Jaguar Land Rover PLC:

Bond Valuation
Submitted by – Hemant Yadav
P41078
Section - B
 Key Questions in the Case

1. Decrease in
2. Benefits of
interest
bond market
expense Would
No company would forego such an
efficient bond markets allow
opportunity to halve its interest
firms to reap such benefits? Who
expenses and improve its bottom line.
gains and who pays in such
But can such a simple, positive-sum
deals?
game exist in an efficient market?
 1. Decrease in interest expense
Factors that enabled JLR gain this positive sum game
Moody’s Multi-
Rating currency
Upgraded JLR’s bond
funding
JLR to create a natural
issues from Ba3 hedge for mitigating
to Ba2 with a “stable” currency risk
outlook
Turnaround Cash Cow
The company had JLR comprised more than
managed a turnaround 80 per cent of the
and posted a post-tax consolidated automobile
profit of GBP1,035.90 sales revenue for Tata
million. Motors
 2. Benefits of bond market
Benefit that JLR derived from efficient bond market

Interest Saving Funds for R&D

Net savings in interest due to The funds raised at lower

the efficient bond market interest rate could be utilised
comes out to be $129.03 in capital expenditure and R&D
millions. (Annexture 1) activities.
 Annexture - 1
Amount (In Million $) 410 Coupon Value 16.65625
CIP 0.08125 Kd (Semi-Annually) 0.055 0.11
CIP (compounded Semi-Annually) 0.040625
500 0.035 0.0175
n cp pv n cp
2015 1 16.65625 15.78791469 1 ₹ 8.75 ₹ 7.91
2015 2 16.65625 14.96484805 2 ₹ 8.75 ₹ 7.91
2016 3 16.65625 14.18469009 3 ₹ 8.75 ₹ 7.91
2016 4 16.65625 13.44520388 4 ₹ 8.75 ₹ 7.91
2017 5 16.65625 12.74426908 5 ₹ 8.75 ₹ 7.91
2017 6 16.65625 12.07987591 6 ₹ 8.75 ₹ 7.91
2018 7 16.65625 11.45011934 7 ₹ 8.75 ₹ 7.91
2018 8 16.65625 10.85319369 8 ₹ 8.75 ₹ 7.91
2019 9 16.65625 10.28738738 9 ₹ 8.75 ₹ 7.91
2019 10 16.65625 9.751078089 10 ₹ 508.75 ₹ 7.91
2020 11 16.65625 9.242728046 11 ₹ 0.00 ₹ 16.66
2020 12 16.65625 8.760879665 12 ₹ 0.00 ₹ 16.66
2021 13 426.6563 212.7140305 13 ₹ 0.00 ₹ 16.66
356.2662184 ₹ 587.50 ₹ 129.03
Total interest saving ₹ 129.03