Secondary Bond

Bond Terms

Investment Rationale Summary – Not recommending a buy as yields are unattractive for the level of risk taken for this bond. With the automobile industry heavily dependent on economic recovery and affected by the Covid-19 pandemic, it might take a while for sales and demand to pick up. Moreover, a lack of a corporate guarantee further increases the risk associated in buying a bond of a holding company which is highly dependent on the dividends provided by Jaguar .

• Unattractive yields and Weak Credit Metrics: Though yields may stack up favorably against its peers of similar credit rating, it is on the lower end when compared to offerings from its subsidiaries as well as its parent company. In addition to a given rating of B, S&P has also placed them on negative watch. Looking at its financials, its EBIT to interest expense of 0.19 has recovered from 2019’s -23.84, but still does not inspire confidence, while its cash conversion cycle is at -3.26. Moreover, the automobile industry may be unattractive at this stage as it is heavily dependent on the general macro economic conditions, and is also currently in the midst of industry-wide compliance with regulatory action (CO2 emission compliance).

• Lack of corporate guarantee: will provide a non-binding letter of comfort for the benefit of the Noteholders that will not represent a guarantee. Tata Motors intends to make reasonable efforts to maintain a controlling ownership of the Issuer during the tenor of the Notes. In the case of a default, Tata Motors would intend to make reasonable efforts to coordinate and assist the Issuer to obtain the necessary funds for the Issuer to fulfil its obligations. Relative Value

Comparables with external bonds Ask Yield to ISIN Company Name Next Call Date Maturity Coupon Ask Price Z-spread S&P Moodys Fitch Worst XS2265528120 TML Holdings Pte Ltd 3/6/2023 3/6/2024 5.5 101.441 4.875 473.977 B - - US98877DAC92 ZF North America Capital Inc - 29/4/2025 4.75 106.481 3.105 281.879 BB+ Ba1 - US98877DAB10 ZF North America Capital Inc - 29/4/2022 4.5 103.746 2.009 171.870 BB+ Ba1 - US31562QAF46 Fiat Chrysler Automobiles NV - 15/4/2023 5.25 107.716 2.054 168.961 BB+ Ba2 BBB- US31562QAD97 Fiat Chrysler Automobiles NV - 15/4/2023 5.25 107.908 2.099 183.268 BB+ Ba2 WD US382550BE09 Goodyear Tire & Rubber Co/The 31/12/2020 15/11/2023 5.125 100.582 0.661 -229.908 B+ B2 BB- US02406PAP53 American Axle & Manufacturing Inc 31/12/2020 1/4/2025 6.25 104.118 3.737 350.096 B- B2 WD US02406PAR10 American Axle & Manufacturing Inc 31/12/2020 1/4/2025 6.25 103.934 3.890 338.795 B- B2 WD US382550BH30 Goodyear Tire & Rubber Co/The 31/5/2022 31/5/2025 9.5 113.014 3.628 343.179 B+ B2 BB- US235825AE66 Dana Inc 31/12/2020 15/12/2024 5.5 102.143 2.284 187.872 BB- B2 BB+ US59001KAD28 Meritor Inc 31/12/2020 15/2/2024 6.25 102.565 -0.544 -77.569 BB- B1 BB- US345397YG20 Ford Motor Credit Co LLC 9/11/2023 9/1/2024 3.81 102.773 2.958 261.642 BB+ Ba2 BB+ Comparables with internal bonds

Ask Yield to ISIN Company Name Next Call Date Maturity Coupon Ask Price Z-spread S&P Moodys Fitch Worst XS2265528120 TML Holdings Pte Ltd 3/6/2023 3/6/2024 5.5 101.441 4.875 473.977 B - - USG50027AE42 Automotive PLC 30/12/2020 1/2/2023 5.625 99.319 6.193 590.743 B B1 B US47010BAA26 Jaguar Land Rover Automotive PLC 31/12/2020 1/2/2023 5.625 99.473 6.237 577.741 B B1 B US47010BAJ35 Jaguar Land Rover Automotive PLC 15/10/2022 15/10/2025 7.75 107.46 5.477 526.977 B B1 B(EXP) USG5002FAT33 Jaguar Land Rover Automotive PLC 15/10/2022 15/10/2025 7.75 107.515 5.522 525.206 B B1 B(EXP) XS1121908211 Tata Motors Ltd - 30/10/2024 5.75 103.121 5.019 455.372 B B1 - XS2079668609 Tata Motors Ltd - 20/5/2025 5.875 102.563 5.269 487.355 - B1 - Indicative levels as of 30-Nov-2020 morning Bond Structure

Fundamental Highlights

Indicative levels as of 30-Nov-2020 morning Secondary Bond

About TML Holdings Pte Ltd • TML Holdings is a direct wholly-owned subsidiary of Tata Motors Limited. TML’ principal activity is to serve as the holding company for Tata Motors’ international operations which constitutes primarily of its wholly-owned subsidiaries Jaguar Land Rover (JGL) (as well as its subsidiaries) and Tata Commercial Vehicle Co. Ltd. (TDCV) In addition, the Issuer holds a 97.17% equity interest in Tata Motors (Thailand) Limited and a 60% equity interest in Tata Motors (SA) (Proprietary) Ltd, South Africa and a 100% equity interest in PT Tata Motors Indonesia.

• Overview of Jaguar Land Rover – a wholly owned subsidiary of TML Holdings is the manufacturer of Jaguar sports saloons, sports cars and luxury performance SUVs and Land Rover premium all-terrain vehicles. In March 2018, It launched its first all- electric vehicle, the Jaguar I-PACE. By the end of Fiscal 2021, Jaguar Land Rover plans to offer one full electric vehicle, eight plug-in hybrid electric vehicles and eleven mild hybrid electric vehicles

• Overview of Tata Motors- a member of the international conglomerate . Tata Motors is one of India’s largest Original Equipment Manufacturer offering an extensive range of integrated, smart and e-mobility solutions across the globe. Tata Motors offers a broad portfolio of automotive products, ranging from trucks (including pickup trucks), to small, medium, and large buses and coaches to passenger cars, premium luxury cars and SUV

Financials environment and Policy Environment • As at 31 March 2020, the TML Holdings, on a consolidated basis, had total assets of £2.471bn and total liabilities of £1.872bn. Total assets has risen compared to the past where total assets stood at £2.372bn and £2.745bn, as of 31 March 2019 and 2018 respectively. However total liabilities increased from previous years which was £1.822bn and £1.789bn, as at March 2019 and 2018 respectively. TML Holdings, on a consolidated basis reported cash and cash equivalents of £2.79bn as of 30 September 2020, up 42% YoY from £1.97bn. While short-term borrowings stood at £1.13bn, and long-term borrowings of £4.74bn.

• TML Holdings generates its revenue from dividends received from its subsidiaries, JGL and TDCV of which JGL consist of 96.7% of total dividends in 2019. TML Holdings, on a consolidated basis, had revenues of £2.336bn in Fiscal 2020, and incurred a loss of £558 million in the same period as compared to revenues of £2.465bn and a loss of £3.453bn in Fiscal 2019 and revenues of £2.607bn and profit of £1.081bn, in Fiscal 2018. This improvement from 2019 can be attributed to aggressive cost savings on the part of JLR, the China Joint Venture as well a positive volume mix.

• Jaguar Land Rover’s four principal regional markets are Europe (excluding the United Kingdom and Russia), North America, the United Kingdom and China. In Fiscal 2020, retail volumes breakdown was Europe (21%), North America (25.4%), United Kingdom (20.9%), and China (17.7%). The COVID-19 pandemic has inevitably impacted Jaguar Land Rover’s business and the geographic distribution of its retail sales due to the global scale of disruption it has caused and Jaguar Land Rover’s sales and profitability were impacted during the fourth quarter of Fiscal 2020 and the 1H of Fiscal 2021.

• On a consolidated basis, net cash generated from operating activities was £2.238bn in Fiscal 2020 (as against £2.180 bn in 2019 and £2.775bn in 2018). This improvement was due to improved stock management and operating cost measure which resulted in an EBITDA margin of about 10% for JGL.

• The UK government is planning to bring forward its ban on the sale of new petrol and diesel-engine cars and vans as well internal combustion hyrbrids from 2040 to 2030, while the sale of Plug-in Hybrid Electrc Vehicles will be allowed to sell till 2035. Furthermore the EU plans to tighten its CO2 rules as it accelerates the path to carbon-neutrality. Which could have further pressure on internal combustion engine vehicle sales.

Key Risk • Regulatory Risk- New or changing laws, regulations and government policies regarding improved fuel economy, reduced greenhouse gas and other emissions, and vehicle safety. Such UK government’s ban on internal combustion engines in 2030, such regulations will have a significant impact on JLR’s business. In addition, JLR may have to incur additional cost to comply with any new regulation

• The Issuer is a holding company with no revenue-generating operations of its own and will depend on dividends and other distributions its direct and indirect subsidiaries to be able to make payments on the Notes. Therefore the ability of the issuer to fulfil its obligation is largely dependent on the earnings of JLR and investments made by Tata Motors. Moreover are separate and distinct legal entities and will have no obligation, contingent or otherwise, to pay any amounts due under the Notes.

• A default for any indebtedness at the issuer level (TML Holdings) will trigger a cross-default of the notes. However, the bond’s cross-default provisions do not include borrowings of JLR and its subsidiaries, or events that concern JLR. The new bond will not be guaranteed by Tata Motors, but there is a change of control clause as shown below: (a) TML ceases to control the Issuer; or (b) TML ceases to hold directly or indirectly at least 51% of the Issuer’s Voting Stock; or (c) the Issuer ceases to control JLR; or (d) the Issuer ceases to hold, directly or indirectly, at least 51 per cent. of the Voting Stock of JLR. Should a change of control occur the noteholder shall have to right to require the issuer to redeem the notes at a price equal to 101%. But there is no guarantee that the issuer will have sufficient available funds to redeem the notes. Disclaimer

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