Durgesh Ranjan

4110012012
IIF

Jaguar: an overview
1922 - Founded in Blackpool as Swallow Sidecar

company
1960 - Jaguar name first appeared
1975 - Nationalized in due to financial difficulties
1984 - Floated off as a separate co in the stock market
1990 - Taken over by Ford

Land Rover: an overview

1948: Land Rover is designed by the Rover Car co
1976: One millionth Land Rover leaves the production

line
1994: Rover Group is taken over by BMW
2000: Sold to Ford for $2.75 billion

TATA MOTORS: An overview

TATA GROUP is 150 year old, Previously Tata

Engineering and Locomotive Company, Telco.

India's largest passenger automobile and commercial
vehicle.
Tata Motors was established in 1945
Listed on the New York Stock Exchange in 2004.
It is the 5th largest medium and heavy commercial
vehicle manufacturer in the world. listed in BSE, NSE
& NYSE.

Why was Ford selling?

The US auto major put the two marquees on the market in

2007 after posting losses of $12.6billion in 2006 - the

heaviest in its 103-year history
Jaguar was not able to provide any profit for ford because of
the high manufacturing costs provided in the United
Kingdom.
The strong boy Land Rover's profit, on the other hand, was
driven by the record sale of 2.26 lakh vehicles, an 18% YoY
growth in 2007.
Ford was combining both the brands since the products
and manufacturing of vehicles for Land Rover and Jaguar
was so intertwined.

Why to acquire JLR?

Long term strategic commitment to automotive sector.
Opportunity to participate in two fast growing auto

segments.
Increased business diversity across markets and
products.
Jaguar offered a range of performance/luxury
vehicles to broaden the brand portfolio.
Benefits from component sourcing, design services
and low cost engineering

The Deal Process

12/06/2007- Announcement from Ford that it plans to sell Land Rover

and Jaguar.
August 2007 - Major bidders were identified
Tata Motors,
M&M,
Ceribrus capital Management,
TPG Capital,
Apollo Management
Indias Tata Motors and M&M arrived as top bidders ($ 2.05b & $ 1.9b)
03/01/2008 Ford announces Tata as the preferred bidders
26/03/2008 - Ford agreed to sell their Jaguar Land Rover operations to
Tata Motors.(2.3b)
02/06/2008 The acquisition was complete

Tata and the dream

NEED FOR GROWTH
In the past few years, the Tata group had led the growing
appetite among Indian companies to acquire businesses
overseas in Europe, the United States, Australia and
Africa - some even several times larger - in a bid to
consolidate operations and emerge as the new
age multinationals.
Tata Motors was India's largest automobile company,
with revenues of $7.2 billion in 2006-07.With over 4
million Tata vehicles plying in India, it was the leader in
commercial vehicles and the second largest in passenger
vehicles.

 COMPETITIVE ADVANTAGE
Tata Motors was vulnerable to greater competition at
home.
Foreign vehicle makers including Daimler, Nissan
Motor, Volvo and MAN AG had struck local alliances for
a bigger presence.
Tata Motors, which had a joint venture with Fiat for cars,
engines and transmissions in India, was also facing heat
from top car maker Maruti Suzuki India Ltd, Hyundai
Motor, Renault and Volkswagen.

Financing strategy
Tata Motors could comfortably finance the acquisition

of Jaguar and Land Rover. The Indian automaker was

sitting on a cash pile of over Rs 6,000 crore and
generated free cash of over Rs 1,000 crore during FY07.
It could easily use these reserves to raise more funds
without endangering its finances.
At the end of last financial year, Tata Motors debt-toequity ratio was a low 0.56, giving it ample head room
to raise more funds.

 Low leverage of the auto biz provided funding flexibility

At the time financed the purchase through a $3bn, 15month

bridge loan
Additional amount of US $ 0.7 billion was for engine and
component supply, contingencies and working capital.
It intended to refinance the loan through long-term funds
valuable stakes in group companies
Owns $400m of Tata Steel at current prices

Owns stake in Tata Sons (Tata Groups holding company)

worth at least $600m

Refinancing of the loan

The amount was repaid in following manner
Rs 1.92 billion Underwriting agreement with JM
financial consultants
Rs 1.75 billion was raised through a deposit scheme from
the public
Additional subscriptions by promoter companiesTata sons, Tata capital and Tata Investment Ltd.
$ 1 billion aid package by British Government .( out of
total $ 2.3 billion )

For what Tata motors paid

3 modern plants in UK
2 advance design and engineering center
26 national sell companies

Intellectual property: free license to share technology

with Ford
Support from ford motor credit: Ford motor credit will
continue to support the sale of Jaguar and Land rover
for next 12 months

In $ million

Balance sheet
particulars
net tangible assets
net intangible assets
vehicles financing receivables
net current assets
cash
trade investments
pension asstes
other assets
total assets
warranty liability and other provisions
pension liability
deferred tax liability
shareholders equity
capital assets
minority interest
debt
total liability

TAMO
2510
111
2935
-57
638
233
3
6373
489
238
2314
30
3302
6373

JLR
consolidated
2246
4756
2010
2121
2935
-107
536
638
233
696
696
297
300
5142
12215
2667
19
2456
5142

3156
19
238
2314
156
30
6302
12215

In $ million

P&L A/c
TAMO

sales

10210

JLR

SPV

Cons..

14214

24424

cost synergies

EBITDA

1196

935

2131

11.70%

6.60%

8.70%

depreciation

218

699

917

interest

140

42

182

other income

105

105

PBT

944

194

1138

225

225

EBITDA margin

interest cost of acquisition

proforma PBT

944

194

-225

913

impact on PBT

-3%

Post merger
Following Cost Rationalisation initiatives were taken

to improve cash flows:

1.Single shifts and down time at all three UK assembly
plants.
2. Supplier payment terms extended from 45 to 60 days in
line with industry standard.
3.Receivables reduced by 133 million from 38 to 27 days.
4. Inventory reduced by 217m between June 2008 and
March 2009 from 70 to 50 days .

5] Labor actions
- Voluntary retirement to 600 employees.
- Agency staff reduced by 800.
-Offered leaves to 300 workers of Bromwhich and solihull plant.
-Additional 450 job cuts including 300 managers.
6] Agreement with Unions to implement pay freeze and longer working
hours (equivalent to approximately 20% reduction in labor costs.)
7] Engineering and capital spending efficiencies.
8] Fixed marketing and selling costs reduced in line with sales volume.
9] Reduction in all other non-personnel related overhead costs.

Problems
Drop in share prices
Failure of rights issue
Huge debt burden
Sales volume decreased by 35.2%
Lack of consumer loans
Issue of timing
Operational freedom slows pace of change

 Depressed state of the global premium car market

Jaguar/Land Rover lost 306 million pounds ($504

million) for the fiscal year ending March 2009

Tata Motors reported a net loss of Rs3.29bn ($67
million) for the quarter to end-June
Tatas core commercial vehicles market in India is also
suffering from slower sales
Extremely high manufacturing costs in Britain
Eliminated more than 2,200 jobs

Benefits
Tata wanted to make a global impact and it thinks that

buying these brands at a lower rate now, will give

better value later on.
This acquisition also eases the entry of Tata in
European market which it has been eyeing for long. A
previous JV with FIAT took place, this would further
help them penetrate EU market.
Reduce the company dependence on the Indian
market which accounted for 90% of its sales
Increase sales in emerging markets

 Reduce dependence on mature markets

Opportunity to spread its business across different

customer segment
At the price staring from 63 lakh and going upto 93
lakh, it seems Tata has just got the right place to
compete with the current market leaders BMW,
Audi, Mercedes
Publicity on an international scale
Access to large distribution network

 JLR had many new models lined up for next 3 years, so

no much work just profits

Strong R & D culture and facilities
Component sourcing, engineering and design benefits

Strengths:

Weaknesses:

Tatas strong management

Jaguars declining sales record
capability
Inexperience of handling such
Strong monetary base to invest luxury brands
Tatas Jaguar
Land Rover
Opportunities:
Acquisition
Support from Ford in terms of
Technology,Engine, IT,
Market is volatile and driven
Accounting
by new products
Adding up of luxury brands in
Strong presence of competitors
the product line
like Mercedes, BMW, Lexus
Access to European Market
and Infinity