It is important we get our house in order: Mistry

Shareholders, many of whom according to Mistry are dependent on dividends as the main source of family income, complained to the management on not getting dividend.

Under fire for poor financial performance last year Cyrus Mistry, chairman of Tata Motors, tried to reassure its shareholders that the company will bounce back to profits.

The standalone operations of the company have been disappointing with last year being the worst in its history. Tata Motors, at the standalone level, posted a staggering loss of Rs 4,739 crore (Rs 47.39 billion) against a profit of Rs 334 crore (Rs 3.34 biliion) posted in 2013-14.

While operating margins deteriorated significantly and slipped in the negative for a few quarters, the company has been getting dividend income from its cash rich subsidiary Jaguar Land Rover every year to the tune of Rs 1,500 crore (Rs 15 billion).

At the company’s 70th annual general meeting a shareholder asked Mistry how the company plans to reduce its dependence on the dividends received from JLR, Mistry said, “We hope JLR continues to give more dividends but at the same time it is important that we get our own house in order.

"The commercial vehicle division, with the economy improving, should see it coming out of the woods.

The passenger vehicle division is a much longer process for us.”

There has been a sharp turnaround in commercial vehicle demand since October last year, with high double-digit growth registered every month.

Trucks owners who have been postponing their purchases started to hit showrooms to upgrade their exiting vehicles.

There has been a turnaround for its passenger vehicle division also as new products like Zest, Bolt and GenNext Nano brought incremental volumes.

This along with a series of changes including a change of sales and marketing team has helped the company post growth.

However, capacity utilisation remained considerably below satisfactory levels.

Utilisation at the commercial vehicle front stood at was 50 per cent while at passenger vehicle is 35 per cent, Mistry said.

For the first time in 13 years the company has declined payment of dividend much to the dismay of its shareholders.

Shareholders, many of whom according to Mistry are dependent on dividends as the main source of family income, complained to the management.

“It is sad day that we at Tata Motors cannot give dividends. So for that I feel extremely unfortunate and sad.

"We need to understand the context of where we are today. We are building a company with a lot of hope. There are sacrifices we have to make in the short term.

"The directors are working hard so that we (can) come back,” Mistry added.

The losses notwithstanding, Tata Motors will go-ahead with its capex plan of Rs 3,000-4,000 crore (Rs 30-40 billion) for the year.

It will launch a hatchback and a compact sedan this year and a compact sports utility vehicle next year.

It is also ramping up its retail presence increasing its touch points by three times in five years.

Despite the challenges the company was able to successfully raise Rs 7,500 crore (Rs 75 billion) in the form of right issue which was subscribed 1.2 times.

Jaguar Land Rover is also facing turbulence in its biggest market China and also in Russia and Latin America.

The company is banking on its recently inaugurated assembly facility in China to mitigate the risk of the devaluation of Yuan which could impact vehicles imported in China.

On Wedensday, JLR announced it will explore the possibilities of setting up a new plant in Slovakia, the fourth such location outside the UK.

Image: Tata Group chairman Cyrus Mistry adjusts his glasses as he attends the 'Vibrant Gujarat Summit' at Gandhinagar in Gujarat. Photograph: Amit Dave/Reuters