JLR eyes strategic, tactical partnerships to lessen capex burden

Industry:    2019-07-31

Jaguar Land Rover is eyeing strategic and tactical partnerships to share the capital investments in technology, future models and in areas of shared mobility, said N Chandrasekaran, chairman of the British luxury carmaker’s parent company Tata Motors.

“The only way to handle this need for capex is through partnerships because we want to spread the investment across larger volumes,” Chandrasekaran said while addressing shareholders at Tata Motors’ 74th annual general meeting here on Tuesday. “There are many discussions, from strategic to tactical, and these opportunities keep coming and we keep evaluating every one of those opportunities.”

Even as JLR was trying to bring down capital expenditure, it cannot make any drastic cuts, Chandrasekaran said. During the past 12 to 18 months, the company has managed to cut down its capex to £3.8 billion from £4.5 billion, he said.

In June, JLR and German luxury carmaker BMW had announced a collaboration to develop the next generation electric vehicle technology.

JLR has been facing headwinds in its key market of China and uncertainty over the impact from the Brexit has further impacted the luxury carmaker’s business.

Allaying doubts as to whether JLR is the right business for the parent company, the Tata Motors chairman said the British brand is one of the most iconic and still generates a lot of revenue and a call cannot be taken based on short-term conditions. “Based on the actions we have taken on the operating side, the company’s performance should get better every quarter,” he said.

Regarding Tata Motors’ India business, he said that while demand environment in India is slow, operationally the company is strong.

Chandrasekaran also laid emphasis on the company’s intent to divest from non-core subsidiaries. The company had recently sold its stake in TAL Manufacturing to Tata Sons and the chairman said it “does not want to be in anything that is marginal”. The company also does not want to go for a “distress sale” and will take a call on exiting Tata Technologies and its joint venture with Hitachi when it gets the right value for these assets, he said.

NO DIVIDEND
At the AGM, Tata Motors shareholders were critical of the resolution that called for a commission of up to 1% of the net profit of a year to be paid to non-executive directors, including independent directors. This will be paid in addition to the fees of the directors. They pointed out that the shareholders have not received dividends for the last few years. Some raised concern that they might be getting shortchanged by the management as directors continuing to draw hefty salaries and fees.

Denying the charge, Chandrasekaran said the company has to be fair to all the stakeholders. “We don’t think that we are trying to reward the management or the independent directors unnecessarily,” he said. “We are trying to do the bare minimum and we agree that it is a big pain, but unfortunately the law does not allow us to pay you. Even though we have had a Rs 3,000 crore swing in the standalone business, still we are not meeting the rule. I really hope we can get it corrected next year.” He was referring to the about Rs 2,000 profit that the standalone Indian business made last year as compared to approximately a Rs 1,000 crore loss in the previous year.

None of the management in JLR has received the additional bonus that is linked to the achievement of certain targets for the last 3-4 years, Chandrasekaran said.

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