provisionings apart from Singur project provisions for [indiscernible] inventories et cetera. Can you quantify that?

How big that is?

It's almost of the same magnitude in 3, 4, 5 different line items or INR 300 to INR 400 crores.

Okay. Okay.

And just secondly, in domestic business, we had seen a very strong improvement in net realizations. So what would you attribute this kind of improvement to, especially considering that mix has been more favorable on commercial -- or sorry, on passenger vehicle side?

In fact, one of that you touched upon, which is the mix improvement. If you take the passenger vehicle business and your product are differently cashing up well and we have been able to get good revenue impact on that.

And on the commercial vehicle front also the growth has been in the larger segment, which is in medium which Vijay talked about and in the small commercial vehicles, mainly the mix effect.

Okay. Okay.

No major price increases during the quarter?

Price increase, we have done one price increase, for [indiscernible].

And how big that would be?

I think it's of about 1%, 1.25%. Almost across the board.

Right. Right.

Last question pertains to JLR tax. You mentioned in the presentation that there was -- tax was low due to reduction in China withholding tax.

What would be impact of that and would it be -- would it mean in lower overall tax rate going forward?

No. It is a onetime correction.

They have been providing withholding tax at a higher percentage and that has been decided it will be lower. So we will not have a continuing impact on them going forward.

Okay. But what would be the impact on this quarter?

23 to 25.

It's relatively small. If I remember, I think it was somewhere between GBP 25 million to GBP 30 million.

GBP 25 million to GBP 30 million. But going forward, it would be 5% withholding tax?

Can you hold on for a minute?

Sure. Sure.

[indiscernible]

Just one correction. The -- an average quarterly impact of this lowering of the tax rate would be around GBP 20 million, GBP 25 million, as I said.

At this quarter, we have seen a reversal in the Indian consolidated accounts in terms of cumulative effect of about 3, 4 quarters. So the total impact on the tax rate in this quarter is slightly more pronounced, about GBP 70 million, which is what in this quarter has lowered the effective tax rate.

Going forward, since this is a one-time correction, going forward, the effective tax rate would still continue to be around GBP 25 million to GBP 26 million.

One question on the realization in JLR. There's actually been a pretty sharp jump in the revenue side.

Is there any one-off in the revenue that we have booked or is it just product mix?

Volume and product mix. Mainly the volume for overall product mix and geographical mix.

Okay. Sort of one thing.

Sorry to go back to the free cash negative number of the guidance that you have mentioned. You are already tracking if I analyze your number close to about GBP 4 billion in the [indiscernible] more than that while your guidance seems to be between 3.6 to 3.8.

So just wanted to understand does this imply a pretty sharp correction as far as profitability is concerned? That's number one.

Number two, can you -- new capacities coming up in the U.K. Can you just give us a status of that and lastly how your China distribution footprint is going to look?

And what our targets are there?

In the same order that you asked the questions. I don't want to get further into pinpointing a number on the EBITDA or the cash flow negative, et cetera.

I think what we intended was the general guidance. One can look at it in different ways and I don't want to get to the extent of putting a number in terms of our guidance.

From a business -- for expectation point of view, we expect and I think it's only fair to share with you all, that there will be some negative trends, which have an effect on the EBITDA. We're lowering the EBITDA in '15-'16, all of which mostly you will be aware of.

In any situation where the manufacturing get shifted from U.K. to JV company in China, EBITDA accounting will be different when you account for the China JV profitability.

And the JV is also tracking its production in the greenfield plant. A complete new family of engines is starting now and getting built up.

And because the crowded calendar that we have, there will be a launch and another related costs also for many of the products in the next year. Vijay, already in his opening comments, has talked about some of the performance in many of our -- in some of our global markets.

I think it's a combination of all this, and I don't want to get beyond this, whether the EBITDA will be X percentage or Y percentage, what will be the extent of free cash flow negative if any. Our aim would be to ensure that we are able to generate cash flows to meet our expenditure, but it's only fair that we provide a warning for this shape of the underlying business factor that are expected for next year.

I don't want to go beyond this in terms of giving a precise number, amount or quantifying. The second question was related to capacity.

We have talked about this before. By end of March '16 -- March '16 fiscal year, the manufacturing capacity in U.K.

will reach about 550,000 vehicles, around that level and we will have the China capacity at about 130,000, that will be our global capacity of the JLR cars. The third question was about the China distribution footprint.

As I recall, we had about 160, 170 distribution points at this point of time. We expect it will cost about 200 plus by next financial year.

I have 2 questions. Number one, you mentioned and you quantified the amount of write-offs on receivables in the current quarter.

Could you also tell us what has been the delinquencies support to Tata Finance -- Tata Motor Finance? I think last year, it was little short of INR 1,000 crores.

That's question number one. Second, just to refresh our memory and this question has remained relevant for a long time.

What is your capacity across various product lines in India, M&HCV, LCVs and cars? And my third question is do we have any clarity on the new Bharat Stage norms?

Clarity on?

Bharat Stage norms. Emission norms.

Emission norms.

First, in terms of the provisions and write ups, both in terms of receivables, inventories and others in the quarter, it has been a little over INR 300 crores that includes a variety of 3, 4 items. As far as the delinquency and other support, the support to financiers, not only Tata Motor Finance but also other financiers, can be in the form of delinquency support.

It can be in the form of interest. I've mentioned that we provide to the financiers for more attractive interest rates than what they would like to charge as far as the customers are concerned.

So it can take in different forms. The delinquency support to Tata Motor Finance, which we had been providing for on a quarterly basis.

Including that is the amount that I told you for the quarter, it's about INR 300 crores to INR 400 crores, more pronounced in this particular quarter in Q3, that has tended to make the comparisons somewhat difficult in this quarter. The second question was capacities in India.

At the current level of operations, we are roughly operating at about -- it's difficult to put one magic number for capacity because for wide portfolio of products ranging from trucks to small commercial vehicles to cars and UVs. Overall, in the commercial vehicle business, if I can put an average number, we will be operating between 50% to 55% in terms of capacity utilization and about 30% in terms of passenger vehicle business.

The last question was on the Bharat Stage norms. No, the position is not very clear at this point of time.

We'll have to wait and see what happens.

What proportion of your truck sales today is BS-IV?

I don't think we will be able to give you an offhand answer at this point of time. Maybe I can -- we can put it out on the website as a response to the question.

So that everybody would be...

Govind, on the Bharat Stage norms, what the government has said that the new fuel would only be available in late 2017.

Effectively, we'll have to wait and see.

So this is the pronouncement from the government. So we'll have to wait and see.

So it does look as if it is pushed out in time by 2 years.

The Bharat Stage IV being met also requires key change in the, if I remember, I think the sulphur content in the fuel that requires some major investments and modifications in the refining -- in the refining capacities in the refineries. So I'm not sure if we are able to give a definitive date.

Right now, it is being talked about in terms of 2017. Even that, if I remember right from history, I think it's the shift by about almost couple of years from the position stated earlier.

We have to wait and see how it's happening.

If you could slip in a related question. There is also some talk that we'll go directly from BS-IV to BS-VI, if that is by 2020.

If that were to happen, how prepared are we?

I need to pass that question at this point in time. Qualified enough to answer that but I owe you an answer.

Just want to understand, I mean, has there been -- has there been a significant impact in this quarter of the -- I mean, the impact of Freelander runoff in this quarter? I mean, because your -- while your ASPs are improved and I guess, that's because of the FX being favorable this quarter, the raw material cost has not really dropped down.

So if you could give some explanation as to what's keeping the raw material cost constant despite better ASPs?

You are right. Freelander has been a runout model.

And typically, when a model runs out, you have to support it with a slightly higher variable marketing expense. So that is correct, what you're speaking about, Sonal.

But would you be able to quantify anything on the raw material cost side, what sort of cost?

No, I don't think, we'll be able to quantify, Sonal.

Okay. And the other things in terms of your EBITDA pressure point.

You mentioned the new family of engines. So I mean, my sense would be that since you're moving it in-house, it should ideally be EBITDA accretive.

How does it become EBITDA negative for you?

So we are talking about the launch costs, which are there. When you start a commercial production, the launch costs would be charged off to the P&L.

I think what you are talking about is after the engine plant achieves the full ramp up. What you say is if you recollect what we had said earlier that while we will definitely save Forbes' profit margin on this, however, the investments are fairly high and the depreciation and interest charge would be on the higher side.

So to start off the commercial production, there would be higher launch costs. But once you reach the ramp-up stage, it would be EBITDA accretive and [indiscernible] neutral.

So EBITDA accretive and EBIT neutral, right?

[indiscernible] neutral.

And just going back to the Freelander thing. Have you seen the most of the runoff thing in this quarter itself or do you still expect something in Q4?

I think we still expect something in Q4.

Okay. And the negative impact of FX heading this quarter is minus GBP 20 million.

Is it?

The realized hedges...

Above the EBIT deadline the realized hedges.

Yes, please.

Hi everyone, thanks for joining the call and thanks to the management of Tata Motors for taking this call and joining late in the day. We will close the call now.

Thank you.