FINANCIAL MANAGEMENT I

SUBMITTED TO-
PROF. VIPIN AGARWAL

SUBMITTED BY-
NILANJANA MUKHOPADHYAY
AMIT DEY
ANJANI TIWARI
BISWADEEP BANDYOPADHYAY

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BRIEF HISTORY ABOUT TATA GROUP

AT A GLANCE-

 India’s largest business group

 Business diversification in 7 sectors
 Operating in 80 countries

 Employee strength- 3,00,000

 In 2008:Revenue($62.5 bn) & Profit ($5.4 bn)

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Pioneers-

Development stages-

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Foundation (1868-1931) Consolidation(1932-1989) Expansion(1990
onward)

Business under Tata

groups-
Energy
Tata Power is one of the largest private sector power industry. It supplies its power to
Mumbai, New Delhi.

Engineering
• Tata Motors (formerly Tata Engineering and Locomotives Company Ltd
(TELCO)), manufacturer of commercial vehicles (largest in India) and
passenger cars
• Tata AutoComp Systems Limited
• Jaguar and Land Rover
• Voltas, consumer electronics company
• Voltas Global Engineering Centre
• Tata Consulting Engineers Limited

Chemical

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• Tata Pigments
• Tata Chemicals

Consumer Products
• Tata Salt, i-Shakti Salt, Tata Salt Lite
• Eight O Clock Coffee

Services
• The Indian Hotels Company
• Tata Housing Development Company Ltd. (THDC)
• TATA AIG General Insurance

Brief about Tata Motors

At a glance-
 It’s headquarters is in Mumbai.

 TML is headed by Ratan Tata.

 It produce luxury cars as well as industrial car

 Globally active in UK, South Korea, Thailand and Spain.

 It holds the position of world's fourth largest truck manufacturer

and world’s second largest bus manufacturer.

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 revenue of USD 14 billion in 2008 - 09.

 Market Share –

Commercial Vehicles - 64%

Passenger Vehicles - 13%

Products-
Passenger Cars & Utility vehicles

Tata Sumo/Spacio
»
» Tata Safari
» Tata Indica
» Tata Magic
» Tata Nano
» Tata Xenon XT
» Tata Xover (2009)
» Tata Manza (2009)
Commercial Vehicles

» Tata Ace

» Tata Starbus

» Tata Globus

Military Vehicles

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» Tata 407 Troop Carrier

» Tata Winger Passenger Mini Bus

Its acquisition-
» acquisition of Daewoo Commercial Vehicle of South Korea(2004).

» Hispano Carrocera – Spanish bus manufacturing company(2005).

» TML has formed 51:49 Joint Venture with Marcopolo, Brazil-based

global leader in bus body building(2006).

» TML also formed a joint venture with Fiat(2007).

» the acquisition of British Jaguar Land Rover (JLR) business(2008).

Case study
of
Tata Motor

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Trouble in Acquisition of Jaguar and Land Rover
The dream Tata Nano project was one the great example of Tata motor. The aim of the
project is to make the cheapest car in the world started in 2003.
In India, possessing a car was a symbol of elite class. Most of the people choose to drive
two-wheelers, as for them cars were not affordable. The target segment of Nano are two-
wheeler drivers who wanted to buy a car if it was available at an affordable price.

Acquisition of Jaguar and Land Rover provides the TML with a strategic
opportunity to acquire superior brands with a great heritage and global existance, and
increase the company’s business diversification action across markets.

Ford Motors Company (Ford) is a market leader and the 3rd

largest MNC in the world automobile industry. The company acquired Jaguar from British

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Leyland Limited in 1989 for US$ 2.5 billion. After Ford acquired Jaguar, adverse economic
conditions worldwide in the time of 1990s led to tough market conditions and a decrease in
the demand for luxury cars. The sales of Jaguar in many markets declined except some
markets like Japan, Germany, and Italy where it still have a record of high sales. In March
1999, Ford established the PAG with Aston Martin, Jaguar, and Lincoln. During the year,
Volvo was acquired for US$ 6.45 billion, and it also became a part of the PAG.

In September 2006, after Allan Mulally (Mulally) assumed

charge as the President and CEO of Ford, he decided to dismantle the Premier Automotive
Group( PAG). In March 2007, Ford sold the Aston Martin sports car unit for US$ 931
million. In June 2007, Ford announced that it was considering selling JLR.

On 2nd June,2008, India-based Tata Motors completed the

acquisition of the Jaguar and Land Rover (JLR) units from Ford Motor Company (Ford)
for US$ 2.3 billion.Jaguar was involved in the manufacture of high-end luxury cars, while
Land Rover manufactured high-end SUVs.

The initial response from the employees of JLR toward the Tata
Motors-JLR deal was positive. An internal survey carried out in early August 2008 showed
that the employee satisfaction was at 78% as against 41% during the pre-acquisition days.

However, with the declining demand for luxury cars, JLR had
to cut down production and redeploy the workers at Solihull in late August 2008...

The problems faced by Tata Motors, the largest automobile

company in India,in late January 2009.Tata Motors was reeling under a severe business and
financial crisis. The company had acquired Jaguar and Land Rover (JLR) from the US-
based Ford Motors for US$ 2.3 billion in June 2008. To finance the acquisition, Tata
Motors raised a bridge loan of US$ 3 billion from a consortium of banks. By the end of
January 2009, Tata Motors was yet to pay around US$ 2 billion towards the bridge loan.
Moreover, JLR needed further investments, that too quickly, to keep the operations running.
Besides this, the commercial launch of Tata Motor's small car Nano required much more
time than anticipated.

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With the Indian economy showing no signs of revival soon, there
seemed to be no immediate possibility of an increase in domestic demand. The Managing
Director of the Tata Motors was left wondering if the worst was over for Tata Motors and
what he should do to revive the company's performance.

The management of Tata Motors was of the view that the acquisition
of JLR, which had a global presence and a repertoire of well established brands, would help
the company become one of the major players in the global automobile industry.

However, things did not turn out the way Ravi Kant had expected.
Due to the global financial crisis that deepened further with the collapse of Lehman
Brothers in September 2008, consumer demand plummeted and global lines of credit were
frozen.

The company reported a loss of Rs. 2.63 billion, compared to a profit of Rs. 4.99 billion
during the third quarter ending December 2007. Tata Motors reported a quarterly loss after
a span of seven years. In the December 2008 quarter, Tata Motors' reported a sales volume
at 98,760 vehicles as compared to 144,608 vehicles during the corresponding quarter of the
previous year. Mentioning the reasons for the company's poor performance, the
management said, "In the October-December quarter of the financial year 2008-09, the
automotive sector in India suffered severe contraction in demand, arising from major
financial and other market upheavals. This exacerbated the lack of liquidity and
unavailability of consumer finance."

JLR’s acquisition appeared negative for Tata Motors, as it creates difficult economic
condition. Tata motors had also incurred a huge capital expenditure as it planned to invest
another U$ 1 billion in JLR. This was in addition to the U$ 2.3 billion it had spent on

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acquisition. Tata motors had also incurred huge capital expenditure on the development and
launch of the Nano and on a joint venture with Fiat to manufacture some of the company’s
vechile in India and Thiland.this lead to downward movement of tata motors.

World wide car sales are down 5% as compared to the previous year.Tata motors profit
decline by 2008-09 over the previous year.jaguar and land rover lost $510 million in the 10
months tata owned until march 2009

In January 2009, Tata Motors announced that due to lack of funds it may be forced to roll
over a part of the US$ 3 billion bridge loan after having repaid around US$ 1 billion. The
financial burden on Tata Motors was expected to increase further with the pension liability
of JLR coming up for evaluation in April 2009...

 Tata motor has to increased the efficiency and effectiveness of their R&D acitivities
to thaw the burden as soon as possible.
 Build experience in handling luxury automobile brand.

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