40% investment by TaMo CV arm in FY25 to be in advanced tech: Girish Wagh

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Leading commercial vehicle (CV) maker Tata Motors on Wednesday said 40 per cent of investments by the CV arm  in 2024-25 would be in advanced technologies, including electrification and alternative fuels.

Girish Wagh, the company’s executive director who also heads the CV arm, said: “We will have more than 40 per cent of our investments this year in advanced technologies, and within that, the bulk of the capital expenditure will go into electrification and alternative fuel. We will have natural gas and bi-fuel across the range.”

He further said in terms of electrification the company would follow a platform and modular methodology. “Apart from battery electric, we are also working on fuel-cell electric technology, and we already have 15 buses running on this in Delhi. Some part of this expenditure will also go into Hydrogen internal combustion engines (ICE). We have a facility in Pune and we also have an Hydrogen ICE engine-making facility in Jamshedpur ready,” Wagh said.

Besides, he said, Tata Motors had been investing in connected technologies for the past four-five years. “Whatever we invest in software should benefit the customer – either through improved total cost of ownership or improved uptime.” For example, the company uses a machine-learning model to give insights to drivers online to run their vehicles more efficiently, leading to an improvement in the total cost of ownership on ground.

“We will continue to invest in software,” Wagh said, adding capex in the CV business would be around 2-4 per cent of revenues. In 2023-24, the CV business posted a turnover of Rs 78,800 crore, with earnings before interest, tax, depreciation and amortisation (Ebitda) margin of 10.8 per cent.

The non-vehicles business, which includes spares, digital solutions, etc, is growing fast and now has around mid-teens contribution to the CV revenues. At the Tata Motors annual general meeting (AGM) earlier this week, Chairman N Chandrasekaran had said the CV arm, apart from vehicular business, would focus on vehicle park-linked businesses like spares, digital and smart mobility solutions which would help reduce the volatility of the vehicle sales business.

‘Not worried about debt after demerger’

Tata Motors Chief Financial Officer P B Balaji said the Indian business was currently debt-free. The standalone CV company is getting demerged and it has around Rs 6000 crore of net debt. After the final FY25 numbers (of cash and borrowings) come in, when the businesses demerge, the CV assets will go into the CV company and the remaining assets will go into the ‘top co’ (holding company), Balaji said. The passenger vehicle (PV) business would merge into this ‘top co’ and, Balaji said, it would have two subsidiaries housing the electric vehicle (EV) business and Jaguar Land Rover.

 “After demerger, we identify the assets ratio – what are the assets pertaining to CV and PV. Then we split the borrowings according to the same ratio. Both companies will together remain debt-free. We are going net cash and, therefore, the net debt of standalone companies will continue to reduce,” said Balaji.

At present, the assets are split in a 60-40 ratio in favour of the CV company. Wagh said the demerger should happen 12 months from now.

Tata Motors had said in March that it would demerge its PV and CV businesses into two separate listed entities. As part of the initiative, the CV business and its related investments would be part of one entity. Similarly, the PV business, including electric vehicles, Jaguar Land Rover and its related investments, would come under a separate listed entity.