Tata Motors planning to raise capital expenditure by Rs 10,000 crore a year

Friday, Jan 30, 2015

Tata Motors, India's largest automobile company by revenues, plans to raise its capital expenditure by Rs 10,000 crore a year as it strives to make a strong comeback in the domestic market. The average annual capex over the past three years had been around Rs 25,000 crore-30,000 crore, which is expected to rise to Rs 40,000 crore in the next couple of years. While Tata Motors will see its average annual capex increase by Rs 1,000 crore to Rs 4,000 crore, JLR, its wholly owned subsidiary, will infuse an additional Rs 9,000 crore for the next two-three years to 3.5-3.75 billion pounds (Rs 32,000 cr to Rs 35,000 cr).

Informing the stock exchanges on its proposed Rs 7,500 crore rights issue, Tata Motors said on Thursday that it will use the funds for new products, global expansion and invest in subsidiaries for future growth in India and abroad. In a statement to the BSE on Thursday, the company said, "Considering the future growth and expansion plans of the company on a global basis, it is expected that the total capital outlay will remain high in the near term for the India business and JLR."

The company also plans to launch over 100 new products or variants for the domestic and international markets over the next three years through its ultra range of light trucks as well as expand the Prima range of medium and heavy trucks.

"The company will launch eight improved and enhanced vehicles across 5 key brands over the next 2 or 3 years and the products offered on a new modular platform will come from 2016-17," said Tata Motors.

Tata Motors has been increasing its R&D spend in domestic operations over the past few years, from 3.3% of total sales, to 6.3% of its total sales in FY-14. For JLR, the R&D has been averaging around 6.6% of total sales.

JLR continues to have a longer term capital spending target of 10-12% of revenue, which it believes is in line with other premium rivals, but in the near and medium term, JLR expects its capital spending to be a greater percentage of revenue in order to realise the present opportunities for growth, said the company.

Tata Motors also plans to invest in its captive finance subsidiary to enable it to capitalise on the next phase of economic growth in India. Tata Motors share price was up 1.42% on Thursday's trading session at Bombay Stock Exchange, on a day when Sensex rose 0.41% to 29,681.77.


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