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M c I n t i r e I n v e s t m e n t I n s t i t u t e 1

McIntire Investment Institute At the University of Virginia

Tata Motors Limited (ADR) (NYSE:TTM)

Prepared by Rahul Madhu| 10 April 2011

M c I n t i r e I n v e s t m e n t I n s t i t u t e 2

•  History •  Thesis Points •  Misperceptions •  Risk •  Catalysts •  VAR •  Recommendations

Presentation Outline

M c I n t i r e I n v e s t m e n t I n s t i t u t e

•  Founded in 1945 –  Tata Locomotive and Engineering Company Lt.

•  Started building trucks in 1954 under collaboration from Daimler AG

•  Restrictive policies (License Raj) crippled demand.

•  Major Indian automobile manufacturer.

3

History

M c I n t i r e I n v e s t m e n t I n s t i t u t e 4

Stock Overview

M c I n t i r e I n v e s t m e n t I n s t i t u t e

In USD

Last price $28.06

Market Cap $17.76 b

EPS (TTM) 1.60

P/E 17.40

Forward P/E 8.20

2010 Revenue $21.02 b

Yield 1.14 %

ROAE 56.45

5

Financials

M c I n t i r e I n v e s t m e n t I n s t i t u t e

Rapidly growing

automotive market

Strength of the brand

name

Synergy between

new acquisitions

6

Thesis Points

M c I n t i r e I n v e s t m e n t I n s t i t u t e

•  With a rapidly expanding economy, more people have expendable funds to buy cars.

7

T. P: #1 Growing Market

M c I n t i r e I n v e s t m e n t I n s t i t u t e 8

•  Tata Motors would be able to capitalize on this demand by offering vehicle well suited for Indian tastes

Indian Automotive Industry

801.36

814.611

894.796

1161.523

1511.157

1628.755

2019.808

2253.999

2332.328 2641.55

3536.783

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Vehicle production (1000 units)

M c I n t i r e I n v e s t m e n t I n s t i t u t e 9

Indian Automotive Industry

Automobile per Capita (1,000 people)

Canada 582

USA 440

Japan 451

Germany 495

France 451

Earth 96

India 7

M c I n t i r e I n v e s t m e n t I n s t i t u t e

•  Tata Motors mostly focus on making commercial vehicles – The reality is that Tata Motors is a

full range motor vehicles manufacturer

– Tata Nano to the Range Rover.

10

Misperception

M c I n t i r e I n v e s t m e n t I n s t i t u t e 11

Full Range of vehicles

M c I n t i r e I n v e s t m e n t I n s t i t u t e 12

Source: TM 2010 10K Report

0

50

100

150

200

250

300

2008 2009 2010

Passenger

UV

LCV

M&HCV

Sales (1000 units)

M c I n t i r e I n v e s t m e n t I n s t i t u t e

Common Mispricition

•  Most of Tata Motors revenue comes from India. – Truth: Tata Motors sells

vehicles through its dealerships in 26 countries and exports to 60 countries all around the globe.

13

Misperception

M c I n t i r e I n v e s t m e n t I n s t i t u t e 14

•  More than 50% of the revenue comes from international markets.

Diversification

M c I n t i r e I n v e s t m e n t I n s t i t u t e 15

•  Ventured into new industrial products – HCV (1954) under

partnership from Daimler AG

– LCV in 1986 with the 407 truck range

– Passenger segment in 1998 with the Tata Indica.

Organic Growth

M c I n t i r e I n v e s t m e n t I n s t i t u t e 16

Tata Motors international –  Tata Daewoo Commercial Vehicle

(2004) –  Tata Hispano (2005) –  Marcopolo India JV(51:49) (2007) –  Jaguar Land Rover (2008) –  Fiat India JV(50:50)

Inorganic Growth

M c I n t i r e I n v e s t m e n t I n s t i t u t e 17

40%

54%

5% 1%

Tata Motors

JLR

TDCV

Tata Hispano

Revenue Break-down

M c I n t i r e I n v e s t m e n t I n s t i t u t e

•  Tata Motor's management philosophy places strong emphasis on adapting to cultures/traditions of the acquired company

18

T. P: #2 Synergy

M c I n t i r e I n v e s t m e n t I n s t i t u t e

•  Preserves identity and culture of the company by retaining top management.

•  Workers would be more willing to work with the people they trust

19

TDCV/Tata Hispano

M c I n t i r e I n v e s t m e n t I n s t i t u t e

•  The Tata name brings with it a great sense of social responsibility. – ~4% profits to charity

•  Strong emphasis has been placed on creating a sound workforce. – Reduces work strikes –  Increases efficiency

20

T. P: #3 Brand Name

M c I n t i r e I n v e s t m e n t I n s t i t u t e

•  ~67.4 billion dollar conglomeration

•  114 different companies •  Tea to Steel •  11th most reputable

company in the world •  65.8% of the ownership in

held by Charitable trust

21

Tata Group

M c I n t i r e I n v e s t m e n t I n s t i t u t e 22

46%

16%

15%

7%

4%

12%

Passenger

Maruti Suzuki

Hyundai Motor

Tata Motors

M&M

GM

Others

64%

13%

15%

2% 6%

CV

Tata Motors

M&M

Ashok Leyland

Eicher

Others

Tata Motors Vs. Competitors

M c I n t i r e I n v e s t m e n t I n s t i t u t e

•  Optimizing synergy – R&D collaboration

•  Land Rover/Jaguar expansion into China

•  Tata Daewoo expansion to Africa

•  Overall recovery of the global economy.

23

Catalysts

M c I n t i r e I n v e s t m e n t I n s t i t u t e

•  High non-food related inflation

•  International segment could be affected by slow recovery

•  Bureaucratic risks •  RBI increasing interest rates

24

Risks

M c I n t i r e I n v e s t m e n t I n s t i t u t e 25

•  “The Tata Ace is very reliable, because I can run the truck for months with little maintenance and I spend only 400 Rupees on Petrol” --Das

VAR

M c I n t i r e I n v e s t m e n t I n s t i t u t e 26

Valuation

OM (%) P/E ROE

Tata Motors 10.14 17.54 56.45

Toyota 2.64 20.90 4.86

Daimler 7.24 12.20 13.50

Volkswagen 6.02 23.66 16.82

Nissan 6.08 15.55 1.59

Fiat 3.07 15.87 1.30

M c I n t i r e I n v e s t m e n t I n s t i t u t e

•  Initiate a 4% Position at Current prices

27

Recommendation

M c I n t i r e I n v e s t m e n t I n s t i t u t e 28

Questions