Tata Motors Limited (TMCV.NS) Earnings Call Transcript & Summary

Good morning. Welcome to Tata Motors Investor call to discuss the recently announced transaction of Tata Motors acquisition of Iveco Group. Today with us, we have Mr. Girish Wagh, Executive Director, Tata Motors Limited; Mr. PB Balaji, CFO, Tata Motors Group; Mr. GV Ramanan, CFO, Commercial Vehicles Business. Today, we plan to walk you through the presentation followed by Q&A. [Operator Instructions] I now hand over to Balaji sir to take over. Over to you, sir

Thank you, Anish. Good morning, and good evening, everybody. Thanks for coming in at short notice. Really appreciate it. May have the slides up please. [Technical Difficulty] We are having a challenge putting the slides up for whatever reason. The audio is coming through the video and feeding. So I would request you to take a look at the presentation that we already uploaded on the deck. I'll refer to the page number and proceed. We'll try and see if we can fix it as we go along. But for now, I don't want to keep all of you waiting. Once again, I apologize for this surprise. Safe harbour statement, do take a look at that, given there are 2 listed companies at [indiscernible], draw your attention to that. So these are the fabulous products we are looking at between -- I'm looking on Page #4, which is the Iveco Group and its portfolio, a lovely mix of product portfolios from light commercial vehicles to electric buses to heavy commercial vehicles and a solid Powertrain portfolio as well. So this business is something that is very, very interesting and something that as I would take you through the slides, you'd realize how strategic it is for both Tata Motors as well as for IVECO. So just to give a bit of a flavor of what the company is about. Some of you may not have followed this company or others may have, but if it's a repetition, my apologies. But it's worthwhile spending a little bit of time on this business. It has 3 segments. The industrial business basically forming of Truck, Bus and Powertrain and a captive financial services business and a defense business. As far as this transaction perimeter is concerned, defense is not included in this. And therefore without defense, it's a EUR 14 billion business. For people not conversant with euro, rupee, just multiply it by 100, you are in the right zone ballpark there. So roughly about INR 140,000 crores is the revenue of the business with an EBIT of EUR 891 million, almost INR 9,000 crores with a 6.3% EBIT margin. The transaction that we are talking about, it's an acquisition of 100% of IVECO Group N.V. via voluntary tender offer to all public shareholders. As a precondition to the deal, the defense business has to be sold or spun off before the settlement of the voluntary tender offer and the last date for that is March 31, 2026. The price offered is EUR 14 -- EUR 14.1 per share, implying a total equity value of EUR 3.8 billion. And this again is without defense. The merger agreement has been signed yesterday with IVECO Group N.V. with their Board recommending and supporting the transaction. Additionally, we also have an irrevocable commitment secured from Exor, who is one of the large shareholder there to tender all its shares and support the transaction. Obviously, this is subject to regulatory approval in multiple forms, of course the merger control, FDI, EU foreign subsidies regulation as well as given it's a captive finance arm, there's a financial regulatory piece as well. From a financing perspective, the EUR 3.8 billion funding has been secured through a bridge financing facility, and this is being done by Morgan Stanley & MUFG. And this facility is expected to be syndicated and then termed out through a mix of equity and long-term debt over the next 12 months after the closure of the transaction. So assuming you're taking about 9 months to close the transaction between about 20 or 18 to 21 months, we expect to take out the final financing scheme for this. We believe starting now the next 20 days, we file our papers and the transaction is expected to close basis that sometime by mid of April 2026. Just for abundant clarity, the company that will be acquiring it is the post-demerger commercial vehicle business. That's the one -- that is the listed entity that will be acquiring. And the advisers to this transaction were Morgan Stanley for financial advisers, they were exclusive for this. Legal advice and due diligence was done by Clifford Chance. PwC did the financial and tax duty and Kearney was involved in the commercial and customer due diligence. Let me now pass it on to Girish to talk about the IVECO company in slightly greater detail.

Okay. Slide 7. So of course, IVECO Group is an Italian multinational company, and Balaji has already spoken about the businesses. It was founded 50 years back in '75, headquartered in Turin. And the current listed entity actually came out of CNH Industrial in 2022. They have 19 manufacturing sites and almost 30 R&D sites spread across Europe, Latin America and one in China, have around 32,000 employees and of course, a wide product range in Trucks, Buses, Powertrains and of course, financial services. Next slide. If I give further details on each of the segments, Trucks is the largest segment by revenue, almost EUR 10 billion in calendar year '24 with an EBIT of 5.6%. They have a market share of 11% in EU as well as LatAm and a full range of trucks starting from LCV, more than 3.2 tonnes going right up to 50 tonnes. The manufacturing locations mainly for trucks is Italy, Spain and assembly facility in Latin America. Buses revenue of around EUR 2.6 billion with an EBIT of 5.5%. They are #2 bus manufacturer in Europe and #1 in intercity buses. They have 2 brands here, IVECO Bus and Heuliez with main manufacturing locations in France and Czech, Slovakia. Fiat Powertrain or FPT now with a calendar year '24 revenue of EUR 3.5 billion, EBIT of 6.2% and is actually our fifth largest engine manufacturer globally with most of the manufacturing locations in Italy. Financial Services is the IVECO Capital arm, which does the wholesale funding for the distributors and dealers as also retail financing in certain markets in partnership with Santander and BNP Paribas. This is the geographical footprint of the company, and you can see that 75% of the revenue comes from Europe, followed by around 12% in South America, 12% rest of the world and 1% of industrial revenue mainly from Powertrain is from North America. Bulk of the employees, of course, are in Europe, almost 28,000, 4,000 in South America and around 1,000 in rest of the world. I've already spoken about the spread of the manufacturing sites. Let's look at the portfolio now and portfolio readiness for alternate fuel. So the Daily is a cabover frame architecture light commercial vehicle in the form of just a cab chassis and a van configuration. This is currently available in diesel, LNG as well as full electric variants, also in formats like 4x4 and crew van. IVECO is currently the market leader in the upper end of light commercial vehicles from 6 to 7.5 tonnes with 65% market share in the cabover frame configuration. In addition to this, IVECO has recently tied up with Stellantis and Hyundai to widen the range and especially to have access for Monocoque vans and in EV version. They have the eJolly and Super eJolly made with Stellantis co-branded, built mainly for, of course, urban mobility and the eMoovy, another architecture -- Monocoque architecture from Hyundai and meant for electric variants. So that's the light commercial vehicle portfolio. In the medium-duty trucks, IVECO has the Eurocargo platform, versatile one for both cargo delivery as well as construction equipment and municipal services. Moving on to the heavy commercial vehicle portfolio, the trucks. A few years back, a completely new platform and branding has been launched in heavy commercial vehicles as S-way, X-way and T-Way. S-Way is meant for long-haul in 2 forms, articulated as well as rigid trucks and is available in diesel, LNG as well as full electric variant. X-Way is heavy-duty meant for on-road efficiency, but also off-road capability, again, in articulated form as well as rigid form. And T-Way is meant for construction and mining requirements. So essentially the tippers again in articulated and rigid form. The market share for light commercial vehicles is 12.2% in EU and around 18% in Brazil and Argentina. For medium and heavies, it is around 8.4% in Europe and 9.2% in Brazil, Argentina. Buses, a very comprehensive portfolio. As I said, the market leader in intercity buses with 2 configurations, crossway, which is a low decor and crossway, which is a low entry and available in multiple forms, diesel, diesel hybrid, LNG, LNG hybrid, LNG as well as electric. And in city bus, again, multiple platforms, urban way, E-Way, Streetway, Crossway and Crealis. And Crealis, in fact, is an articulated 18-meter bus and of course, available in multiple energy configurations. In city bus, IVECO is the #2 player currently in European Union. In the buses, they also have mini buses based on the daily platform as also a rolling chassis platform [indiscernible] which is meant mainly for Brazil and Argentina. They have the Evadys platform in the coaches, which is a smaller presence as of now. Going to Powertrain, a very strong portfolio meant for both on-road, off-road applications. In engines, essentially 3 platforms, the F-Series, which is 2.3 to 3-liter capacity; the N-Series, which is 4.5 to 6.7 liters and the Cursor Series meant for heavy-duty, which is from 8.7 to 13-liter capacity. Applications, of course, bulk of it comes from on-road trucks and buses, but also a significant share coming from off-road, essentially from agriculture, construction and power gen business as well as marine. In terms of technology, the entire portfolio is Euro 6 ready, and they are currently also working on Euro 7. In addition to this, FPT does have a strong portfolio of axles and transmissions for the entire range and have also recently entered into electric powertrains, which includes electric axles, battery management system as also battery pack currently with imported NMC chemistry cells. Financial Services, Balaji, would you like to take this slide on financial services?

Yes. Sure. So from the business is structured on 2 fronts. One related to wholesale banking, wholesale financing, which is consolidated within the books of IVECO. And the other is retail financing and retail financing is done majority through partners, basically BNP Paribas and Santander. From a portfolio perspective, the on- plus off-book is about EUR 8.3 billion, out of which close to [4 to 5] billion is sitting in on book. And the delinquencies have been quite under control and the business over the quarters is fundamentally designed around to deliver a 2% ROA on the on-book portfolio. It's a business that has been there for the last 50 years and extremely well run. And also has some innovative capabilities being created as we speak, which is called [GIT] related to how to lease and drive penetration of electric vehicles portfolio or the new energy vehicle portfolio in the commercial vehicle space. So it's a very key part of the offering that goes into a commercial vehicle support in the European environment and something that has been pretty well managed. Back to you.

Yes. Thanks, Balaji. So this is an important slide. So as we said, I think 2022, IVECO separated out from CNH Industrial and got listed. And since then, I think they have been growing from strength to strength. In March of '24, we also had a Capital Market Day wherein they announced the unlimited pathway strategy, the bold ambition, where they have laid out plan to grow by 5% CAGR on the top line to deliver around EUR 17.5 billion with 7% to 7.5% EBIT, so almost 200% EBIT growth from now and generating a free cash flow of around EUR 0.8 billion. This is by calendar year '28. They have also divided their business into 4 sub-businesses, Trucks, Buses, Powertrain and IVECO Capital. And each of the sub-business also has an ambition and a path charted out to achieve the targets for calendar year '28. Within trucks, so it is more about operational excellence, making the cost structure competitive by using commercial levers as also more of design to value and complexity reduction. We will continue with the leadership in light commercial vehicles in the body or frame configuration by expanding the range further and coming up with model year '27 that also has new lighter architecture for electric variant. In medium and heavy duty, of course, the task is to leverage the full potential. And the company has introduced model year '21 and an upgrade again in model year '24. And in our commercial due diligence, including meetings with customers and channel partners, very clearly, the impression, actual experience and perception of the products have grown significantly. And in fact, in heavy-duty trucks in quite a few segments, they are now leader on total cost of ownership. In addition to this, there is a plan to further improve the portfolio by increasing the modularity, including ZEV architectures and also coming up with a new cabin, which will not just meet the regulations, but will also, therefore, bridge the gap on cabin interiors and comfort. In buses, IVECO aims to reinforce the intercity leadership and towards this, a new platform is being built, which will ensure that the cost structure further becomes even more competitive and also have multi-energy platform and therefore, get ready for penetration of electric into intercity buses. With a huge success in intercity, now gearing up for the similar success in city buses, which is more of tender driven, similar to intercity. And the new platform, therefore, is going to help this particular segment as well. In addition to this, in buses, there is a plan to grow geographically and therefore, expand within you outside the core markets. The target is to get to 8% EBIT by FY '28. In Powertrain, I think to be one of the last man standing in ICE and therefore, further unlock manufacturing, engineering and procurement efficiencies, scaling up the aftermarket business is a significant opportunity, which has been called out and a very strong intent of getting into e-powertrains and growing there by being in e-axles, battery management system as well as battery packs. And this business has an aim to reach around double-digit EBIT by FY '28. Now coming to the transactional, rationale. So in the recently held Investor Day, I think we unveiled our vision of the demerged entity, Tata Motors Commercial Vehicle and how do we want to grow and what has been our strategy as winning decisively. Now this acquisition actually fits very well in that strategy and the vision that we laid out. So first of all, it leads to a very complementary set of capabilities coming together. Having access to futuristic technology, whether it is on Powertrain, ADAS, SDV and other aggregates. And at the same time, IVECO will get access to design to value and frugal engineering capabilities in India. And together, these capabilities will make the joint entity much more competitive on the global scale. With this acquisition, of course, together, Tata Motors and IVECO Group actually moves from sixth position to fourth position in terms of the volume of vehicles or trucks sold in more than 6-tonne category, which is seen as trucks. And together, it also creates a big platform and free cash flows, which will give us the strength to invest boldly into future technologies. The portfolio is completely complementary. The price range of Tata Motors Commercial vehicle ends at a particular point and the pricing -- price range of IVECO vehicles start just above that. So the portfolio is absolutely complementary. The geography is also very complementary. The Tata Motors business is strong in India, SARC and has also entered into Middle East and African markets, whereas IVECO, very strong in European Union as also Latin America. And we have worked out initial set of synergies in the area of revenue, capital expenditure and operational expenses, which should free up at least 0.5% of consolidated revenue in the form of free cash flow. One of our strategy also has been to diversify the business and therefore, reduce the risk of cyclicality and its impact on the cash flows. I think with this kind of geography complementarity, this fits very well in this strategy of reducing the impact of cyclicality. And therefore, it becomes a very, very logical step -- next step after the demerger of the Tata Motors Commercial Vehicle business. Going on Slide 18, it further explains on the capabilities, complementary capabilities that I spoke about. So technology and innovation in Europe in the areas of Powertrain, ADAS, SDV, telematics will be now available as also alternate energy. It clearly strengthens the global engineering talent pool that we will have access to. We will infuse global practices in product design engineering, and it actually comes with the framed Italian design and engineering capabilities, which will be leveraged to the fullest extent. As I said, it also makes IVECO access the frugal engineering and design-to-value capabilities of the India business and therefore, improve their competitiveness in the European market. In terms of market positioning, very complementary. And I think both the portfolios and especially the IVECO portfolio is also regulation ready. Going next. So you could see here how it creates a global player. So in terms of volume, above 6 tonne trucks, it's a 30% growth for TML at 4.6x growth for the IVECO Group. In terms of revenue, 3x growth for TML and around 1.5x for IVECO. EBITDA margin, again, in EBITDA, 3x growth for TML and 1.5x for IVECO. On EBIT, 2.2x growth for TML and around 1.9x growth for IVECO. In terms of free cash flow, it's a 1.4x growth for TML and around 3.7x growth for IVECO. And you can see in the graph, the joint entity will become #4 in the global pecking order for volumes above 6 tons. And you can also notice that 2, 3 and 4 are very close to each other. Going ahead, it clearly leverages the strengths strength of TML and IVECO Group, and I've already mentioned these strengths earlier. And this will lead to the synergies. These are the initial set of synergies that we have put in place. It will include some revenue synergies in terms of bringing in some of the IVECO products in India. So for example, heavy-duty tippers, tractors, vans, buses. It would also mean taking some of the Tata Motors products in Latin America, which is where IVECO Group is -- has a strong presence. It will certainly lead to CapEx synergies as we can combine some of the programs. And while we get these CapEx synergies on these futuristic technologies, which is going to be very important, by adapting some of these technologies to the Indian market requirements and leveraging the frugal engineering capabilities will also lead to design to value and therefore, cost synergies in both the places. And these cost synergies, we have worked out knowing very well the nonfinancial covenants that we have in place, especially for 2 years for retaining the facilities, et cetera, in Italy. And these synergies is almost around 0.5% of joint revenue from FY '28 onwards. In terms of portfolio, I have already explained, I think very complementary. On the left-hand side, you can see dark blue is the market presence of Tata Motors and the light blue is the market presence for IVECO, hardly any overlap and therefore, very, very complementary. On the right-hand side, you can see that the portfolio is also very complementary in terms of price positioning. Even in terms of brand positioning, very well differentiated in terms of Tata Motors CV being value-driven and rugged commercial vehicles, whereas IVECO being more premium and modular product lineup for regulated markets. I will now once again hand over to Balaji for the transaction details.

Yes. Thanks, Girish. Maybe I'm sure you've seen the slide, but let me probably put it in context in terms of -- I see a lot of questions coming on, how does it different from JLR? Why are we doing this on the like? I think arguably one of the most important slides in the deck in terms of putting the context of the commercial vehicle business. Unlike passenger vehicle business, our commercial vehicle business is a pretty steady business where market shares are pretty steady over a period of time, one. Two, it is also not a highly disruptive business, but at the same time, it's a gradual and steady change in technology and better safety, better emissions, better connectivity that is currently being played out. So for Tata Motors, we should mentally be clear that just playing in one particular market will mean that you'll continue to remain in this market. And if our strategy is about winning decisively and growing, this business also needs to start looking at what are the other avenues for growth. That is point number one. Point number two, we have always said that we would want. The believes we believe, given the nature of this business, the only [indiscernible]in this business is the cyclicality that comes through it and therefore, the volatility in cash flows out there. So diversifying cash flows is a long-term value creation from a shareholder perspective, which we are committed to. And it is one of the more material ways in which you get it done, number two. Number three, in terms of the ROCE of this business at this point in time for Tata Motors is about 40%. For you to be able to generate the kind of growth that you are looking at, at those level of ROCE with risk being low and EPS to be shifted upwards is going to be very difficult beyond a period of time because it's going to be an organic growth business from that perspective. In that situation, this industry, that is the reason it's a highly consolidated industry. It is not an industry where suddenly there's going to be a start-up coming and then one fine day, everything is getting disrupted. It's not of that game. It's got a huge value chain. It's got service network, which is huge. you will need to have a good financing arrangement to get these things right. So market by market by market, this needs to be one. And one of the reasons why this industry is consolidated is also because of that. And for -- if Tata Motors needs to have ambitions of growth ambitions or value creation over long periods of time, it is so important that we also bulk up. And this bulk up, I also see in terms of where are the synergies going to come from. I would visualize this as 2 Venn diagrams, 2 circles. And I would see the overlap region in between. It will start small and over a period of time, it will start coming together. And unlike at the time of the JLR acquisition, where the regulations on standard, be it on safety, be it on emissions, be it on features or connectivity was substantially different between what India was and where the premium luxury business was, commercial vehicles is not in that space today. And I would argue that both IVECO as well as Tata Motors are actually bang next to each other in terms of the continuum of product offerings, continuum cost curve, et cetera. So it's very natural for us to come together. And at the same time, we should be careful that we retain the customer base, we retain the brands and we, therefore, ensure the front end is as differentiated as possible, but there are substantial places for us to work together and conquer it. Another angle I would add to your thing is take a look at the financials of this business. Its EBITDA is reasonably strong. It's matching Tata Motors, but it falls substantially from EBITDA to EBIT because of the investments needed for which the scale is not there for it to sustain the profitability, which is where sharing some of these joint development costs together will, in the long run, make a lot of value. So the combined ROCE of this business, I would expect it to be close to almost 20% over a period of time. And that to see this kind of a high-scale business for Tata Motors sit today at current scale of almost INR 70,000 crores, INR 75,000 crores and try to build a INR 2.2 lakh crore business at 20% ROCE is almost impossible. And therefore, this is the least risk. So it's a running business. And unlike JLR earlier where cash flows were a challenge. This one is a cash profitable business even today. Its new launches are starting to work well. We are entering in at the right time for it -- for us to be able to accelerate this growth further. And you've seen the Unlimited Pathway strategy that has been laid out. So I think they already have a solid team. So issues on bandwidth of management from Tata Motors to other is not an immediate issue. But yes, we need to be mindful of the cultural integration challenges that we have, but it's a very mature team on both sides. And therefore, for us, our ability to work together, we have been working with them for the last 6 months. We don't see any issues whatsoever. I think we are going to have fun together in terms of creating challenges for the other players in the market. Therefore, for us, it is a strategic move. It is not a tactical move at all. It is strategic. It is meaningful. It's not an incidental site show. It is a meaningful large acquisition that is there. And of all the cases that I've been looking at, this is probably one of the lower risk avenues for growth and profitability that we see. And from an Indian business perspective, success is not a given. We need to be very, very clear. If you're looking at -- do not look at this by one quarter to another quarter. You look at it over the next 15 years as you suddenly say that net zero has to happen and the world standards start coming together, just to assume that just because we are a leader today, we'll remain a leader, we will be full hardy. And therefore, getting this access to technology, ensuring we work together, having access to global market is very, very important. One of the other questions I see is that how is this different from the Daewoo acquisition? Daewoo acquisition was almost a one-market acquisition. only in Korea, it was there. And Girish is going to talk about that subsequently. This is a global player that we are talking about. And more importantly, standards of all emissions and all the European rules and Indian rules are now actually next to each other in terms of how they are coming together. So timing is very, very appropriate at this point in time. And also the -- it was a very material acquisition. Daewoo was a small acquisition. It's more a tuck-in acquisition. This one is a game-changing acquisition because you're saying this is now going to be 3x our current size and therefore, with robust returns. And the combined entity will be almost 20% ROCE, cash positive, how -- therefore, to say that I can, therefore, not decide to take on bold bets in terms of what kind of technologies you want to enter in is very much doable. And don't forget that both businesses are already cash positive. And the portfolio and geographical diversification is important because in that geography, for me to, let's say, take Latin America, for instance, while EU may be anemic from a growth perspective, we are not making any great assumptions on EU growth at this point in time. But there's huge opportunity in LatAm. And Tata Motors going into LatAm is impossible. We don't have the network. We don't have the financing. We don't have the service network as well. But I can definitely have a portfolio approach into LatAm where IV Coast comes at the top, we come in below, which should definitely help that market as well. And we understand how to manage costs, and that's something we should do well. And therefore, there is -- and we should not forget the value coming out of steady cash flows in this business. At the same time, the transaction, we should also be clear. A lot of questions I see in terms of why would you do this, et cetera. Opportunities of this size and scale don't come when you want it. You need to move when it is available. And therefore, this is also need to be kept in mind, and we couldn't -- the timing couldn't have been better. We are demerging this business. We have gone debt-free, and they are just about pulling their defense business out. We had a very, very small window in which this needed to be closed, and therefore, that is what we have done. And the transaction is financially prudent. Do not look at where they have come from in terms of pricing. This is a market where we are very clear we want 100% of this business. It will be delisted for which you need to pay the appropriate price to ensure we are delisting this market, this product. And in a situation when both are FCF positive, we are reaching EPS breakeven in 2 years, and we are able to repay the acquisition debt in the next 4 years, it is at a very high ROCE returns and strong cash flows, we believe it's financially prudent as well. The funding strategy, I also hear story -- questions in terms of how is EPS being positive. Yes, there will be a fund raise that will happen. We also have Tata Capital that we'll monetize as part of this to ensure that the equity raise is limited. Combination of these 2 within 4 years, we will repay the debt out completely. And we do not expect, therefore, stress as far as investing in this business because of this. And you will also notice that we have not made huge assumptions on synergies. And one of the things the Board has pushed back very hard is that I know you guys are being conservative, at the same time, ensure that you come back with a bold plan. So what I would request all of you is give us time because it's a listed company, there's only so much we can work with the management on in terms of redrawing the strategy. Pretty soon, give us a few months. Once they are clear with the product, the regulatory approvals have all come through and the delisting has happened, you should hear a very, very strong storyline in terms of how do you want to turbocharge his business. It's not just about cost synergies. I would want to see growth synergies substantially more than where it is today. So what's in it for IVECO shareholders? I'm sure some of you are already listening in. Firstly, I think you've been protectors of this business for a long period of time. And therefore, I'm sure you would want a very respectable home for your business. And who better than Tata's in terms of a strategic long-term growth-oriented, value-accretive, responsible business partner than us. And therefore, we would really request you to consider this in all seriousness. And yes, it's an all-cash exit, which is also going to be difficult in the current market conditions, and we are committed to that, and the premiums are strong. And from a transaction certainty perspective, I'm sure you would have read the -- we have already engaged with the Italian government, and you have seen the commentary from the government last night immediately after our announcement. There is full support for the transaction given the commitment that we have to ensure that this is a cherished asset in Italy and IVECO as a brand really thrives going forward. And probably one of the most important slides is what's in it for the employees and other stakeholders of IVECO. First of all, there's minimal disruption because of this. You already have a fab strategy. We love the strategy that has been laid out. And for people who haven't read it, I do draw your attention to the Unlimited pathway strategy that has been pulled out last year. you are absolutely bang one message in executing that. And therefore, we have -- there's absolutely no change to the current strategy. If at all, we just want to see how much we can accelerate it further, number one. Number two, you already have an investment road map that is technology neutral in a net zero transition, which, again, in the world of commercial vehicles, we completely subscribe to. And therefore, we are looking at it exactly the same way. So the connect was instantaneous among between the 2 teams. And given the complementarity we've been talking about, there is no impact with respect to the footprint, customer contracts or current employment. This transaction does not create anything to start with. At the same time, we should be clear that we are in a real world. And therefore, whatever the management and the Boards decide at this point in time to remain competitive, that will get done by the management at that point in time. This transaction does not create anything additional to whatever is currently happening. And we are absolutely excited about the pathway for IVECO as a brand, for FPT as a brand, and we would love to turbocharge that as well. And therefore, the corporate identity will be protected. The company will continue to be called IVECO and the brands will be preserved. At the same time, quite so much for the defense, the real piece is what is the excitement of doing this. I think by joining a reputed family of Tata, we eagerly look forward to welcoming you. I think we have already demonstrated that we are very, very patient long-term players in this industry, and we are here to shape industries. And we have done that with JLR. We would love to do this again with IVECO. And by enhancing and diversifying our volumes almost 3x with strong returns, we now have the firepower to actually invest for our future and to be able to compete effectively in this market. And now we have the ability of complementarity of markets to start entering newer markets with full scale in terms of dealers, service network, financiers, all laid out. And therefore, that's going to be the actual excitement comes there as we start winning in different markets. And of course, we are absolutely clear the IVECO Board will continue to drive decisions for the long-term growth and competitiveness of the business. So this is what I have to say in terms of the rationale. Time lines, it's going to be an intense 9 months, a lot of paperwork, and we start with -- start today in terms of putting the paperwork together. We need to file with CONSOB by 25 -- by mid of August within 20 days. And then there's a lot of engagements with the financial regulators starting today, which will be there. And they need to give that approvals given that there are banking licenses in different markets. And we would, therefore, expect that the open offer will actually open sometimes towards mid-Feb to end Feb, and we would expect by end of March for the acceptance period to end and close this transaction, make the settlement payments by mid of April. That's the time plan that we are working towards with full alignment with the IVECO team as well. Needless to say, the defense transaction has to be completed by March 31 and the run-up to that. And therefore, that is an important deliverable from the other side as well. So this is what I had to say. And I've already seen there's a lot of questions that have already come in. I've tried to address a lot of them as part of my coverage, and Girish has also covered a lot of them, but let's run through it at speed.

So first is on the EPS side. The calculation, which I mean you have showed out there, the way we have done about it is in a very simple way. If we did not do this transaction to -- if we were to do this transaction. If we do not do this transaction, there's a domestic commercial vehicle business that is running. This domestic commercial vehicle business has a particular number of shareholders and it has got an earnings and then what is the number it will generate as an EPS. Then the combined entity, along with the synergies, along with the Unlimited Pathways plan that has been laid out, we see the fundraise happening sometime next year. After the fundraise, I think the next 2 years, this business becomes EPS positive completely. And it also pays down debt in the next 4 years from now in terms of the numbers. So therefore, that is how it is done. And the multiple that we are paying is about 2x EBITDA compared to where Tata Motors trades at about 10x to 12x EBITDA. So therefore, from all the questions related to growth, Europe and everything is actually there in the multiple itself. And therefore, that shouldn't cause a stress in terms of how we are paying it. Macro environment in terms of EPS breakeven, we have not assumed major growth as far as Europe is concerned. We want to be conservative, but that doesn't mean we can't do it. The reason the positivity is coming from the LCV portfolio and the buses portfolio and the trucks portfolio, which Girish eloquently explained because they are just about getting their portfolio act right and growth is starting to come through. And therefore, we should be able to see market share gains in these markets in a gradual manner. That's what we have done. And challenges in terms of integration. This is from Pramod. Let's not underestimate 2 completely different cultures will need to come together. What gives us real optimism that we'll get it right is the way the teams have been engaging over the last 6 months. Sometime we started sometime in January. It's been going on for the last 6 months. It's been an extremely open, transparent and fun conversations we've been having with each other with a lot of understanding. There is mutual respect to the depth of understanding we have of the portfolios and the industry. And we believe together, there is also a burning conviction to say that as we come together, we can really build a memorable business of scale and size. So we understand the excitement is what will drive us, but we should be careful that we don't get ahead of ourselves. So there's a clear governance plan that is being laid out, which we'll be discussing with the IVECO team once now that we have to -- now we can go more open, we'll be in a position to converse all subject to what the regulatory framework allows, which we can talk or not talk. But once we are clear that the deal is done in April, then I think it's a different conversation thereafter. And we should be in a position to engage much more intensely thereafter. U.S.A. exposure is minimal -- sorry, Girish, go ahead.

U.S. exposure is just 1%.