Tata Motors Passenger Vehicles Limited (500570) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Tata Motors Analyst Investor Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Sneha Gavankar from Tata Motors. Thank you, and over to you, ma’am.

Thank you, and good evening, everyone. On behalf of Tata Motors, I would like to welcome you all to watch this conference call, and thank you for joining on short notice. Tata Motors and TPG Rise Climate have today entered into a binding agreement whereby TPG Rise Climate along with its co-investor, ADQ, shall invest about USD 1 billion in a subsidiary of Tata Motors that will be newly incorporated for undertaking passenger electric vehicle business. To share the details of this development, we have with us from Tata Motors Management, Mr. PB Balaji, Group CFO; Mr. Shailesh Chandra, President, Passenger and Electric Vehicle business; Mr. Aasif Malbari, Vice President, Finance, Passenger and Electric Vehicle Business; and Mr. Dhiman Gupta, Vice President, Treasury, Investor Relations and M&A. This will be followed by Q&A. So over to you, Balaji, sir.

Firstly, thanks, everybody, for coming in at short notice. Much appreciate it. What we try and do today is to quickly run you through the business of EV, why we see potential in this business and why we are excited about it. And then we'll have a -- and quickly cover the business rationale as well as the deal structure, and then happy to take any questions. Without further ado, Shailesh, can I request you to talk about the business?

Yes. Thank you, Balaji. So let me take through the first section, which is around the EV industry. So let me first take you all through the PV and TML, EV journey so far. Starting with the EV industry growth, we have seen that in the past few years, the industry has been growing at the rate of 1.5 to 2x every year since FY '17. And this year, we are expecting the industry to grow by 2.5 to 2.7x. And what is really driving this steep growth is the favorable government incentives, which is not only the central government FAME II program but also the state government incentives, which is a top-up to the demand incentives being extended by the central government. The second reason is the launch of a more credible, practical and aspirational mainstream EVs by Nexon and the customer is talking very positive about their experience, which is really enabling the other customers to start considering electric vehicle. Also, we have been seeing that the ICE vehicle prices have increased since the BSVI implementation, and it continues to increase with every emission norm change and introduction of safety norms. And because of the steep increase in the fuel prices also and the inherent benefits that electric vehicles have as far as running cost is concerned, it is also kind of creating a pull from a consumer perspective to consider electric vehicles. [Technical Difficulty]

We request all the participants to please stay connected while we reconnect the management. Ladies and gentlemen, the line for the management is reconnected. Thank you, and over to you, sir.

Thank you. Shailesh.

Okay. So I hope you were able to see the earlier slide, but this is the growth that we are seeing on the market share. This is slide #6. So if you see the market share growth, we started with 11% market share in FY '18 then we had just one product, which was the Tigor EV meant for the fleet segment, government fleet. And since then, we have been launching new products like Nexon EV in the personal segment. And since then, with the success of Nexon EV, the market share has increased to 71%. And you're also seeing the steep growth in volumes that we have seen. But this actually is limited to the supplies. The real potential is really seen in the right side, which shows the growth potential of EVs. The dark blue line shows the cumulative bookings that we have been receiving and the gray line is showing what we have been able to retain because of the lack of supplies. So there is a very steep increase that we are seeing in the demand, but we are fast trying to ramp up and catch up on the supply side versus the demand. I will talk about, going forward, what is really going to drive the EV industry. Two big factors; one is the government incentives. We have seen 11 state government is coming with very progressive EV policies, which is, as I said, is topping up the demand incentives versus what is already available from the central government incentives. Then the PLI schemes, which is focused on advanced cell chemistries as well as for PLI for auto is focused on EVs. So both these in combination is going to really drive the adoption of EVs. The other demand drivers that we see is, one, the stringent emission norms from 2022 April, we are going to see the introduction of CAFE, which will drive all the OEMs more towards electric vehicles to offset the emissions coming out of the ICE. So that itself will feel some push factor. The total of cost of ownership is seeing parity with respect to the ICE powertrains like petrol and diesel. And from next year onwards, you will see the [ parity ] even in the personal segment. And this basically would be the tipping point in terms of driving the adoption of electric vehicles. Also, you have better customer options as OEMs are introducing longs -- long-range EVs. Trains anxiety has been one of the key bottlenecks or barriers to adoption of electric vehicles. And in the coming years, we are seeing manufacturers like us going for higher-end products as compared to the medium range for that we get today. So all these factors in combination is going to really provide a very exponential growth in the future. How Tata Motors is planning to lead the charge in this space on the back of this opportunity? As far as product is concerned, we have planned for introducing 10 electric vehicles by FY '26 in the next 5 years, which would be in different body styles, in different price points from affordable EVs to is EVs with a higher range, more sophisticated technologies. And on the sales and marketing side, we are also going to increase the micro markets where we are present today. As you saw that today, we are present in 60 cities, but we'll continue to expand every year into more cities also as we are introducing more electric vehicles and different models. Also, awareness creation has been seen as the key enabler to drive the adoption of electric vehicles. We have been doing that for the last 2 to 3 years. And as we open the new micro markets, we keep focusing on awareness creation. Also, we are coming with more options to access the EVs through subscription model, which will allow those customers who are still wary to adopt a new technology, an option to go for a 12-month or a 24-month subscription. Capability building, we are driving deeper localization, strictly following the pace manufacturing plan as laid down in the same requirement. But now going forward, we are also going to go beyond that, and go for deeper localization, focusing also on the localization of chain parts and of course, building the center of competence. Ecosystem has been the biggest enabler in driving adoption, and this is one clear advantage that Tata Motors has by tapping the group companies who have domain expertise in different area of ecosystem whether we talk about charging infra or cell manufacturing or different financing solution. So this is also what we are going to extensively leverage going forward. So this is how we plan to really proactively win in the EV space. Over to you, Balaji.

Yes. Thanks, Shailesh. What I'm try and talk about is the business rationale and how does it all come together? If you recollect that in March 2020, the Board had approved the proposal to actually subsidiarize the PV business and which we are confirming that by 1st of January next year, that will be fully operational. And that was done with a focus actually to ensure that we are able to drive a differentiated focus between CV and PV. And at the same time, we would want to unlock the business for value and see if we're able to get partners to work with us on this area and drive operational flexibility. And it also improves the ability of TML to reward to their shareholders. And that was the purpose, which is currently being executed. Along with that, if I look at the PV strategy, which we have been consistently maintaining, the PV strategy is to win sustainably. And with that in mind, we had called out in our Investor Day as well that we definitely want to go after a double-digit market share, which we are happy to confirm we are there. A high single-digit EBITDA, it is still a journey. We are progressing well. And we want to be FCF positive by FY '23, which again, we are progressing well. And for this, the actions that we have put in place was to reimagine PV, the front-end execution. The whole spew of products under Forever New, the full portfolio being refreshed, and it is doing very well for us. Leverage the Alpha and Omega architectures. We have the Altroz launch and Alpha and now have the next product coming in, which is PUNCH, we're just launching as we speak. And on Omega, we had first the Harrier and then we had the Safari coming in thereafter. So we want to leverage these architectures more and more. And existing assets are being really juiced to the limit, look at the factories, the production capacity, everything is being driven hard with very, very careful investment choices that we have made, all in the spirit of to win sustainably. Move on to EV. It started with a fledgling unit. And then we are very clear as we started experimenting, they're starting to understand it and starting to see the consumer react to it. Very clearly, we want to lead the charge in the Indian EV market there. And that's the reason the strategy was to win proactively. And here, the actions are very dramatically different to the PV. We want to introduce 10 new EVs, capitalize the charging infrastructure, invest proactively in drivetrains, products, platforms and the like. So there's a very inherent dichotomy between these 2. And that is the reason when you look at the implications for it, when you look forward and say that is this is a kind of also potential in this country, we will need to really invest. And EV will require at least GBP 2 billion of investments, INR 16,000 crores plus kind of investment will be needed over the next 5 years. And PV will definitely be fund constrained, so the support with aggressive EV aspirations. And therefore, the need to continue to -- and we are also clear that we need to continue to invest in EV in order to build momentum and retain the competitive advantage. And lastly, but equally importantly, EV technologies are still evolving and hence they are risky inherently. If this is an implication that we have, then the way we have to look at this business and the investor pool that we need to look at is going to be different, but it is a huge advantage going for EV that it has got a very clear net zero-emission as a fundamental call to it, which is fabulous. And therefore, we can then use this potential of the EV business to tap into a different segment of investors who are focused on the long term, who are focused on a carbon-free world, and who have a very, very different outlook investment in the space. And there is, therefore, potential to unlock significant value. At the same time, fund our growth aspirations in this business and move the -- and take the lead in moving the Indian automobile industry to a carbon-free world. So this fits in very well even with our sustainability aspirations as well. With that in mind, there are 3 -- 4 aspects of Helios, which is the project name for this transaction. First, create a pure-play EV company to focus on passenger mobility. This will be created as an asset-light subsidiary of Tata Motors. We'll house all the dedicated EV talent and design capabilities of TML, and we'll really aim to attract top-notch global talent into this particular company. Second, we want to invest -- step up the investments in EV and related technologies to greater than GBP 2 billion over the next 5 years, as we already talked about. Third, we want to leverage the existing PV assets and investments to drive efficiencies as well as drive speed to market because this is -- we need to ensure that we stay ahead of the curve on this one. And the PV company will therefore be a toll manufacturer. We provide all the services to EV company to make it stand up on its feet. And fourth, onboard like-minded investors who will be able to provide us capital, access to the global ecosystem that they've already invested in and unlock value. And most importantly, this external scrutiny of an external investor will always ensure that we are on notice and will really sharpen our delivery focus. So those are the key aspects of Helios. So this is a transaction structure, Slide #12, where the PV co will become a 100% subsidiary of Tata Motors in Jan 1. The EV co the new company, we have not yet named it, we'll name it. We'll find a good name for it in due course. We'll focus squarely on the future EV products and build and own the future IPs of EV and we'll also capitalize the creation of the charging infrastructure in the country. And the external investors, they will take 11% to 15% of that company. And we have Tata Motors, the listed co, having a ownership of 85%, 89% in this company. And also, these 2 companies will pool their CapEx credits, so that now that we have taken EV out of the PV company and put it out there in terms of all the revenues, et cetera, this will require carbon credits in the future. So that will be a pooling arrangement that we'll be putting in place. And this is where we're delighted to share with you the TPG Rise Climate, which is a new fund of TPG Rise that we're investing $1 billion at a valuation of up to $9.1 billion. And this process obviously involved a selective outreach to marquee investors over the last 2 months, and that has now reached a conclusion now. And TPG Rise Climate will be the lead investor, and they are a $7 billion fund with a focus on investing in companies that enable carbon reduction in a quantifiable way, and ADQ will be the co-investor. What are the key terms of the deal? It's a $1 billion equity funding, where TPG Rise has a commitment of INR 7,500 crores, $1 billion. 50% of this will come by March '22, subject of course to conditions prevent being met, and also, of course, the set-up of the EV companies one of the conditions precedent as well. And the balance 50% will come by Q3 '22, on achieving go-live actions. Basically, the EV company need a set-up the [ code IT ] system, everything for it in order to be able to recognize revenue in that. We were expecting by Q3 '22, that will be done, and therefore, we can go live thereafter. And that will mean -- that is the time the next tranche will come in as well. The instrument is a CCPS structure, and it converts into ordinary equity shares in the EV company basis achieving revenue threshold. So the only constraint there is achieving revenue thresholds. The valuation will be up to $9.1 billion. And depending on the ratchet moves from 11% to 15%. The maximum that TPG Rise stake in the company would be 15% and minimum will be 11%. So that's how we will be working on. And these are all on a post 20 basis. So that's what we have to say. There is additional material in the deck for you in terms of references on what are the drivers to growth. Why is Tata Motors EV has been doing well? That's available for you to read. I don't want to spend time on that. Happy to take any questions that you may have.

[Operator Instructions]

So the first question is from Jinesh Gandhi. He's asked quite a few questions, maybe I'll read them out. So the investment plan of USD 2 billion would require further investments, possibly further dilution in Tata Motors stake in EV business. EV investment plan talks about investing in charging infra. Does it mean that the EV business would invest independently of Tata power for charging infra? What level of EV penetration do you estimate in PVs by FY '25, FY '30? Sir maybe you can take these 3 questions and there are another 3, yes.

So the first question, Sneha was on -- further dilution. So I think, firstly, I think this $2.2 billion of investment is over a 5-year period. And therefore, there's also business cash flows that is out there. And therefore, we will look at it a proper time in terms of for this fund raise if we need to do. So currently, the plan -- there's no plan for any fund raise at this point in time. This INR 7,500 crores that's coming in will serve us well in the coming years to take all actions that we need to do. So we are there, one. Two, with respect to charging infrastructure, if you notice, we have said catalyzing charging infrastructure. We have not yet had any conversation with Tata Power in terms of what structure that we need to put in place if at all. So that is something that we'll work with them in the coming days to ensure there's a mutually satisfying outcome that comes out. So this is basically being reserved here in terms of the investments that if we need to do, we'll be happy to do it, and we want to invest -- coinvest with them, we'll be happy to do it. If they want to take the lead in investments, we'll be happy that way. So any option is out there all options are open. But what we have basically sprit with this, we have done this deal is that nothing should come in the way of realizing the ambition that we have set for ourselves in the EV world. And therefore, if it means we need to invest in charging infra, we'll go ahead and do it. That's how we have looked at it. Sneha, can you check that the call is connected?

Yes, yes, it is connected. [indiscernible] we can hear you. The call is connected, right?

Yes, ma'am, the call is connected. We can hear the management.

Yes, yes. Okay.

Go ahead, Sneha.

Yes. The next question, sir, I'll take maybe 2, what level of EV penetration do you estimate in PVs by FY '25, FY '30? And can you give a flavor of the current revenues, EBITDA PAT for the EV business?

So let me answer the first question. And I'll talk first about the industry in the next 5 years, we are anticipating a double-digit penetration as far as the Indian market is concerned. For Tata Motors, we have specifically taken a target of penetration of 20%-plus with the 10 products that we are planning to launch in the next 5 years. So that's the answer to the first question. On the revenues, currently, if you notice, we are selling about 1,000 vehicles plus every month. And overall, the revenues in the region of about INR 500 crores, INR 600 crores. And we aim to hit an EBITDA breakeven in the business next -- this year. And obviously, since it is a focused investment, we obviously intend to invest -- move into an investment phase in the next 3, 4 years. And then subsequently, we expect to -- this business should expect to go cash positive there onwards.

The cash -- by when would the entire cash come into the company? And is the investment of 75 be linked to any milestone? Or how would it run over 18 months from the first tranche?

Yes. I think the cash, as I said in my presentation as well will come in 2 tranches. First tranche expected by March '22, once we conclude the transaction of CPs implemented, which we are confident of. And the second tranche will come in by end of that -- end of the next year, calendar year, by which time we should be able to get all our internal IT systems running to start recognizing revenue in the company -- in the new company that we are creating. The receipt of INR 7,500 crores. Other than these 2, there's no other constraints. So we will receive the full INR 7,500 crores. The performance obligation go into the stake that is there, which would move from 11% to 15%. So the $9.1 billion, that's why I called out up to $9.1 billion is basically 11% of the $1 billion that is out there. So that's how the calculation works. Hope that's clear.

The next question is from Pramod Amthe from InCred Capital. What are the terms of interest rates in conversion? And the timeline for first conversion and last conversion? What is the investment till date in...

Yes. Very, very nominal.

Yes.

Sneha, go 2 questions at a time. It's very difficult to remember the way. So on rate on the CCPS are very, very nominal, nothing to write for about. As far as conversion itself, there is -- the whole thing is by FY '27 is when after the contract, there is a conversion. And in case there is any capital raise under our thresholds, then there is a possibility of a post conversion, but those are details. Most of it is confidential, so I wouldn't want to get into that.

What is the investments in that in EV car specific projects? And what is the exit route plan for new investors in EV car venture?

So I think the investment, as I said earlier, is close to about INR 16,000 crores is the kind of investments that will go into the new EV Co. And as far as exit options are there, all options are available for the investor right from Tata Motors, buying them out to third-party investors, we find a third-party investor for them or we stop it into Tata Motors, or we merge it into Tata Motors or the IPO out. So all options are available for this. It's a pretty flexible option structure that is there. We'll work together with them and then make it happen.

Is the plan for finding a partner in the car division complete with this transaction? Or would you be still looking for a conventional car partner?

Currently, that -- it's fair to say that's not on the front burner, but that doesn't mean we are not open to conversations. And we now have to land this deal and take off on EV, so that's what our focus would be, at this point in time. But we are not seeing nor to anybody who's interested in working with us.

The next question, sir, is from Sonal Gupta, L&T Mutual Fund. He says many congratulations to Tata Motors on the deal. Given that you've announced $2 billion plus investment in EVs under this company, will Tata Motors also infuse any capital? Or will that be raised from other investors at a later date?

I think firstly, if you notice, we are the -- incorporating the company from Tata Motors from where this dilution is happening. And therefore, we do not see a need for any further capital to come in from Tata Motors. Instead, what is actually happening in a full access to the full EV ecosystem in terms of factories, in terms of sales points, management bandwidth, design, all that is going on their brand, nameplate, everything. So therefore, we are actually wanting to use everything that has happened in Tata Motors and give EV its full support to ensure that it is able to take off. That's how this deal is being constructed.

Other than product and platform development, are there any other areas where EV Co will invest R&D and build IP around it?

Shailesh, would you want to take that?

Yes. So the IPs will be built around -- primarily around products that is for sure. And there will be additional capacities which will be needed to meet the aspirational numbers that we have set for ourselves. These would be the 2 primary areas, which I said. And of course, since there will be localization of components, et cetera, this could be another area. And if there is a need, as Balaji said, for charging infra, if we need to invest to meet our aspiration, that is something which we've discussed with Tata Power that can also be one potential area if we have to really accelerate things.

Thank you, sir. Next question is from Raghu from Emkay. His question is how was the pre-money valuation of 8.1 billion arrived at?

I think EV valuations globally work on a different logic. And we had Morgan Stanley and JPMorgan as our advisers. And we had put the overall business plan front of them. And of course, there was a view in terms of what could be the kind of valuation that is there. So comparable multiple sales have been used. And if you look at this valuation to the -- if you look at the EV players in East Asia or EV players in the U.S., I think we compare pretty favorably to the East Asian peers who are out there. And with respect to the U.S. peers, obviously, those are premium OEMs, so therefore, it's not a strictly comparable. But our all --compared to East-Asia peers, we are quite comfortable with the way it is playing out, it's comparable there.

The next question from Kapil Singh of Nomura. Can you please talk about the key terms and conditions of this investment? What does the range of valuation depend on we discovered that? And how will the remaining amount we raised as we plan to invest USD 2 billion? Will the India PV business or any manufacturing fee?

So let me take a while for us to go through the first piece, which is the ratchet, 11% to 15%. That is completely dependent on our revenue realization by FY '27. And obviously, the numbers I'm not in a position to share, but it is totally linked to only revenue realization, and we are pretty confident of achieving those, one. Two, with respect, there will be 3 transaction agreements that the EV Co will enter with. Number one, with PV Co for a tolling arrangement to get access to manufacturing, so that PV Co will toll manufacture the cars that are there for EV Co, that is contract one. And that's all the arms-length standard related party transaction that are there, one. Second transaction they'll enter into would be a royalty and an IP agreement in order to access all the brands and nameplate, for example, the Nexon brand, the Tigor brand, all that -- the Harrier brand. All of them will be available in terms of -- everything is great, even the PUNCH today they are just getting launched, when that becomes EVs that's also available for the EV company to draw and improve. So therefore, that will be the second agreement that it's going into. And that again will be standard related party transactions and clear on that. That's the second one. Third one will be a very normal shared services agreement for getting all the shared services from Tata Motors, Tata Motors PV in order to ensure that we don't do traditional things like accounting, payroll, all that will be available from them. So they can get started fast. The spirit of these contracts is to get EV out and running very fast. So they will not waste any time doing what others have already done. They will take it on an indefinite license, or they will take it on an equity basis and move. So that is a way that structure is being done. What are the next question?

Will the India PV business earn any manufacturing fee?

Yes. So for the tolling arrangements, there will be a fee to pay for the PV company. For use of the brand and IPs, there will be a royalty and IP agreement for which there will be a fee that will be going in. And those are standard RPD transactions that are there. And it's not only to be to the extent of what they've have used. If EV today creates a new brand, EV creates a new IP, they won't be paying for that on the PV company. So actually, very straightforward simple arrangements. There's nothing complicated in that, nothing -- actually even nothing interesting in that also.

Next question from Gunjan from Bank of America. Can you talk about the back-end supply chain in terms of battery cell tie-ups? And what is the penetration that you expect in the next 5 years or so?

So next 5 years, I already answered this question a while back. From an industry perspective, the EV industry in India is expected to be in the -- what we say, early double-digit penetration is what we expect. From a Tata Motors perspective, we are aspiring to be 20% plus. As far as batteries are concerned, right now, we have already localized the back-end module in India, and this is being supplied to us by TACO. Going forward, as far as cell manufacturing is concerned, is something also which is under consideration by the Tata Group. And that decision will be taken. If that's the case, then we'll source it locally. And as of now, we have arrangement with some of the international cells company to give cells to TACO who in turn converts that into battery pack and get it to us. There's no exclusive cell manufacturer whom we have tied up with as of now.

Next question from Vinay Singh of Morgan Stanley. What are the revenue thresholds for conversion to equity? And what are your EV targets in volumes and revenues?

As I said earlier, I won't be in a position to share that. That is confidential for obvious reasons. So all I can say is that we are pretty confident that we'll hit them. And therefore, it's our aim to maxed out the valuation, 9.1 billion at 11%. That's what we are running after. And that's what even TPG Rise is running after. So therefore, both of us are aligned that we have to make land of laser.

Next question, sir, is from Pramod Kumar of UBS. How many of the upcoming 7 EV launches will be Born electric? And related to that, what will be the launch pipeline for the ICE portfolio?

Yes. In the next 7 products, we could definitely be considering our dedicated Born electric EV. But it is too premature to talk about it at this stage. We'll talk about it closer to the date, but it is definitely under consideration and in the plan. In the interim, we are also going to tap into the multi regime platform architecture, which I talked about in my presentation, which enables the current modern architectures in the PV side which will be more electric ready, enabling it to house more batteries and therefore, higher range. So this is something which will be the next generation after the conversion products that we are doing. But in the next 7 products, we are also constrained Born EVs also.

How crucial is sustained higher government subsidies for meaningful EV adoption? And what would be the likely price increase for the consumer if subsidies were to expire?

Yes. So it's -- if the subsidy is going to be important for the next few years. But this will be important as the battery prices are at a certain level. Going forward, in the next 2 to 3 years, the battery prices are also rapidly coming down and there is a localization initiative also that we are running. So the reduction on the cost that we are going to see will completely offset the need for any subsidies. So even if subsidies are going to go away, it'll not take away in any manner the penetration levels that one is thinking of from EV industry in India as well as from Tata Motors ambition of achieving 20% plus. So even if subsidy goes away in the next 2 to 3 years, it should not impact because by that time, the cost structure would have come down significantly.

The next question is from Prateek Poddar from Nippon India Mutual Fund. With a USD 1 billion of funding, can we expect capital intensity in the stand-alone business to reduce going forward? And will the EV company eventually be demerged for value creation?

I think as far as capital intensity in the PV business is concerned, I refer back to strategy. We are very clear that we want to win sustainably. We are very clear we want to be cash positive. So that strategy continues. There's no change as far as that is concerned. And we'll definitely invest to ensure that we want to continue to grow that business. That business is not being weak. That business being invested prudently. The reason why is EV investment, we actually want to step up our aspirations, and therefore, we want to drive investments there. That's the reason Helios is being done. As far as a destination, what happens is that time will tell. As the Chairman puts it nicely, we feel the stones in the water, and then we will figure out where we go. This is the first step that we are taking, and we believe it's a step in the right direction. And where will it take us, time will tell.

Next question from Chirag Shah of Edelweiss. Based on business plans and say everything goes as per plan, by when the CCPS converts into equity? And what are the key areas that you are looking to spend in the EV space?

Yes. I think the latter part of the question I've already answered, therefore, I'll skip that. As far as CCPS conversion is concerned, there are 2 thresholds, one is FY '27, it will -- depending on the revenue that we achieve on that particular period, there is a floor of 11% and a cap of 15% as far as stake is concerned. That is the way in which it will convert, one. Two, the other angle is that there is a -- if for any reason, Tata Motors does a fundraise, primary or secondary, and that need certain thresholds, then there will also be a post-conversion on that basis. So that -- those are the 2 events, and that can happen earlier than that. And therefore, that -- which form it takes, we will see. But that's how -- those are the 2 things there.

Next question from Satyam Thakur of Credit Suisse. What are the underlying EV volumes estimates by [ your ] that we have gone with based on which the valuation was based? And whether electric buses and LCVs will remain separate from this new entity?

The first question, I'm not in a position to answer. All we are saying is that we would like to -- there is an internal plan that we are working towards, which we believe is aspirational. And we and TPG really believe that this is the kind of aggression that we need to go in with and that's how we are putting our steps jointly together on that one. As far as EV buses are concerned, that's outside the perimeter. And there is just one piece there, be it LCVs, buses, they are all outside the perimeter. If for any reason there is a technology that EV company develops, which the commercial vehicle business wants to pick up because it makes sense for them to use it or is already being created, then that, of course, is something that they'll be a license fee and take that. That is as per any normal OEM IP transaction that will be. That's all it is.

Next question is from Ronak Sarda from Systematix. What kind of assets and liabilities will move into the subsidiary? The presentation talks of an asset-light model. How does that work? And will the subsidiary be eligible for PLI scheme?

Yeah. Great set of questions. One is as far assets and liabilities are concerned, no assets, no liability moves from Tata Motors PV Co into EV Co it's an asset-light company. As far as PLI, PLI scheme is something that has been around. We welcome the scheme. We will approach this as the Tata Motors Group because that gives us more degrees of freedom. And the payoff obviously happens for electric vehicles in passenger vehicles and commercial vehicles. And therefore, we will take the payoff in those, but those investments, the threshold investments includes ICE. And therefore, it makes sense for us to go to Tata Group, Tata Motors Group to invest in that. As far as battery PLI is concerned, that's another one, those are on advanced chemistries. That's a separate discussion and Tata Motors participates in that, but we will look at it as part Tata's Group and see what are the best way to leverage that particular opportunity. But for the automobile advance technologies fee there, we will go as Tata Group -- Tata Motors Group, and EV company will have a significant payoff that will come into it going forward.

The next question from Nitin Arora of Axis Mutual Fund. What is the total requirement for launching 10 EVs? And would this fundraising be sufficient?

Yes. I think there will be estimation of the investment size needed, right? And we already spoke about it, it is not only in the area of product manufacturing, et cetera. We have sized the need for the launch of 10 products, and this is the basis on which we have called for this kind of an investment. So it is absolutely taken care of.

The next question from Rajesh [indiscernible] what would be the CapEx plan for next 5 years? And how much of it will be on product development?

Yes. I mean maybe you missed the piece there, that's what we said, at least 2.2 billion of CapEx we'll be putting in the next 5 years. I wouldn't be in a position to split it up between each of those for obvious reasons.

We have another question from Jinesh of Motilal Oswal. What are the level of minimum revenue thresholds does the deal building for? And what happens if those revenue thresholds are not met?

Yes. As I said earlier, the cap of stakes that TPG Rise will be able to pick up in the EV company is a max of 15% and minimum of 11%. So therefore, those are floor and cap. And therefore, the valuation would be -- the revenue thresholds will move within that. And for any reasons we do not meet the revenues threshold then the stake caps out at 15%. And for any reason, we dramatically exceed the revenue thresholds and -- therefore, then the minimum stake they'll have is 11%. So the valuation obviously caps out on that basis for this transaction.

So next question from again Satyam from Credit. How does profitability of the EV business compare to that of our ICE EV business at gross and EBITDA levels? And what scale do you envisage it would be necessary for breakeven?

At this point in time, we are pretty confident that the EV business will get a EBITDA breakeven next year. Its contribution margins are similar to what we are seeing in the PV business already. And therefore, we are confident we hit an EBITDA breakeven next year and take off from there.

Next question from Nitij from Jefferies. Would you be able to share some details on your EV plans for coming years? For example, what platforms and products, say, in the next 2 or 3 years as you walk the part to 10 EVs? And how do you decide what's the right pace of investment in EV since it's a very nascent industry?

Yes. So in one of the earlier questions, I had tried to answer this, but let me just give you once again answer that. So we are starting with the Gen 1 products, which are focused on pure conversion, which means that we are picking up our ICE product and removing the ICE powertrain and packing the electric powertrain within the space, which is there. And the limitation that you have is the range. You can't go for higher range products. Therefore, the generation 2, which I talked about is the multi-energy platform, where we are adopting some of the modern architectures that we have like Alpha into a more electric-ready platform, which helps in housing more battery and therefore, delivering higher range products. So -- and giving more body styles at different price points. So this enables us to tap the next level of demand as far as electric vehicles are concerned. And then the third generation would more start shifting towards the Born EVs. This is how will be the sequence in which different levels of electrification in our products are going to come and how the apexes are going to shift from pure conversion to adapted platform to Born electric. This is how we are planning to go about. What was the second question?

Products, platforms and [indiscernible] how do you get 10 units?

So Sanjay Chawla from Emkay. How much of the current fixed costs from Tata Motors PV or the stand-alone entity would get transferred to the EV company?

Can you repeat the question, Sneha? Your audio was bad.

How much of the current fixed cost from Tata Motors PV or the stand-alone entity would get transferred to the EV company?

As we said earlier, the dedicated EV engineers are the ones that we get shifted to that. That cost is anyway sitting within Tata Motors today, and these numbers are not going to get consolidated within Tata Motors. So therefore, there's no delta costs coming in because of that. And we've been very careful that we leverage everything that is already there in PMI to make this happen. So there's no duplication of cost coming in. Therefore, I would rather look at this as we are transferring the requisite talent into EV and getting focused work around EV. That's how we are looking at it. So there's neither any cost savings. This is what -- there's no restructuring, nothing in this. It's a growth initiative that we are on to. Invest and grow, that's how we are looking at it.

So maybe we have time for one last question. It's from Nishit from Axis Capital. What is the cost of -- okay, this has been covered. Does TPG bring in any additional technical capabilities apart from the USD 1 billion investment into the company? And how do you look at working on new ICE platforms for PVs? Will the company look to do this? Or will the focus be exclusively on PVs in India?

Let me split the question into 2. As far as TPG Rise is concerned, I think they are a huge network of highly valuable inputs that they'll be able to provide in terms of technologies, references, connections, ecosystem. So we very, very carefully work with them so that we are able to plug into that ecosystem there. That's a big benefit that's coming that's intangible for all practical purposes, but it's going to be a big one. Second, also, we are really keen. They will have a Board seat. They will come on to the Board of the EV co and we also -- we do expect their valuable contribution in shaping the strategy and also more importantly, ensuring there is adequate scrutiny of the EV plants. So those are really valuable stuff that we are expecting. And there, I'm sure we've worked very well with them on that front. Your question on PV platforms, as I said earlier, there is no change as far as PV strategy is concerned because we believe India will still have a pretty sizable ICE portfolio, ICE market that will be out there. And we will want to have our fair share in that particular market. So whatever the business needs, the only thing, its strategy is different from EV so that I can -- again, I reiterate that point, that has to be -- that has to be winning sustainably. Therefore, they will have to ensure that they deliver the cash flows and ensure that they live within their means. While PV is all about pushing it all out there and going full blast. That is a difference, but nothing is going to stop PV from investing. As we speak, we are saying PV will go cash positive from FY '23 onwards after considering the investment that is needed for making it. So it is all lights are green as far as PV is concerned on their growth road map and investment road map.

Right, sir. I think with that, sir, we can conclude on the Q&A. If there are any -- you can have any closing remarks, sir?

Sure. So firstly, thanks, everybody, for joining at short notice. Sincere apologies for the technical glitch we had 0 notice, we could obviously -- for obvious reasons, prepare for this particular call. We have to go on the slide. But I do apologize for the quality of the audio and break-in, breakouts that are happening. We'll do a better job next time on that particular front. And thank you for joining the session and appreciate your continued support. Thank you.

Thank you. Ladies and gentlemen, on behalf of Tata Motors Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.