Tata Motors, India's fourth-largest carmaker, will reduce its capex to Rs 4,500 million this year at the autonomous level by 10% even if it needs to invest in the transition to BS-VI standards next year.
Tata Motors' capex reduction follows a similar reduction for Jaguar Land Rover earlier this year. From 4 billion pounds for FY20, capex for the JLR is now revised at 3.8 billion pounds.
Speaking to analysts PB Balaji, chief financial officer of Tata Motors, said: "We will (re) calibrate our total investment this year to close about Rs.4.5 billion compared to the Rs.5 billion we had originally planned."
Tata Motors has aligned some new model releases that are expected to be commercially introduced before the end of the financial year. This includes an all-electric Nexon, an Altroz premium hatchback and the Harrier seven-seater.
The company also needs to upgrade most of its commercial and passenger vehicles to BS-VI before the April 1, 2020 deadline, when the new emission standards will take effect. The company did not specify the investment required to upgrade to BS-VI.
Tata Motors is conducting an aggressive cost-cutting exercise that began a year ago. Called the "Design Fee", Tata Motors aims to deliver £ 2.5 billion in cash and cost savings in 18 months, which began in the third quarter of last year.
Alongside the announcement of its October second quarter results, the company also announced plans to increase the placement of nearly Rs.5.5 billion in shares and warrants, preferably to promoters Tata Sons.
Funds raised would be used primarily to withdraw debt at the autonomous level, which at September 30, 2019 was at Rs 26,815 crore. At the consolidated level, the company's automotive net debt is Rs 50,000 crore. Get access to India's fastest growing financial subscription service, Moneycontrol Pro, for just Rs 599 in the first year. Use the code "GETPRO". Moneycontrol Pro gives you all the information you need for wealth creation, including actionable investment ideas, independent research and insights, and analysis. For more information, see the Moneycontrol website or mobile app.