Welcome to the Tata Motors Q2 FY23 earnings conference call. I'm joined today by Mr. Thierry Bolloré, CEO of Jaguar Land Rover, Mr. P.B. Balaji, Group CFO, Tata Motors, Mr. Girish Wagh, Executive Director, Tata Motors, Mr. Shailesh Chandra, Tata Motors MD, Tata Motors Passenger Vehicles, and Tata Passenger Electric Mobility Limited, Mr. Adrian Mardell, CFO, Jaguar Land Rover, and my colleagues from the investor relations team. Today, we plan to walk you through the earnings presentation, followed by Q&A.
As a reminder, all participant lines will be in listen-only mode, and we will be taking questions via the Teams platform, which is already open for you to submit your questions. You are requested to mention your name and the name of your organization while submitting the questions. I now hand over to Balaji to begin the presentation.
Thank you. Good day, everybody. Thanks for taking the time to join this session. As is customary, we'll try and keep a fair clip in terms of going through the slides and pointing out the key highlights, and then look forward to taking on the Q&A at the subsequent stage. Next slide, please. This is a standard safe harbor statement.
The only call-out I would say is the segments, automotive segment. Just to reiterate, we have done this, no change from last time, but just to confirm, when you say Tata commercial vehicles, it's all Tata branded commercial vehicles. Similarly, passenger vehicles, all Tata branded passenger vehicles, Jaguar Land Rover, and vehicle financing are the four automotive verticals, and of course others, which is the remaining segments. These are the segments. No change there.
Next slide. Again, an intense quarter this year. In India, the commercial vehicle space saw a flurry of activity, with multiple launches in the medium and heavy, light commercial vehicle, and a full range of pickups that were launched. In the passenger vehicle space, the big one was the Tiago EV launch, which was a blockbuster opening of 10,000 vehicles, which I'm sure Shailesh is going to talk about later.
On the JLR side, the key move was the stabilization and the ramping up of production of Range Rover, Range Rover Sport that we had committed to. The order bank, of course, grew to a record 205,000 vehicles. The chip supplies continued to create trouble for us.
As we start signing more and more partnership agreements, we do expect to see this easing, and I'm sure Adrian is gonna cover that subsequently. Next slide, please. Before I get started, our key corporate action that is announced today.
Tata Motors intends to voluntarily delist its American Depositary Receipts shares from the New York Stock Exchange, as the objectives with which these were originally listed in 2004 are no longer relevant. There's a consistent drop in the participation in the ADS program, and it's now less than 5% of the ordinary shares. We will file for a voluntary delisting of the ADS in January 2023, and also terminate our depository program that we have with Citibank, N.A.
Once the ADS have been delisted from NYSE, there'll be no over-the-counter market trading of the ADS in the U.S. due to legal-regulatory restrictions we have in India under the Indian law. Therefore, the holders will need to convert their ADS into underlying ordinary shares, but you have time till July 2023 to make that happen.
We expect to file for deregistration with the SEC in January 2024, a full 12-month after the delisting for ceasing our U.S. reporting obligations. Obviously, then the whole process is being done with an aim to simplify our fin ancial reporting and also reduce administrative burden, and there's no cash outflow for TML due to this. Next slide, please. I'm happy to take any questions which you may have on this subsequently.
Overall, revenue grew at about 29%, with the global wholesales going up 33%, and profit before tax was a loss of INR 1,800 crores. EBITDA went up 130 basis points, EBIT of 390 basis points, and we had a free cash flow breakeven about INR 1,000 crores in the quarter. The volume recovery was, and is fundamentally based on a better mix and lower breakevens, even though volumes were lower than planned, particularly at JLR.
Next slide, please. Where did this growth of 29% come from? 28% came from volume and mix, and, reassuringly, a good 8% came from price. Which means we are able to take up prices in line with the inflation that is there in the market, which is also reflected in the results.
translation, we lost a fair bit as the pound sterling depreciated vis-à-vis the Indian rupee. From a profitability perspective, all businesses came to improve the profits. We had a challenge in Tata Motors Finance, which I'll talk about later. The net debt came in at INR 59,900 crores. The good part is the external debt is now down to INR 32,500 crores.
Almost INR 20,000 crores is because of working capital, mostly in JLR and a little bit in Tata Motors as well, which we intend to sort out as the growth comes back into the business. That's overall for me. Next slide. Handing it over to Adrian for talking about JLR. Adrian, over to you.
Yeah, many thanks, Balaji. Next slide, if you would, please. Okay. These are our KPIs. Top left, you can see retails did start to improve quarter-over-quarter of 12%. Not yet back to last year's levels, but I'll show you the inventory build later in the presentation. We're confident we're going to get there in the second half of the year.
Going down the page, double-digit EBITDA for the first time in a few quarters, and again, we're confident that's going to continue going forward. The revenue, a dramatic year-over-year increase of 36%, even though volumes were only up 17%. What you're seeing there is both an increase in volume and a substantial increase in mix of volume as a result of our
Range Rover and Range Rover Sport vehicles now being presented to the marketplace. That's driven an EBIT positive in the quarter for the first time in those comparative two quarters. Substantial improvements of more than 5 percentage points. We were loss-making. Obviously, all of that was non-EBIT, and we'll take you through the implications of exchange on their numbers later.
We were close to cash break-even, -15, substantially better than the comparative quarters, with just 75,000 wholesales. All of that cash loss and more was actually working capital negative. We've taken our break-even underlying point down to 70,000 units again, which was the level we were at the end of last year that we didn't think we would be able to get back to. There is a lot of positive information underlying within this data set.
Next slide, please. Okay, the only things I really haven't called out there is the order book. The order books are still very strong, more than 200,000 units. I'll take you through the details of that. The breakthrough on Range Rover and Range Rover Sport production now at the end of September, up to 2,000 units a week. Let me remind you, when I talked to you in July, I was referencing 1,000 units per week.
That's a substantial increase there. Our focus program continues to be value generative. GBP 300 million in the quarter, GBP 550 million in the first half of the year. Our liquidity is strong, GBP 3.7 billion cash plus the revolving credit facility, GBP 5.2 billion in total. Next slide, please. Okay, so these are the volume positions.
Just for the top right-hand side, the increases in the retail were quarter-over-quarter. Not surprisingly, with those Range Rovers now coming through, all of that increase, most of it is actually in the Range Rover brand. From a wholesale perspective, we did 75,000 wholesales, a lot lower than the 90,000 we were signaling in July. We were decommitted on semiconductors in September. That had an impact both on September production and will actually flow into the September and the October wholesale.
That decommitment is fixed. A long-term supply agreement is now in place with that source, so we do not expect further decommitments from that source going forward. Again, the wholesale numbers you expect, given the production increases on Range Rover and Range Rover Sport, is on our very rich Range Rover brand. Next slide, please.
This is the same data but by region. As you know us well enough now, a lot of Range Rovers are sold in North America and China. Therefore, it's not surprising and corroborative data that the big increases quarter-over-quarter are in those two regions, in the retails and even more so in wholesales, of course, because our units flow from production to wholesale before retail.
Again, good corroborative information of the trend to come with increasing those new Range Rover products. Electrification is stable at 65%. Stable on PHEV and BEV at 11%. We need more supply, particularly of those PHEV units, which will actually come on board as we go through the next several quarters. Next page, please. Okay, our profit bridge, our profit walk versus last year. I'll mention a few things here.
I'll mention them because they're important to this quarter, but they're also important to the trends that you're going to see in future quarters. You will see volumes at a higher level. That was worth INR 120 million versus last year. You will see a significant improvement in mix just with the value we actually dispatched to the markets in Q2.
That was INR 300 million higher than last year. Emissions was a last year credit, but not repeated this year. Not a negative trend this year. Pricing, now those vehicles are coming to the marketplace, and VME at very low levels will both continue into the second half of the year. Obviously, they're intended to offset the inflationary costs you see there in material which we suffered in the quarter versus last year.
I have a slide on that later, so I will hold those comments till then. The fixed costs are growing, but they're growing from historical lows, and t his is still significantly lower than three years ago. They will lift a little bit as we go forward because we do now want to begin to accelerate our transformation programs in commercial, in digital, and obviously, we're now scaling up our product engineering programs.
You will see these numbers continue going forward to be adverse versus last year, but still in historical lows. I will talk about exchange on the next page. Very complicated exchange at the moment. We thought we'd take the opportunity to lay it out for you and hopefully kill all the questions you may have around it. First big point, our operational exchange is very positive. It will be.
We are predominantly a U.K.-based manufacturer exporting 80% of those vehicles. Obviously, for any exporter, if your local currency, for us sterling, is at a low value, you do very well. This is a good operational model for us on exchange. Of course, you also know we protect ourself for variability and downside risk on exchange, and therefore, a lot of our protection is coming through as negative versus a weak sterling.
Most of our dollar contracts are in around $1.30, and this will be with us for the next 4-5 quarters. Then there was a big movement against sterling in the quarter. You see that within the revaluation. It totals £100 million in total versus last year. The dollar effectively moved from $1.21 down to $1.11.
We have a lot of liabilities on our balance sheet for dollar-denominated, and that's what you're seeing within here. It's a point-to-point adjustment. Reflecting a very weak sterling at the end of September. I think the bottom left is really important. It gives you what happens next. We have GBP 20 billion worth of hedging contracts.
You see there, we've shown those same three points, GBP 20.1 billion at the end of September. If we were to strike those versus the 1.11 at the end of September, there'll be GBP 2 billion of losses to come through. Look at the memo below. That shifted with sterling appreciation of just $0.04 in October, a drop from GBP 2 billion to GBP 1.4 billion.
Let me remind you again against the top left, our operational exchange will be bigger than our losses going through our income statement. This is a theme that will continue with us over the next several quarters if we stay within this 1.10-1.15 dollar sterling window, which we seem to be into at the moment. Next slide, if you would, please.
Okay, so this is the cash position. We were cash negative of GBP 15 million, but just take a look at the working capital. It was 124 offsetting the 15, and therefore again, we were underlying cash positive on just 75,000 units with an 18% MLA Range Rover, Range Rover Sport mix, which will grow going forward, of course. Effectively, we paid for more units in the quarter than we wholesaled to the market.
Our wholesale pipelines are starting to lift, which is a signal actually of a better supply flow. Just look at the brown box there. Working capital negative over the last six quarters has been more than GBP 2 billion now. As our volumes start to increase and our mixes improve, that will slowly start to unwind the other way.
We are confident we're at the low point on working capital, and that will build back over the next six quarters. Next slide, please. Break even. Look, we've taken the break even down to historical lows again, in part because we've been tough on expenditure, even though we've allowed some to grow. In part, of course, 'cause volumes are bigger, mostly because the mix is turning back to a more normal level of mix we would actually expect.
It's getting back to mixes we would have had in Q3 last year, and that will improve in the second half of the year. We do expect expenditure to increase because we do want to continue with our change programs through to our reimagined strategy, which you're very clear about, I'm sure. The mix will help offset the break-even point to about 300,000 units, full year.
We feel we're in a really good position in terms of the underlying structure of this organization and the resupply and the improvement mix will both move in our favor as we go forward over the next several quarters. Next slide, please. This is investment. Investment was higher in Q2 than Q1, but still just GBP 526 million. Few things to note.
Engineering investment is increasing as we're now bringing more engineers in place to move to our electrified architectures. That will continue over the next several quarters. We're now beginning to capitalize more of those engineers because we've triggered a maturation in our architectures, which enables us to do so in line with our accounting policy, which we've taken you through some previously. Overall, we're at 40% engineering capitalization.
Let me remind you, we expect to be between 50% and 60% at some point going forward over the next cycle. Again, I'm referencing 3-4 quarters often. Over that period, you will see capitalization increase to those levels again. Next slide, if you would, please. Okay. Business update. Let's talk semiconductors. Next slide. There we go. Look, we're now in a position to do the first phase of what other OEMs are doing.
We've got our new nameplates out there, our Range Rovers and Range Rover Sports. They are our valuable assets, most valuable assets, and we have a position now we can start putting those chips into our most valuable assets. All other OEMs have been doing that over the last 12 months. We've been in project changeover over the last 12 months. It's not surprising the mix is improving in our favor, and that will continue.
Phase 1 of the management of these challenges, we're now in a position to be able to do. Phase 2, we've been working on for a long time, actually. That's engaging directly with the chip manufacturers, putting in place long-term supply agreements with them. We've again had breakthroughs over the last 3 months, including with a chip supplier which decommitted us in September.
We're confident from those supply sources into calendar year 2023, from quarter four of this year for ourselves. We continue to work to close out the residual items we have. We do have residual items left to close out. There is still a possibility we'll be knocked off course, but month by month, we are starting to put in place a more robust, a more fit for purpose supply chain and agreements with our sources.
Again, we're heading in a good direction, slower than we want to be, slower than others, but we're heading in a good direction here. Next slide, please. This is really, really good, right? This is the new Range Rover and Range Rover Sport. It's weekly production, giving you the trend over the last five months. June was the last time we talked.
We had data, I referenced 1,000. You can see we improved as we went through the summer period, but the real breakthroughs were from September, and that's continued into October. This is weekly data. So we're now building and shipping more than 2,000 cars a week, which means with the quarter, MLA will soon, once these cars get to their destinations, China and North America in particular, we will soon be posting 30,000 wholesales within a quarter into quarter four.
Quarter three, some of those cars will be on water, but that will dramatically shift the mix of these units. It was up 10% earlier in the year, 18% in quarter two, towards 30% and beyond for quarter three, quarter four.
P&L and our profit bridge are both on mix will continue to be strongly positive as we go forward over the next several quarters. Really, really big to us and my compliments to the team who have worked tirelessly for the last nine months to get us to this position.
Next slide, please. This is our order book, and of course, you will see straight away that the breakthrough in supply is now starting to impact where our orders are. Our very patient clients who are waiting for these new vehicles for a long time will soon start to receive handover of said vehicles. It's grown over the quarter to 205,000 units.
It's starting to taper off as our fulfilled orders, our handovers to customers are increasing, and our new orders net of cancellations, it's within that data there at just about the 90,000 level. We really haven't marketed these cars or any of their vehicles over the last 12 months because of supply. Once supply starts to come through, we have several tools and several weapons to drive up that new order intake, which we will actually do.
Obviously, keeping orders in place for longer than our clients wish for has been a consideration, which is why we've held off on those, on those marketing campaigns over the last several. This is starting to feel better balanced than how, yeah, and I don't expect order totals to explode going forward like they have over the last 5 quarters. Next slide, please. Okay.
Health of our pipeline expressed with finished vehicles. Two data sets here. The blue black line, the one at the top, that's retailer inventory. That's vehicles where our retailers are waiting customer pickup. You can see the light blue bar at the top. That's a normal level of activity. In normal times, that blue line should be within that top block.
It was until May 2021. It's fallen dramatically, but the point is steadily lifting from about February. It's steadily lifting to the point where we had 44,000 vehicles at dealers at the end of September, awaiting customer pickup. These are sold cars. We're waiting for people to hand over, which is why our retail levels, as I mentioned earlier, will now start to grow.
Our own wholesale stock, the stock that we still own, that's in transit to dealers, is actually in the gray line. You can see that started to lift, and you can see in September it fell away dramatically. That was the supply decommitment we've mentioned already, which did impact dramatically September production. Also impacted September wholesales, which is why we missed September and October wholesales, but we're now back on track.
Our production levels are now working to the level we expected. Again, we do expect the gray line to be back in that gray section as we go through quarter three and quarter four. We're getting healthier. I've spent time on this, so it's clear that our data's starting to turn slower than we want, but in several corroborative data points. Next slide, please. Okay. Inflation obviously is the other big thing.
The big three is supply, MLA, and inflation. MLA is in a really nice place. The other two, still work in progress. It's broadly what we anticipated at the start of the year. We referenced up to GBP 1 billion. This is first half data, GBP 430 million. Of course, our refocus program is there not only to offset inflation, but to generate bottom line value.
It's doing that. It generated GBP 550 million in the first half of the year, so we're positive cash, GBP 120 million. It's mostly doing that in the commercial space. You know, pricing, lower variable marketing, lower wage costs, and therefore lower discounts going forward. We're also starting to see the agile transformation come through in lower headcounts and people costs, and investment is lower in the first half of the year.
How do I expect this to shape? I expect inflation to be with us. We know it's gonna be bigger and deeper than we thought six months ago. This level of inflation feels about right in the second half of the year for us. I expect refocus to continue at this level. We are reconfirming a GBP 1 billion+ full-year, but I expect the market performance to grow, the labor costs to be about the same, and the investment to fall away as we start to increase our product engineering investments over the second half of the year.
Next slide, please. I think this is my final one. Next one. Thank you. The first half metrics down the left-hand side. Look, what do we expect in the second half of the year? We expect our wholesales, our revenue-based volumes to be up about 10%.
More in Q4 than Q3. As supply is coming through and as MLA is still building, those vehicles have to get to their revenue recognition points, which as you know, some of those points are six weeks after build. That will increase as we progressively go through month by month. Revenue will be bigger than GBP 10 billion.
Where we see it today, it's closer to GBP 11 billion. EBIT margin will be positive in the second half in both quarters we anticipate. I've mentioned investment increases, but the full year guidance around 2.3%. You know what? We can get back the cash we didn't get in the first half of the year. We know it's all working capital. We think our trend of volumes is positive. Therefore, working capital will be positive.
We've demonstrated for the last four quarters, we're underlying cash positive anyway. We believe we can get back the cash we lost in the first half of the year. Break even we're writing, but if you know us well enough, we want to do better than that. Key priorities, of course, it's all about chips, and chips. It's hard work for us, right?
We were behind the clock. It's a bit like turning up to the buffet two weeks late, right? Some of the stuff left ain't what you want. We're breaking through this. We're working tirelessly, and we're working in the right direction. Continue on new Range Rover, Range Rover Sport, which we're doing. Volumes, I've mentioned. Refocus, I've mentioned. Also our intent to be positive on the KPIs EBIT and cash flow. I think I'm back to you, Balaji.
Thank you. Thanks, Adrian. Moving quickly on to commercial vehicles. Change here, where we are moving to the registration VAHAN market shares in our reporting. The other thing we'll also notice in this is, traditionally we used to refer our internal report metrics are on medium and heavy commercial vehicles, intermediate and light, small commercial vehicles and pickups, and then commercial passenger vehicle.
That's how it used to be. Since this is now, we would love to ensure that it is as transparent and as easy to pick up, or you can pick it up from the VAHAN portal yourself. Therefore, we are reporting the VAHAN numbers themselves here as is, whereas even in the splits that are there.
From a market share perspective, compared to 44.7%, we lost about 150 basis points this year so far. We are definitely looking at what is the right way to win in this marketplace in terms of shifting to a demand pull business model. I'm sure Girish is gonna talk more about it in his section as well. The focus is on getting back to a double-digit EBITDA and profitable growth as soon as possible. You should see that playing out in the coming quarters. Next slide, please.
From our overall mix, actually the only call-out here I would say is, draw your attention to the CNG section, where, in I&LCV section, thanks to the way the CNG prices are starting to move up and the gap between diesel and CNG has come off quite sharply. You do see that in the salience, therefore, of CNG in the overall segment actually come off quite sharply.
We believe this is going to be temporary. Once these things, the international geopolitical situation stabilizes, the growth in CNG should be coming back again. Next slide, please. Overall numbers wise, year-on-year growth of 35%. PBT positive at 300+. EBITDA year-on-year is 180%, but I would draw your attention to the sequential drop that you see.
This is basically coming out of residual commodity inflation. This is the last of the price increases as we close the contracts, which we went through. We do see reductions coming through from Q3 onwards. That's already evident of numbers from September, October as we see. This is what you see as a number there. EBIT numbers, of course, 260 basis points improvement.
Quarter-on-quarter is more linked to the same number you saw in the EBITDA. Next slide, please. Shape of where the drivers came from, you do see volume mix. I draw your attention to the realizations. It's starting to now inch up above the variable cost increases, so we are seeing numbers coming in. This is on a year-on-year basis, therefore the increase you see.
What is also from a commodity perspective, we did see a few challenges, particularly on the Forex side. Where with the international business significantly coming down because of the global situation, we had to take out a few covers, cancel a few covers because the volumes are not supporting the way that's a lot that you see there. Next slide, please. Girish, over to you.
Yeah. Thank you, Balaji. The Q2 had a growth of around 4% over the Q2 of previous year. Of course, the Q2 of previous year was also COVID impacted. I think from Q3 onwards, with the impact of this, we will see normalization of trades to lower level. As Balaji spoke, the EBIT margin was impacted due to the residual impact of commodities , which was to the extent of almost 200 basis points, as also lower export mix.
We were able to offset it partly with improved pricing and also some cost reduction actions. We see a consistent growth in our spares and service penetration, which is a key focus area for us. The non-vehicle business revenue grew by almost 50% for the entire first half as compared to the H1 of last year.
Balaji spoke about CNG salience coming down, and it's almost down to now 17% and 15% in I&LCV and SCV respectively, from a level of almost 45% and 18% in the same quarter last year. This is because the difference between diesel and CNG price, which used to be almost INR 44-INR 45, has come down to now INR 15.
Within the bright spots, I think, of course, I think the strong industry growth, especially led by M&HCV, of course, has a base effect of the last year. The good thing is the passenger vehicles, the buses have also come back pretty strong with a good demand in school buses, employee transportation, and there's also some demand coming in from the schools now.
I think with our consistent focus on ATL communication as well as digital for lead generation, I think you see the consistent gain in the net promoter score as also top of the mind brand awareness and consideration by almost 100, 200, and 300 basis points respectively, and they are now at the highest ever level. I think our strategy of therefore increasing the brand salience is working in the right direction, which is going to support our retail acceleration initiative.
We also strengthen our product play with the launch of more than 30 new products and 70 variants. Within that, I think in quarter two, we did launch our new range of pickups, as also a range of smart trucks, including you know some of the first in the industry safety features.
The semiconductor situation has eased further, although it remains on our radar. In addition to that, we are also keeping track of the new semiconductors which we get introduced in the vehicle when we migrate to BS-VI Phase II, and also some of the electric vehicles where we are going to ramp up the production.
Going ahead, clearly the focus will be on retail acceleration and track the market share, which will also therefore help us to maintain the inventories at healthy level within the system as we gear up for the BS-VI Phase II transition. Strong focus on margin improvement will continue to sustain market operating price increases. I think what we've been doing is reducing the discount and increasing the market operating price and not touching the max retail price, which is there.
In addition to that, I think we also had a very good first half in terms of cost reduction, almost the best performance ever on cost reduction. We will continue to engage with the key financials as also the other stakeholders, especially with the kind of MOP correction that we are taking, and also with the rising interest rates.
Need to ensure that we provide all the right solutions for our customers, both retail as well as other key accounts. Readiness for BS-VI Phase II, that is Real Driving Emissions, is absolutely key and there's a lot of focus within the organization, and we remain on track for this transition from April 2023.
As Balaji mentioned, in the international markets, I think the total industry volume has declined sharply, and I think our focus has been clear on maintaining market shares, margins, as well as the channel health. I think within this, we have seen a sharp decline in Sri Lanka, followed by Nepal and even Bangladesh, and also sub-Saharan Africa has declined by around 10%.
Next. Coming to our future businesses update. On the electric mobility, I think we have been able to complete the in-market trials of Ace EV with our leading e-commerce customer at two locations in the country. I think the product has delivered very well in terms of range and the load it can carry, and seems to have a significant competitive advantage over the current solutions. I think we should be starting actual deliveries within this quarter.
We are also gearing up not just operations, but also supply chain for the new set of orders that we have for electric buses also. I'm referring to the CSL Phase I tender, which we had won for around 3,600 numbers. There's a bit of a change in that likely to happen, but otherwise we are gearing up for start of supply of these buses from Q1 of next year. In terms of our smart city mobility solutions, in the last quarter, we completed delivery of 100 more electric buses to Delhi Transport Corporation. With this now, the total e-bus fleet has covered more than 51 million km cumulative.
We, as I said, we received LOA, letter of acceptance for 3,600 buses from Delhi, Calcutta and Bangalore as a part of the Phase I tender. The Calcutta one is being reviewed in light of the recent court order which has come in this regard. In addition to this, there was a new tender which was floated by Jammu and Kashmir for 200 e-buses for own and operate model, which we have won.
Even this delivery of these buses will start during the next year. We have a healthy order pipeline not just from the tenders from the government, but also from private sector, especially for employee transportation in corporates.
I think among the fleets, we have been able to deliver more than 96% uptime across the buses, which is better than what we have committed in the contracts. The total revenue from this business in H1 has now crossed INR 200 crore. That's where we are in terms of revenue from this new business line. On digital front, I think Fleet Edge continues to do pretty well.
Now we have more than 290,000 trucks, connected trucks on the road, and within that we've seen more than almost 80% active users now with good usage during the day. During the last quarter, we launched the minimum viable product two on Fleet Edge, which includes a lot of new features and reports for the customers and the fleet owners, as well as their workshop managers.
They see a lot of value coming in from these reports and insight, which will help them to improve their total cost of operation. Lastly, e-Dukaan, which is our online spare parts marketplace. Has been doing pretty well. In fact, in H1, the revenue has grown three times from what we had achieved in H1 of FY 22. I think we continue to build the back end and then have more and more customers coming on onto this app, which will help us to grow this revenue at similar rate. That's about CV. Back to you, Balaji.
Thank you, Girish. If you're on passenger vehicles, a pretty strong quarter coming through with 57% retail growth and domestic market share steady at 14%. 8% EV penetration, 10% CNG penetration. Those are the key highlights. Next slide. EV side, I think, this is the strongest quarter that we have had. We are now at almost 88% market share.
More than that, the penetration is now continuing to increase, charging infrastructure is continuing to increase. We do expect to see this continuing to drive penetration up. Next slide. On the financials, 71% revenue growth. PBT breaking again. EBITDA was down 30 basis points, but a lot of it is the same two reasons here on a sequential drop.
One is the residual commodity inflation there, and the other was a one-off that was taken in this quarter, which will correct in the subsequent quarters. No major concern there. We'll continue to keep on keeping this profitability improving. EBIT of 200 basis points improvement. Let me hand it over to Shailesh for.
On the financial, this is what I just referred to. I think on a year-on-year basis, volume realizations you know continuing to increase. There's still scope for pricing. We just put through a pricing in the first of November. Of course, from a overall perspective, the one that I would want to draw your attention to is the depreciation and amortization, where we're taking more into the P&L than to the balance sheet.
On the commodities, the hedges are paying off at this point in time as the currency depreciates. Next slide. Shailesh, over to you.
Yeah, thank you, Balaji. Let me start with the key highlights of the industry first. In quarter two, the industry wholesale reached the highest ever, crossing 1 million mark with a very healthy growth rate of 38% year-on-year. As you know that last year, the base was low because of semiconductor issues that the industry was facing.
Segmental trend, you know, continued to grow strong in favor of SUVs. SUVs further increased their share in the total TIV, whereas hatches continued to see significant decline. As far as Tata Motors is concerned, we further strengthened our market share in H1 to 14.1% as compared to 12.1% in FY 2022. In PV and EV, the business grew by 84% and 371% respectively.
It was, of course, the highest ever offtake for us in quarter two. We maintained our number one SUV position as well as Nexon also retained its number one SUV position among the 40-plus SUV models that we have in the industry. EV also posted its highest ever quarterly sales at 12,000 plus with a market share of 87%.
Balaji talked about the launch of Tiago EV and a very strong response that we got on the first day of, you know, opening the booking. We crossed 10,000 in the first day itself. So far we have received very, very healthy bookings for Tiago EV even while the customers have not tested the car. Very, very encouraging response seen for Tiago EV.
Talking about the bright spot that we foresee in quarter three, we believe that industry will sustain the momentum what we have been seeing in the past quarters. The focus in this quarter for the industry would be retail. There will be moderation in offtake as all the players would like to reduce the channel inventory as we are approaching the calendar year end.
Also semiconductor supplies have been strong, and we have seen that's the reason why last quarter there was 1 million supplies in the industry, and this quarter also we don't see a major issue because of semiconductor supplies. As far as Tata Motors is concerned, you know, across all the models, we are seeing the demand remaining strong because of a strong customer appeal for our products.
There has been consistency in supplies, and you have seen, you know, quarter after quarter, we have been sequentially growing our supplies. Also, we de-bottlenecked some of the capacities in our existing plants, so it is therefore going to support the demand well. We will see strong growth trajectory as far as EV is concerned.
Challenges in the industry would be now preparing towards, you know, a transition to the new emission norms from April 2023. The work will start from now. Market growth is going to normalize, as I mentioned, especially in this quarter, as the effort would be to reduce the channel inventory. How we are planning to work on the challenge, I think, as far as demand is concerned, we'll continue sustained initiatives at micro market level for different products.
We'll also start transitioning to BS-VI Phase II from quarter three end itself. There is a clear glide path that we have. Created for our profitability improvement using nine levers, and that is also pretty much on track, and there's a very strong rigor as far as execution of this aspect is concerned. Back to you, Balaji.
Thank you. Thanks, Shailesh. Next slide. Overall, CV and PV on the cash side, the cash profit after tax and investments very well funded. So the business is generating the cash it needs to invest. You can see the working capital changes flow through as growth comes up, is what I would expect to see in JLR as well as growth comes back.
We still have a way to go to knock off INR 2,600 crores on a full year basis. I'm sure as the year progresses, we'll get back those numbers as well. Next slide, please. Investment spending to be up to INR 6,000 crores and FCF will still remain positive. That's the broad message here. Next slide. We'll take a minute on Tata Motors Finance.
We had an AUM of INR 46,000 crores, but I'll draw your attention to the GNPA line of 8.5%. Before that, two comments. One is, TMF and TMFSF, the two NBFCs are classified as middle layer by RBI. The process to demerge the NBFC business will combine the two, Tata Motors Finance and Tata Motors Finance Solutions. It will consolidate and simplify the group. Very similar message to the ADR messages I said earlier. That's on the corporate side. The main one is the central line, which is the point related to the sharp slippages that we've seen in the restructured portfolio, COVID-linked stuff that is there.
The underlying portfolio is pretty healthy and continuing to do well, but the restructured portfolio is something that has seen a sharp slippages, and therefore we will be monitoring this closely. That's why you see the loss this quarter as well. This is something that does concern us, and we will aim to therefore tweak some of the approaches in Tata Motors Finance to focus squarely on improving sourcing quality on underlying business to offset some of this, and also stepping up the targeted collection that we have there.
At the same time, capital adequacy is fine. The asset equity ratios are fine. Liquidity is fine. We just have to ensure the execution on the ground in Tata Motors Finance steps up further, and the team is on message to get that done. Next slide, please.
Overall outlook, we'll pause here particularly on the top point. Demand remains strong for now and will remain a key monitorable because the geopolitical uncertainties are pretty large and, wouldn't want to be, complacent as far as demand is concerned. At the same time, no worries at this point in time, so we will be remain watchful.
Chip supplies, as Adrian indicated earlier, will improve further there. India, we do not see a concern, and therefore, the volumes will continue to ramp up steadily. In India, definitely, and JLR as well, cooling commodity prices will aid improvement in underlying margins, and we do expect to deliver strong improvement in EBIT and free cash flows in H2. JLR, we already talked about.
Coming to Tata Motors priorities, definitely delivering market-beating revenue growth through product innovation, service quality, and the new demand full model is going to be a very important one. A sharp improvement in realization and EBITDA margins is what the business is focused on. We are already starting to see the first successes of that.
We will deliver, as far as CV is concerned, market-beating growth and continuing a steady improvement in profitability and cash flows. As far as EV, it's about driving penetration. This is what we have to say. There's a flurry of questions that have already landed up. Let me try and lump them together because there's going to be, this will be a fair amount of repetition. There's a broad set of themes, Adrian, coming your way.
One related to chip supplies and the theme of, when the global chip supplies are actually starting to ease, why are we doing long-term contracts? That's one kind of questions that are there. Second is, now that we have secured chip supplies, are we the 80K, 160K production for second half, full sales for second half that you've signaled, is it on the conservative side?
And, thirdly, will that also mean that the margins that we are also putting out there is on the conservative side? These are the questions. I think there's one theme around semiconductors that I see. If you could pick that. In the meanwhile, let me try and summarize other questions as well. Over to you, Adrian.
Yeah, sure. Thierry will answer the semiconductors, and then I'll go into the profitability stuff afterwards.
Yeah. Well, good afternoon, good morning, everyone. I think this chip supply is absolutely fundamental to understand. That is, we have almost finalized all our long-term supply agreements. It is very clear that if you miss one, it's enough to create the problem that we have had, you know, and that Adrian explained in September.
The good news is that now we have finalized all our supply agreements, but let's take the example of the last one that we could sign. It's going to be effective by calendar year 2023. Which means that we can see already very positive signs in the way we are dealing with our problems in an effective manner. That's why we are very confident of our ramp-up.
The full effect of this long-term agreement is going to come into action gradually with the global supply base and with our Tier 1s. That's the reason why it's a gradual improvement. We should not also forget that the supply crisis in terms of chips is really a crisis in our sector. We can see improvements, but it's going to continue.
When I'm discussing with the CEOs of all the industry, it's going to continue in the coming years. It's not a matter of months or quarters, but it's going to be a matter of years before we come back to a situation which is much more normal than what we can see today.
If you let me build from that theme into the second half year. One thing said is we're more certain of supply from January than we are from October. I told you earlier in the presentation that we were decommitted in September, and that carried through into our production and wholesales into October, which is this quarter.
It's reasonable for you to assume 169,000 half of the year. We've guided you there'll be stronger volume in quarter four, i.e., from January, than in quarter three. What we're seeing for our volume position in quarter three is a limit in Q2, but not a dramatic improvement. However, our mix, because the units we're now able to build within Castle Bromwich and Solihull will improve, and therefore total units in Q3 will be modestly increased.
Average selling price and average revenue per unit will increase a lot above the GBP 70,000 per unit level, which we started to see towards the end of September. That's what you're going to see over the next three months, with then an increase in supply in our quarter four. It balances out to the 160,000 units.
Don't forget, we don't wanna put a number out there that we're having to explain why we didn't either. A part of this is learning from our Q2 experience because Thierry's other advice is, at a point in time, you can actually be decommitted outside of your expectations, and it just takes one part for us not to be able to complete and ship a vehicle.
That's why the guidance you're seeing in the second half of the year and the intent behind what we're trying to do here and the complexity that there still is for ourselves and for everybody else in the automotive industry, by the way.
Thanks, Adrian. I think let's probably take the other two questions also coming your way, which then takes us to the next logical question saying that, what are the reduction in production and cash flow of guidance in JLR mean for our FY 2024 guidance of becoming debt-free, and how do you see the revised guidance?
Let me take that. I think at this point in time, the net debt near net-debt-free target remains as it is. We're not changing it simply because we don't want to update it every now and then. We do understand the stretch that is there in trying to get there. Obviously we will work to look at all options and see how close we can get to that.
I think the better time to do this discussion would be at the end of the financial year, as we are able to see, Adrian and Thierry talked about, Q3 is a transition period, and then Q4 is when the full calendar year benefits come through as well. That will give us the time, better time in terms to talk about it. We are aware of the challenges to get there, at the same time, wouldn't want to run ahead of ourselves in terms of putting a number out there. That's on the net debt.
A related point on this, in terms of your funding, Adrian, does it also mean that you may be coming to the bond market sooner rather than later in terms of taking care of this GBP 1 billion that is currently not in your plan?
Thanks, Balaji. Ben, what are your thoughts?
Yeah, no, I'm happy to pick that one up. We did end the quarter at GBP 3.7 billion of cash, and that does include a buffer for unforeseen cash requirements or to cover maturities if we don't wanna go to the market at the time. We already gave guidance that we would be significantly cash flow positive in the second half of the year.
We have about GBP 800 million of bonds maturing in February, March. Basically, you know, the guidance that was put on the page you saw was GBP 750 million. That would about cover it and say you really wouldn't be eating into the buffer.
You know, we could do scenario planning and say, "What would happen if that didn't happen?" I think that what would happen is we just use some of the buffer. I think we are in a situation where, yes, you know, over time, we'll always wanna maintain that buffer and maintain good liquidity. Rates in the market right now are not very attractive. I think we do have flexibility for the reasons that I just said to wait until we see rates that are more attractive to us to issue at.
Okay. Thanks, Ben.
Let me turn to India. I think there are the questions coming through on the profitability of the Indian business. The Indian business margins are. I think this comes from Gunjan, Bank of America. The Indian business margins have declined sequentially in both segments despite price hikes and better operating leverage. How should this pan out ahead? What sort of metal correction tailwind do we expect in second half, if you can quantify?
I think let me take that question, Gunjan. I think, so if I see PV and CV individually, close to about 70 basis points of residual inflation came through in this current quarter, in our overall profitability, which we expect to actually neutralize and turn and actually go forward, start giving credits in Q3 and beyond.
We do as I said earlier itself, the intention is for the CV business to get to as close to double-digit EBITDA at the earliest. PV will continue to have a steady improvement in profitability going forward, for which commodities is one of the levers.
It's fair to say that the operating leverage from a PV perspective is now juiced to the limit, and we would want to now see the contribution margins and mix continuing to play and keep improving, and there's enough and more opportunities on that front. That's what we see as from an improvement perspective. Other thing on the PV we should keep in mind, I think we've lost from a.
Not lost, I think that we have taken a charge, a one-off charge of almost about 50-odd basis points this quarter on the related to a few obsolescence issues that are there. Those are sitting in the underlying business but they are one-offs and should not repeat going forward. That's on the profitability side. Girish, this one coming your way.
Mm-hmm.
I think, when you see CV margins, they are very weak despite industry volumes, this sort of industry itself being very weak. Can CV business margin reach double digit? Are they closer to double digit like, let's say, 9%, kind of, close to double digit there? How do you see the profitability of the industry?
Yeah. I think, as Balaji mentioned, you know, we as market leader have actually taken this upon ourselves to increase the realizations from the markets. That's a big change that we've done in towards, you know, second half of Q2. We have been increasing our market operating prices, with which we will see that the margin should improve.
As Balaji mentioned, I think our target will remain to get to a double-digit margin, EBITDA. I think the good thing right now is the transporter sentiment index we do see remains, quite positive, which is good, so the demand is going to be there. We also see that the fleet utilizations are good. Freight rates are also at a good level.
Despite the increases in diesel prices and the vehicle prices at whatever level they are, the transporter profitability is intact. This should help us to firm up the realizations as we go ahead. With commodities tapering off and our cost reduction actions, I think we should be getting towards our double-digit EBITDA target.
A question to both, Shailesh and Girish. In terms of BS-VI Phase II, what kind of cost inflation can we expect?
I can say at this juncture that the cost increases for the BS-VI Phase II are going to be lower than what we had seen in the BS- IV to BS-VI transition. In terms of price increases, therefore, it will be lower than what we had to take from BS-IV to BS-VI. I think it depends upon the technology also, but the statement that I'm making is applicable to most part of the diesel portfolio.
That's where we are. I think we obviously, you know, are very light on gasoline. There is only one product in gasoline. Gasoline anyway will have much lower cost impact. That's where we are in terms of cost impact due to RDE migration.
A similar response, I think, you know, the transition that we had seen earlier from BS IV to BS VI, it was a double-digit kind of an increase. Far as price was concerned, you're not going to see that kind of a price increase at this time. You know, diesel, when specifically talk about diesel, because that gets impacted the most.
You'll see different kind of cost increases for different manufacturers depending on the technology selection curve. That's what we now see going forward, but it's not going to be as significant increase as we had seen from BS IV to BS VI.
Thanks Girish. Adrian, this is coming your way. Given that a lot of your cash outflow is coming out of working capital, the fact that you are now guiding to a 160 volume with semiconductors having ramped up, is that number conservative? Number one, which you had answered in part. Is its implication on cash flows, given that working capital unwind should give you better benefits going forward, are we being conservative on the cash flow?
Yeah. Okay. Thanks, Balaji. So are we being conservative on the cash flows? There's two or three things happening in the second half of the year within that. And all of them I've actually referenced on the call, but it's good to itemize the data here. One is, we'll be building more cars and therefore working capital will stock higher.
Ultimately, it depends on M&A too, in the last six weeks of the year, of course. Right? But our assumption is we will build more cars towards the end of Q4 than we're building at the end of Q2. Therefore, there will be a working capital turn in our favor in the second half of the year. There's a mix improvement.
Even though volumes aren't as high as some people wish, the mix improvement and the value per unit and the average selling price will grow as well. All of those things will be positive. I've also said to you on the call is we expect investments to increase in the second half year in two or three places, one of which is the capital investment number, which the guidance we've given you is INR 200 million higher in the second half of the year than the first half of the year.
With the supply starting to improve, we're also anticipating improving other investments like fixed marketing to generate more orders, which we're deliberately not generating today because the size of the order banks. We will also allow expenditures to grow in other places alongside our digital transformation.
Our spend will grow, and our cash receipts will grow, and it will net out to the flavor of the INR 750 you see there. I'm not consciously and deliberately being conservative, although we're being very balanced, and it is possible to overachieve those numbers should we get more supply or more of our units to end destination before the end of March.
Thank you. Adrian, one more coming your way. This is on the order inflow. Q2 seems to be around 93K, lower than the 100K plus that you are reporting in the previous quarter. The broader question that's coming through is this because of a demand slowdown or is it because of the long wait periods? What's causing this throughput rate to come down? Therefore, how are we seeing the cancellation rates as well as the overall demand environment?
Yeah. Okay. We are about 10,000 units lower than we were a quarter earlier in the year. Obviously, a part of that is the reasons I've just said. We're not stimulating new demand. What you're also seeing in the absence of that stimulation in demand is, you know, the aggressive increases in orders for new Range Rover, for example, have started to flatten off. We're building more of those units as well. That's what you're seeing here.
You're seeing the original spike launch of new Range Rover now starting to flatten off. There's been no marketing spend behind that vehicle at all, advertising or indeed variable marketing. There's plenty of opportunities for us to stimulate that demand. The other thing you're seeing as the Range Rover Sport is becoming visible in the marketplace.
You actually see the database increase Range Rover Sport orders as we go month by month in the second half of the year. We're waiting and watching to see whether it naturally, because of that second reason, gets to 100,000, or whether we actually need to start to stimulate some of that demand.
The fourth reason is that we know dealers are holding back on some orders at this point because we don't have delivery times for them. When you put that flavor together, Balaji, we are super confident we're gonna stimulate orders more than 100,000 going forward once we get the supply.
Thank you. I will leave you with a teaser on pension that's gonna come your way, but let me before that move to Shailesh. Two questions, Shailesh. On EVs in particular, one, value proposition of EVs, how is it better than hybrids? So that's one. And second, EV margins, the impact of EV on the overall margins of PV. Can you talk about these two?
Sure. You know, as far as EV is concerned, and the way the ramp-up we have seen in terms of demand of EVs, and Tiago is one big example, first day getting 10,000 bookings, we have never seen this kind of a response even for, you know, some of our very successful ICE cars. Clearly shows that it is being well understood, the strength of the value proposition, not only versus hybrid, but I'm saying versus normal ICE vehicles also.
The biggest proposition here is the low operating cost. The low operating cost is, you know, really translating into big benefits in terms of annual saving, and therefore the justification for the premium that you have to pay for EVs. It is a very smooth automatic transmission vehicle.
At the same time, for which it is being appreciated. Also in terms of performance and, you know, driving pleasure, it is proving to be much superior. Of course, there's a change in mindset and, you know, greater trend of, you know, younger population also to move towards cleaner vehicles and, you know, be responsible to the environment.
All these trends, you know, make it a very strong proposition, and we're clearly seeing that translating into demand. This is answer to the first question. The second question was on margin. I would say that margin of EVs is not very different than what we see for the ICE segment in PV. This should further strengthen from next financial year as the PLI benefits also start coming in. That is.
Maybe I just tag you there for a minute. In terms of your volume outlook for domestic PV, now that the pent-up demand is more or less met up and semiconductor situation has normalized, how do you see it? One question. Second, in terms of how do you expect to gain market share going forward on the PV business?
Sure. As far as you know, this H2 is concerned, you know, H1 picks up a very strong, and we saw nearly 1.9 million vehicle which got sold in H1. Typically, you would see a 48-52 kind of a ratio between H1 and H2. This time you're gonna see nearly 50-50 kind of ratio. It's going to be a very strong year.
You know, highest ever industry volume is what we are going to witness in this financial year, possibly going up to 3.8 million+. Therefore, I don't see right now the demand really going down, except that you'll see moderation on offtake this quarter, and then it should again pick up in the next quarter.
Not to the full extent, I would say, because of the transition from BS-VI Phase I to Phase II, but still it will be good enough to do similar kind of volume as we have seen for the H1. Definitely, the question will be in FY 2024, whether you'll have similar kind of growth. I would not expect that, because all pent-up has got released already in H1, and therefore now it will be more triggered through the new launches.
There will be segments, you know, which might get impacted. This will be mostly the end segment, as there will be some price increases coming because of some regulations which are gonna hit, which is one, the Phase II RDE, and then the safety regulations which will also hit in October 2023.
I think FY 2024, I would just hold my comment right now because I also, you know, we have also then triangulate based on what projections we are gonna see from various agencies. What was the second question, Balaji?
EV margins, you have covered.
Covered.
Yeah. That's important. That's it. Let me probably take the comment, Adrian, coming your way. JLR pension liability situation and the provision needed due to the bond yield changes. You want me to?
Balaji, Adrian asked me to pick this one up. I think this question is relating to the extreme volatility we saw in gilt yields following the mini budget that was announced in the U.K. In late September. That did cause liquidity challenges for pension plans in the U.K. because they have interest rate hedging arrangements, and they had to post collateral against those interest rate hedging arrangements. JLR was no different.
We did see increased collateral requirements in the pension plan related to our hedging arrangements. We did take action in the pension plan to reduce the hedging levels and sell assets to cover those collateral requirements. We acted very quickly when that came up. The pension plan remained liquid throughout the issue. Rates have, of course, normalized now.
They had risen by 2 percentage points to something like 5.5%, and they're back now down into the mid-3s again. I think an important point here is that it was always a liquidity issue, only not a funding or solvency issue. The ironic thing is that actually the pension plans of JLR, the accounting basis surplus actually rose from the end of Q1 to the end of Q2. The accounted surplus is actually over GBP 1 billion at the end of September, and it was slightly under GBP 1 billion at the end of June.
Thanks, Ben. One more question on the JLR side. Other expenses for sales are flat quarter-over-quarter, not seeing any leverage gains. Any key drivers for that, Adrian?
No, not really. Look, I mean, even though we've broken through on MLA, we still only had 13,500 Range Rover Sport sales within Q2. It was just 18% of the total volumes, so we'll be stronger and better than that in the second half. Optically, it's incredibly powerful with that GBP 300 million year-over-year.
We're not punching our full weight yet by any means on MLA, and that will actually increase the average revenue per unit and the total revenue in Q3, and therefore you may see a change. As a counterweight to that, I think I've already answered. We are going to start to lift some of those costs and some of those expenditures.
Of course, you know, the inflationary pressures in the second half of the year, particularly on employee settlements, will start to come in place to lift the costs as well. I see a revenue lift. I see a cost lift. Broadly speaking, the balance between the two will be reasonably close going forward as we see it today, Balaji.
Thank you. One additional question on the VME. Do you see any pressure in China and EU on RR portfolio? Non-RR portfolio, sorry.
No. No, I don't. I mean, particularly whereas we bias our products towards the higher end of the business, you know, the discount at the higher end of the business is lower. Therefore, again, it will be a part of the margin improvements which we'll start to see in the second half of the year once freer supply comes through and we start to build greater quantities of, you know, the smaller vehicles, the SUV 3s. That's when I expect it to be more competitive, and that's when I expect VME to start increasing as an average and as a percentage of total revenue.
Okay. One more question before I move back into CV here. JLR has the revised base settlement at JLR, has it been reflected in this quarter's results? One. Two, timeline for the debt repayment of GBP 1.7 billion in 2023.
The wage settlement is effective from Q3, so you know, there's no impact earlier in the year on this reported period. That will kick in in the second half of the year. As a part of the explanation, even though I recognize that some of that will go into the margin rather than other expenses, it was a part of the last explanation. It's in front of us rather than behind us. The profiling of the debt kicks in in February. Between February and June, there's GBP 1.5 billion sterling equivalent we pay back.
Okay. Second, now just coming back into India, Shailesh, your way. Customer profile of the Tiago EV bookings versus Nexon. Any interesting anecdotes there? And are they first-time buyers? What are the mix? First car or the second car?
You know, we would not have that clear picture of Tiago, but for Nexon, I won't have the split of first only car. You know, between only car and primary car, it is nearly 70%, which has grown significantly for what it used to be. It used to be 25%. Otherwise, it was generally a second car.
People who are now using the Nexon EV buyers, who are using it as the only car or primary car is really now 65%-70%. On Tiago EV, we have only regional kind of a mix, which is very strong. We have seen in states like Kerala, Gujarat, NCR, Rajasthan, and these kind of places, and Telangana.
Pretty, I would say, similar kind of states where we had been selling, but also, you know, some of the states in the east have also started showing interest in EV. That's what we have so far information on Tiago.
Thank you. I think there's one question that's coming back again and again. Let me pick it up in terms of what are the reason for lower profitability of CV and MV despite better volume. I think there's, it's also got questions into how much is the commodity impact for the current quarter. How is it likely to change the next quarter? I think let me cut the problem into two.
As far as CV is concerned, the main reason that we had was the residual commodity increases, the last lap of it, which is just the way negotiations close. They just overflow into July, August, and those are now settled and completed, and we should see the decrease coming from Q3 onward. That's how the negotiations happen.
Additionally, on top of it, in CV going forward, you should also see realizations increase as we move to a demand pull strategy. That will also keep increasing the profitability, and therefore, we would expect by Q3 the business to ramp up in terms of profitability. Intention is to get as close to double-digit EBITDA as soon as possible.
That is the plan there. Coming to PV, yes, the residual impact is also there in that. On top of it, there are also one-offs which we have taken with respect to obsolescence that we had to write off, and that's almost 50 basis points of write-offs that got taken there.
Those are the two reasons why the profitability came down, and both are now behind us and therefore, that's something that we should expect to see the things changing here on. Moving into a set of questions that are coming in terms of ADRs, GDRs. Basically saying that if we are simplifying the structures through delisting the ADRs, what are the plans on GDRs?
At this point in time, there are no plans. As and when there is something coming up, we'll definitely share it with you. In terms of CapEx in India, first half of the year, we have spent about INR 15 billion, but we are guiding for about INR 60 billion. What is our current plan? I think this is up to INR 6 billion, INR 60 billion is what we have said, INR 6,000 crores.
We do have plans that are year-ended typically. That's how it invariably happens as the proposal's clear. We will keep a close watch on it and we'll spend as is prudent. Rest assured, we are not skimping on investments, and the intention is to keep supporting the growth there. I think one question coming your way, Adrian, Euro 6 emissions that are there, are there any additional expenses that you have to undergo to meet the new emission norms?
Well, the Euro 6 legislation is behind us, Balaji. I think we're looking ahead towards Euro 7 at this point in time, which I'm told has been delayed by 24 hours. Announcement's until later this week.
Okay.
I think the Euro 7 ones are the ones we're looking forward to. You know, if they get confirmed in the timeline, then there will be additional expenditures which will be contained within our investment targets we give you going forward.
Okay. Ben, one coming your way. Given the pound depreciation against INR, shouldn't there be exceptional gains hitting the PNL due to debt on the JLR books? Again, I know it's related to INR or is it USD that you're referring to?
Because JLR has its debt in USD. What you also see is there's a translation impact of that, not necessarily via PNL. As far as the OCI is concerned, we do see it's in the OCI in JLR. Ben, anything further you want to add, assuming the question is vis-à-vis USD?
Yeah. I mean, I think it's harder for me to answer the question relative to INR. I guess all I can say is that I'd go back to the slide that we looked at earlier that showed exchange, and basically it showed that the exposure benefit net of hedges was favorable, about GBP 55 million in the quarter, compared to a year ago. We did have the revaluation on the debt.
At the end of the day, debt is largely hedged, either by derivatives, by foreign currency cash holdings, or in some instances designated against future revenue. We don't really. You know, I really think about foreign exchange revaluation on net debt, including hedges, and that is broadly neutral.
We did then have about GBP 90 million of balance sheet revaluation for other non-sterling liabilities that showed up in the income statement. It's all on that slide that we looked at, earlier.
Okay. One question to you, Adrian, in terms of an announcement from another OEM related that the high inflation in Europe could result in moderation of demand next year. Do you share the view or is there a risk to volume or pricing given discounting currently is at a record low?
Yeah. Okay, Balaji. I think I touched on this actually when I talked through the VME explanation. Right? For the larger vehicles, the Range Rovers, Range Rover Sport coming through, we're not seeing any discounting, we're not seeing any fall off in demand. There is a flat lining of new orders, but not a fall away of new orders. The flat line is absolutely consistent with the profiles we have in the demand books, order books we have in place.
I think once supply starts to free up for us of the level that we're currently indicating in the second half of the year, then we will be able to order units, let me say, in the SUV 3 segments. I think those segments are more competitive always from a support VME perspective, from a aggressiveness of supply of other OEM actions.
I do expect higher VME at some point in time on those nameplates. Clearly we need the supply to build them at the moment. The ones where we will be building over the next six months in time, I don't see this as a risk at all.
Okay. I think there's a question. A slightly different question, but again linked to the high energy cost. Is there a risk of shortage of components due to gas shortage or very high energy costs from vendors?
No, we're not seeing any of that at the moment. We're seeing cost increases flowing through, of course. You know, just to give you a sense of that, our base energy bill is around GBP 200 million a year, and therefore, you know, that's certainly increasing. It's impacting our first half year, and it will be a reason. I talked about inflation earlier.
I said the numbers broadly are gonna be the same, and if you put together the two responses we've given, Balaji, the commodities are gonna start to fall. A lot of the cost categories, including utilities and including pay awards, will start to kick in, which is why I'm saying overall the costs will broadly be the same in the second half of the year. It just comes at us from different places.
We don't see supply risk at this point in time. Obviously, as a nation, we're less reliant on supplies from Russia, of course. Most of our supplies come from other places like Norway. We do have alternative supplies, particularly for the buildings outside of our production processes like paint shops. We have other alternatives from other sources.
We don't have gas storage. If you wanted to get into gas storage, we know our facilities in Europe and our governments in Europe do have a gas storage which will get them through most severe simulated versions of a winter. We're not actually expecting shortages of supply to impact our production facilities over the second half of the year. We haven't seen any yet, but we are expecting cost increases.
This is a summary of where we believe we're gonna be on gas in the second half of the year.
Yeah. Thanks. I think the question on the Ford plant acquisition, Shailesh, when are we going to see production out of the Ford plants that we have acquired? Just to clarify, we've not yet acquired. We will close the transaction. The intention is to close it by end of this financial year or early in the next year. End of this calendar year or early in the new year. Everything points to that kind of timeline. We are all systems go on that one. Production?
Yeah. Balaji, we are right now in the process of government approvals. Final stages of finalizing the model location mix with changes now, because whatever we are producing in the other factories are going to relocate to some extent to this factory also, and the new EV models which are gonna come.
FY 2024 is where we are going to see some start of the activity in the later part of FY 2024. Is the current how to say estimate of when we'll be able to retool this plant for the new models. For the models that we are going to shift to this factory and some of the new EVs are gonna be made there.
Okay. There's a question on this. Probably I'll take it. How important is JLR to Tata Motors and the wider group's growth strateg y, and what level of support does the former envisage going forward? I think it's absolutely categorically.
We made that many statements that JLR is absolutely core to Tata Motors and it enjoys, it's as much Tata as any other company is, and therefore within the group as well. It's a crown jewel, and we will keep it that way. In terms of an interesting question, post the launch of Tiago EV, do you see any pressure on Nexon EV? Shailesh?
You know, Tiago EV is a very different product segment with very new customers, and so we don't see any impact on the Nexon EV demand. That's all.
Thank you. Maybe the last question, unless there's something comes up now. This is on Tata Motors Finance. How much of the incremental loan formation is dependent on Tata Motors PV, CV, EV? What is the plan to improve the operation of Tata Motors Finance? I think let me take a few minutes to explain this one. There are a few things that we are working with Tata Motors Finance on.
One is that their underlying business, which is the running portfolio, is in a good quality. There's no concern on the running portfolio. But we'd like to step it up further in terms of reducing the level of GNPA there and ensure that we step up the quality of sourcing. Thereafter, of course, in parallel, we're also working to tighten the collections infrastructure there.
You should see these playing out in the coming quarters. We're very clear it's an independently managed company. In Tata Motors, Tata Motors Finance, we'd love to keep it as from a decision framework separate. Of course, as much synergy as possible they should drive. Intention is to ensure they take their own decisions on credit and decide whom to fund or what to fund.
Their portfolio, from a new vehicle perspective, is entirely Tata Motors. Their used vehicle portfolio does have sourcing from other OEMs as well, but that's the market. We get a fair share of our market, of the vehicle park that is out there. This is clearly a task for the team there.
I'm sure given their commitment, they will come back on track. It's only a restructured portfolio that is giving us the pain, and that is completely related to the pandemic and the fact that we had back-to-back pandemics for two years in a row. The MSME, particularly small commercial vehicles, some I&L series and M&H series, those individual fleet operators have been in stress. We will need to deal with this and we are committed to deal with it as well and bring this business back into the pink of health. It needs to get to a double-digit return business, ROE business, and we will be there. I think this is more or less done for the day. Thanks, everybody. We have no further questions. Thanks, everybody, for attending the session.
Also thanks to the team around the table as well as in JLR for a lively Q&A session and the response there. In case you do have any further queries, don't hesitate to reach out to us. We'll try and respond to the best of our abilities. Thank you and have a good day. Take care. Bye-bye.