Given the impact of foreign exchange on operations, ace investor Rakesh Jhunjhunwala asked the Tata Motors management to improve the disclosures related to hedging practices. Jhunjhunwala cited the example of Infosys and other companies which disclose their hedges and the rate at which the hedging is done.
Forex components, according to him, have become an important part of Tata Motors' profit. "If you guide us on how you hedge, it will give us a better assessment of the future profitability," he said. He highlighted that it becomes complicated for investors to understand a business where the accounting is in pounds, sales in dollars and sourcing is in Euros. Roughly 80 per cent of production is exported out of the UK, 60 per cent of the revenues are in dollars or dollar linked, while euro accounts for 25 per cent of exports from UK and accounts for 50 per cent of cost, explained the management.
While the Tata Motors' management indicated that in the June quarter presentation the company has given the forex impact above and below the Ebidta line, Jhunjhunwala asked the company to disclose the details in future quarters. The management indicated that they will try to improve the disclosure details going ahead.
To a query on India sales, the company indicated that while medium and heavy commercial vehicles will grow, since January this year growth has come back in small and light commercial segment as well. Jhunjhunwala indicated that the government proposal to scrap old trucks and replace them would be a game changer for Tata Motors given that it is the largest maker of commercial vehicles in the country. The management indicated the positive benefits for the industry and the country due to savings on fuel, logistics and operations.
On defence orders, the company indicated that they received orders for more than 1,200 vehicles and it is in discussions to procure more orders.