TATA Motors (M&A)

GROUP No 9

Name Roll No
Piyush Jhaveri 12
Shruthika Kanchan 13
Vishal Nair 21
Vishal Suri 51
Table of Contents
CONTENTS

Introduction to Mergers and Takeovers...........................................................3

Merger.................................................................................................................................................................... 3

Takeover................................................................................................................................................................ 4

Difference between mergers and takeovers........................................................................................... 6

MOTIVES to do M&A......................................................................................................................................... 6

Mergers and Takeovers in recent times...........................................................8

Indian M&As........................................................................................................................................................ 8

Global M & As.................................................................................................................................................... 10

TATA Motors – Corporate Profile.....................................................................12

TATA Motors – Product Portfolio.....................................................................14

TATA Motors Going International....................................................................15

Ford Motor Company: Corporate Profile........................................................16

About Landrover............................................................................................................................................. 17

About Jaguar...................................................................................................................................................... 18

EVENTS OF THE TATA-FORD DEAL..................................................................20

THE DEAL...............................................................................................................24
TIMELINE OF THE HISTORIC DEAL........................................................................................................ 25

Rationale of the Deal...........................................................................................29

Financial Implications: Statements before and after the Deal...................31

TATA JLR: One year later....................................................................................32

Bibliography.........................................................................................................33

INTRODUCTION TO MERGERS AND TAKEOVERS

We have been seeing companies coming together to form another firm and companies
purchasing out other existing companies to expand their business. With recession, many
businesses and the feeling of insecurity surging over our, it is not surprising when we hear about
the enormous numbers of corporate restructurings taking place, especially in the last couple of
years.

Deals can be worth hundreds of mns or bns of dollars. They can order the fate of the
companies involved for years to come. For a CEO, leading an M&A can symbolize the highlight
of his entire career graph. And it is no wonder that we hear about so many of such deals; that
happen all the time. Next time you go through a Newspaper, chances are that at least one
headline will proclaim some kind of M&A.

Many companies have been bought over and many have taken up internal reshuffle, while
some organisations in the same arena of business have realised it is favorable to merge together
into a single firm. Hence it would be important for us to understand what corporate restructuring
and mergers and takeovers are all about.

On the more positive side Mergers & Takeovers may be critical for the healthy expansion
and growth of the firm. Successful entry into new product and geographical markets may require
Mergers & Takeovers at some stage in the firm's development.

MERGER
Merger is defined as amalgamation of two or more companies into a single firm where
one survives and the others cease to have their corporate existence. The survivor acquires whole
of the assets as well as the liabilities of the merged firm or companies. Normally, the surviving
firm is the purchaseer, which retains its identity, and the extinguished firm is the seller.

A merger takes place when two companies, usually about the similar sizes, decide to go
ahead as a single new firm rather than be separately owned and run. This is more precisely
known as a "merger of equals." Both companies' stocks are surrendered and new firm stock is
listed in its place.

TAKEOVER
Takeover basically means taking over the ownership of the property. In the premise of
business, an takeover is the purchase-out of a controlling interest in the share capital of another
existing firm by other firm.

Methods of Takeover:

An takeover can take place by following:

(a) agreement with the individuals having majority interest in the management like board
members or majority shareholders commanding majority of voting power;
(b) by purchasing shares from the stock market;
(c) to make offer of takeover to the body of shareholders;
(d) purchase of new shares by private accord;

Takeover Process

The whole of takeover process can be classified into plan phase and an execution phase. The
plan phase consists of the devising the business and the takeover plan. The execution phase
consists of the search, scrutinizing, contacting the target firm, negotiating, integrating. Takeover
process follows the following steps.

1. Business plan development

A merger or takeover decision is a strategic in nature. The takeover strategy should align with
the firm’s strategic objectives. Business plan should speak a mission or a long term vision of the
firm and a prolonged strategy for accomplishing that mission.

The purpose of the process of strategic planning is to identify the firm’s competitive strength and
set goals to take advantage of its competitive strengths and to negate the effects of its
weaknesses.
2 .The Hunt

The hunt for the potential firm happens in two stages:-

It basically is the basic screening process. Industry, size of the deal and the geographic location
are some of the criteria used for search process. The size of the entire deal is best expressed in
terms of the maximum purchase price of a firm is ready to pay.

3. Negotiation Stage

This stage consists of many activities conducted simultaneously by various takeover team
members. It is in this phase that the actual purchase consideration is determined.

Definition of the purchase price: The purchase consideration can be defined in the following
terms:

 The total consideration

 Total purchase price
 The net purchase price

4. Deal Structuring

It involves meeting the needs of both involved parties by looking after issues of risk and reward
by legal, tax and accounting structures.

5 . Deal Closure

Deal Closure is the final legal process where the firm changes hands. At this stage all the
mandatory approvals are taken.

Some pre requisites & conditions have to be met before the close of the contract. The pre
conditions will work with the assumption that the seller would obey all the clauses and
warranties and will live by the obligations.
DIFFERENCE BETWEEN MERGERS AND TAKEOVERS
Takeover Merger

Takeover basically means taking over

the ownership of the property. In the
premise of business, an takeover is the Merger is defined as amalgamation of
purchase-out of a controlling interest two or more companies into a single
in the share capital of another existing firm where one survives and the others
firm by other firm. cease to have their corporate existence

in an takeover, the acquiring firm

usually offers a cash price per share to
the target firm’s shareholders or the
acquiring firm's share's to the
shareholders of the target firm
according to a specified conversion
ratio.  In Merger it is not the case

MOTIVES TO DO M&A
Improving financial performance is the sole and dominant rationale used to explain M&A
activity is that acquiring firms seek The following motives are considered to improve financial
performance:

 Economies of scale: This basically means that the combined entity can reduce its
production costs by removing duplicate processes, thus reducing the costs of the firm and
hence effecting improved profit margins.
 Economies of scope: This refers to the efficiencies basically with regards to the
demand-side alterations, such as increasing or decreasing the scope of sales, marketing
and distribution, of different types of products.

 Increasing Revenue or market share: This means that the buyer company will capture
the market of the company it acquires and hence it will increase its market power to set
prices.

 Cross-selling the Products: Here the merging companies can get into each others
business. For example if a bank take overs an insurance company, it can sell insurance
too.

 Synergies: The two firms will have common synergies.

 Taxation: A profitable firm can take-over a loss-maker company to use the target's loss
to reduce their tax liability.

 Diversification: The company can get into new business by M&A, thus mitigating the
risks.

 Resource transfer: The merged entity can share resources and knowledge pool and
R&D facilities.
MERGERS AND TAKEOVERS IN RECENT TIMES

INDIAN M&AS

Inbound M&A activity is slow compared to out bound M&A because of valuation
resistance but, going forward, this too may pick up as international companies realize the
potential of the Indian markets.

Airtel and Zain

Airtel acquired South Africs’s Zain on 8 th of June 2010. The total cost of the deal is
USD 9 bn and the takeover has made Bharti Airtel the fifth largest telecom firm in the world.

Bharti Airtel bought the African operations of Kuwait's Zain after the two entered into a
deal in March this year. After this, the total subscriber base of Bharti has become 180 mn and its
operations are spread over 18 countries including India. 32 per cent stake in Bharti is owned by
Singapore Telecommunications and it chose Zain after MTN.

TATA Steel-Corus

On January 30, 2007, TATA Steel bought 100% stake in Corus at 608 pence per share in
an all cash deal, valued at USD 12.2 bn. This is the largest takeover by Indian Firm of a foreign
firm in history and made TATA Steel the fifth-largest steel group in the world.

Vodafone-Hutch Essar

On February 11, 2007, Vodafone agreed to purchase out the controlling interest of 67%
in Hutch-Essar for USD 11.1 bn. Vodafone Essar is owned by Vodafone 52%, Essar
Group 33% and other Indian nationals 15%.
Hindalco-Novelis:

In February 2007, Hindalco Industries took over Canadian firm Novelis Inc in a all-cash
deal of USD 6-bn. This deal made Hindalco the international leader in aluminium rolled products
and one of the asia’s largest aluminium producers.

Graph showing Indian M&A deals since 2000

GLOBAL M & AS
Oracle-Sun

Information Technology firm Oracle is purchaseing Sun Microsystems in a cash deal the firm
valued at USD 7.4 bn. The deal would give the largest database software provider entry into the
server and storage markets. Oracle purchased Sun shares for USD9.50 each.

Fiat and Chrysler

Italy's Fiat and US car maker Chrysler did a merger deal to create a international auto giant.
The deal is one of its kind as the Italian automaker pitched in to save the bankrupt US firm. The
new firm now exits Chapter 11 bankruptcy.

Pfizer and Wyeth

Pfizer completed its takeover of rival drugmaker Wyeth following the receipt of regulatory
approval from all government authorities required by the merger agreement. It was a USD68 bn
deal that cements Pfizer's position as the world's biggest drugmaker.

ArcelorMittal purchases 35% stake in Uttam Galva

Steel giant ArcelorMittal owned by London-based NRI bnaire LN Mittal is finally entering India.
ArcelorMittal will purchase 35 per cent stake for Rs. 500 cr in the Indian secondary steel
producer, Uttam Galva Steels, to become the co-promoter of the firm.

The firm which has been looking to set up a couple of fresh production facilities in Eastern India
(both projects are much behind schedule) with multibn dollar investments.
Lenovo and IBM

IBM and Lenovo merger was one of the biggest in the IT industry. The combined entity aimed to
focus on quality, service and innovation in technology.

IBM provides services and customer financing to Lenovo, while Lenovo supplies PCs to IBM.
Lenovo also gained the advantage of IBM brand name and helped them to combat competition in
the US and Europe market.
TATA MOTORS – CORPORATE PROFILE
TATA Motors Limited is India's largest automobile company, with consolidated revenues
of Rs. 92,519 crs (USD 20 bn) in 2009-10. It is the leader in commercial vehicles in each
segment, and among the top three in passenger vehicles with winning products in the compact,
midsize car and utility vehicle segments. The company is the world's fourth largest truck
manufacturer, and the world's second largest bus manufacturer.

TATA Motors is a part of the TATA Group manages its share-holding through TATA
Sons. The company was established in 1935 as a locomotive manufacturing unit and later
expanded its operations to commercial vehicle sector in 1954 after forming a joint venture with
Daimler-Benz AG of Germany. Despite the success of its commercial vehicles, TATA realized
his company had to diversify and he began to look at other products. Based on consumer
demand, he decided that building a small car would be the most practical new venture. So in
1998 it launched TATA Indica, India's first fully indigenous passenger car. Designed to be
inexpensive and simple to build and maintain, the Indica became a hit in the Indian market. It
was also exported to Europe, especially the UK and Italy. In 2004 it acquired TATA Daewoo
Commercial Vehicle, and in late 2005 it acquired 21% of Aragonese Hispano Carrocera giving it
controlling rights of the company. It has formed a joint venture with Marcopolo of Brazil, and
introduced low-floor buses in the Indian Market. Recently, it has acquired British Jaguar Land
Rover (JLR), which includes the Daimler and Lanchester brand names.

It is India's largest company in the automobile and commercial vehicle sector with
upwards of 70% cumulative Market share in the Domestic Commercial vehicle segment, and had
a 0.81% share of the world market in 2007 according to OICA data.

(Source : www.TATAmotors.com)

The OICA ranked it as the 19th largest automaker, based on figures for 2007 and the
second largest manufacturer of commercial vehicles in the world. The company is the world’s
fourth largest truck manufacturer, and the world’s second largest bus manufacturer. In India
TATA ranks as the leader in every commercial vehicle segment, and is in the top 3 makers of
passenger cars. TATA Motors is also the designer and manufacturer of the iconic TATA Nano,
which at INR 100,000 (ex-factory) or approximately USD 2300, is the cheapest production car in
the world

TATA Motors has auto manufacturing and assembly plants in Jamshedpur, Pantnagar, Lucknow,
Ahmedabad, Sanad and Pune in India, as well as in Argentina, South Africa and Thailand.
TATA MOTORS – PRODUCT PORTFOLIO

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TATA MOTORS GOING INTERNATIONAL
Major international ventures of TATA Motors in recent past are discussed below:

1. TATA Daewoo Commercial Vehicle- In 2004, TATA Motors acquired the Daewoo
Commercial Vehicle Company of South Korea. TATA remains India's largest heavy
commercial vehicle manufacturer and TATA Daewoo is the 2nd largest heavy
commercial vehicle.
2. Hispano Carrocera- In 2005, TATA Motors acquired 21% stake in Hispano Carrocera
SA Aragonese bus manufacturing company with an option of holding 100 % holding.
With this deal TATA Motors acquired the license for technology and brand right for
hispano. The total deal consisting of equity, debt and technology licensing amounted to
about Rs 70 cr to TATAs.
3. TATA Marcopolo (TMML)
TATA Motors has formed a 51:49 joint venture in bus body building with Marcopolo of
Brazil. This joint venture is to manufacture and assemble fully built buses and coaches
targeted at developing mass r apid transportation systems.
4. TATA Motors signed a joint venture with Thonburi Automotive Assembly Plant Co.:
FORD MOTOR COMPANY: CORPORATE PROFILE

The Ford Motor Company is an American multinational corporation and the world's
fourth largest automaker based on worldwide vehicle sales, following Toyota, General Motors,
and Volkswagen. Based in Dearborn, Michigan, a suburb of Detroit, the automaker was founded
by Henry Ford and incorporated on June 16, 1903. In addition to the Ford, Lincoln, and Mercury
brands, Ford also owns Volvo Cars of Sweden, and a small stake in Mazda of Japan and Aston
Martin of England. Ford's former UK subsidiaries Jaguar and Land Rover were sold to TATA
Motors of India in March 2008.

In 2007, Ford fell from the second-ranked automaker to the third-ranked automaker in US
sales for the first time in 56 years, behind General Motors and Toyota. Based on 2007 global
sales, Ford fell to the fourth-ranked spot behind Volkswagen. Ford is the seventh-ranked overall
American-based company in the 2007 Fortune 500 list, based on global revenues in 2007 of
USD172.5 bn. In 2007, Ford produced 6.553 mn automobiles and employed about 245,000
employees at around 100 plants and facilities worldwide. Also in 2007, Ford received more
initial quality survey awards from J. D. Power and Associates than any other automaker. Five of
Ford's vehicles ranked at the top of their categories and fourteen vehicles ranked in the top three.

Ford introduced methods for large-scale manufacturing of cars and large-scale

management of an industrial workforce using elaborately engineered manufacturing sequences
typified by moving assembly lines. Henry Ford's methods came to be known around the world as
Fordism by 1914.
ABOUT LANDROVER

Land Rover is currently a luxury-type four-wheel drive, all-terrain vehicle manufacturer, based
in Gaydon, Warwickshire, England. It operates as the Jaguar Land Rover business unit by TATA
Motors of India.

Originally the term Land Rover referred to one specific vehicle (see Land Rover Series), a
pioneering civilian all-terrain utility vehicle launched on 30 April 1948, at the Amsterdam Motor
Show, but was later used as a brand for several distinct four-wheel drive models.

Starting out as a model in the Rover Company's product range, the Land Rover brand developed,
first as a marque, then as a separate company, developing a range of four-wheel drive capable
vehicles under a succession of owners, including British Leyland, British Aerospace, and BMW.
In 2000, the company was sold by BMW to the Ford Motor Company, becoming part of their
Premier Automotive Group. In June 2008, Ford sold its Jaguar and Land Rover operations to
TATA Motors.

Land Rover, coming in second to Jeep, is one of the longest surviving four-wheel drive (4WD)
brands.

Current Models

Model Type

Land Rover Defender Light Utility 4x4 vehicle

Freelander 2 Compact 4x4

Discovery 4 Mid-size 4x4

Range Rover Full-size 4x4

Range Rover Sport Full-size 4x4

ABOUT JAGUAR
Jaguar Cars Ltd., better known simply as Jaguar, is a British luxury car manufacturer,
headquartered in Coventry, England. It is a wholly owned subsidiary of the Indian company
TATA Motors Ltd. and is operated as part of the Jaguar Land Rover business.

Since Land Rover's May 2000 purchase by Ford, it has been closely associated with Jaguar. In
many countries they share a common sales and distribution network (including shared
dealerships), and some models now share components, although the only shared production
facility is Halewood, for the X-Type and the Freelander 2. However operationally the two
companies were effectively integrated under a common management structure within Ford's
PAG
EVENTS OF THE TATA-FORD DEAL

1. FORD STARTS FACING PROBLEM WITH PENSION COSTS AND FALLING

SALES IN NORTH AMERICA.

Ford had to sell two company’s based at Solihill and Castle Bromwich in the West Midlands
and Halewood on Merseyside in order to concentrate on it’s loss-making core US car business,
After registering the largest loss of a USD127 bn, Ford decided to sell its iconic Aston Martin
Brand to a U.K based investment conglomerate in a deal worth USD 955.2 mn in 2007. Ford
mission became to integrate the Ford brand globally, and create a strong Ford motor company
that delivers profitable growth to all.

2. FORD INDICATES THAT IT MIGHT LOOK FOR BUYERS FOR JAGUAR AND
LAND ROVER MARQUES

The losses drained out cash and resources out of the Ford Company after which Ford Motor
indicated and invited buyers of its two other brands- Jaguar and Land Rover, as luxury car sales
went down across the globe. Jaguar sales dropped 33% in the US and Europe in the first two
months of the year while Land Rover sales fell 13% in the US and 7.7% in Europe during the
period. But it had been struggling and wanted to focus on its main brands.
3. TATA CONFIRMS THE NEWS TO PARTICIPATE IN THE BID

The head of India's TATA conglomerate confirmed Friday that his group was interested
in bidding for luxury UK car brands Jaguar and Land Rover, in an interview with an Indian news
channel. TATA Motors, India's biggest car company, has appointed advisors to evaluate a bid
and signed a confidentiality agreement with Ford to access financial details of the two brands
which have a combined British workforce of 19,000, the Business Standard daily quoted
unnamed sources as saying last month. The move would be in keeping with TATA group's
growing appetite for overseas acquisitions.

4. MAHINDRA-MAHINDRA FAILED TO MAKE IN TO BID

Mahindra & Mahindra has pulled out of the race to acquire iconic British brands Jaguar and
Land Rover, which have been put on the block by Ford, citing complexities in the way the deal
was structured. The development strengthened the case for TATA Motors, which is now pitted
against private equity firm One Equity Partners that has roped in former Ford boss Jacques
Nasser as an advisor. Sources close to the negotiations said M&M — though a serious contender
in the beginning — decided against pursuing the deal as there were concerns related to
Intellectual Property Rights (IPR) associated with the two brands. "The whole deal was
considered to be very complex, prompting the company not to pursue it," a source said. M&M
thought that it would have to go back to Ford on many crucial issues related to use of technology
even after bagging the two brands. Crucial IPRs related to the brands are locked in with the US
auto major, making it difficult for the eventual winner to "derive full benefits unhindered and
Ford's continuing involvement was a crucial concern".

5. FORD ANNOUNCES TATA AS “PREFERRED BUYER”.

On 1 January 2008, Ford made a formal announcement which declared TATA as the preferred
bidder. TATA Motors also received endorsements from the Transport And General Worker's
Union (TGWU)-Amicus combine as well as from Ford. According to the rules of the auction
process, this announcement would not automatically disqualify any other potential suitor.
However, Ford (as well as representatives of Unite) would now be able to enter into more
focused and detailed discussions with TATA to iron out issues ranging from labour concerns (job
security and pensions), technology (IT systems and engine production) and intellectual property
as well as the final sale price. Ford would also open its books for a more comprehensive
diligence by TATA. On 18 March 2008, Reuters reported that American bankers Citigroup and
JP Morgan shall be due underwriting a loan of USD 3 bn in order to finance the deal.

6. EUROPEAN COMMISION CLEARS ACQUISITION OF JAGUAR AND LAND

ROVER BY INDIAN COMPANY, TATA MOTORS.

On 26th April 2008,The European Commission (EC), the executive panel of the 27-member
European Union, cleared the acquisition of the Jaguar and Land Rover business (JLR) of US-
based Ford Motor Company by India's TATA Motors Ltd The EC announced in Brussels. that it
has granted clearance under the EU Merger Regulation Procedure.
THE DEAL

The definitive agreement was agreed by TATA Motor’s Ltd., on 26 th March 2008 to
acquire luxury British marques, Jaguar and Land Rover.

The all-cash deal, which was agreed in March, includes all necessary intellectual property
rights, manufacturing plants, two advanced design centers in the UK and a worldwide network of
sales companies. Included in the deal were the rights to three other British brands, Jaguar's own
Daimler, as well as two dormant brands Lanchester and Rover. On 2 June 2008 the sale to TATA
was completed by both parties

TRANSITION SUPPORT

Other areas of transition support from Ford include IT, accounting and access to test facilities.
The companies will also cooperate in areas such as design and development through sharing of
platforms and joint development of hybrid technologies and power train engineering, TATA
Motors said.
TIMELINE OF THE HISTORIC DEAL
-

2005 Ford starts facing problems with pension and health care costs and
falling sales in North America.

Starts reporting losses from the second quarter

2006 Alan Mullaly takes over as chief executive and oversees a

USD12.7 bn loss, the largest in the

company's history Ford decides to sell its Aston Martin brand

May, 2007 Ford closes the Aston Martin sale for USD848 mn

June, 2007 Ford indicates that it might look at buyers for Jaguar and Land
Rover marques
 
 

July, 2007 Ford receives preliminary bids for the brands. Reports say that TPG
Inc., Cerberus Capital Management Lp. Ripplewood Holdings, One
 
Equity Partners Llc are in the fray, along with TATA Motors

Ltd and Mahindra & Mahindra

  

August, 2007 Ratan TATA, chairman of TATA Motors Ltd, confirms that his
company was bidding for the premium car Makers
 

November, Investment bankers say that Apollo Alternative Assets is teaming

2007 up with Mahindra & Mahindra

Reports say that Ford has shortlisted three bidders—TATA,

Mahindra and One Equity—for further negotiations with its trade
 
unions Unite, the trade union representing Land Rover and Jaguar
workers, says it supports TATA Motors' bid

December, The three bidders submit their bid

2007
 
 

January , 2008 Ford names TATA as "preferred buyer"

March, 2008 TATA, Ford sign deal

-
June, 2008 Deal finally completed by both the parties.
RATIONALE OF THE DEAL

WHY DID FORD SELL?

• Reports said in 2006 Jaguar were suffering from losses as huge as USD 715 mn. Jaguar
has been a dog i.e. it has not been able to provide any profit for ford because of the high
manufacturing costs provided in the United Kingdom.
• Land Rover's profit, on the other hand, was driven by the record sale of 2.26 lac vehicles,
an 18 percent year-on-year growth in 2007.
• The biggest challenge that Ford faced was bringing down production costs and turning
around the company successfully. It was a test that Ford failed.
• Ford is combining both the brands since the products and manufacturing of vehicles for
Land Rover and Jaguar is so intertwined.

WHY DID TATAS ACQUIRE JLR?

• TATA’s have long term strategic commitment to automotive sector.
• The deal gives them an opportunity to participate in two fast growing auto segments.
• Provides increased business diversity across markets and products.
• Land rover provides a natural fit for TML’s SUV segment. Jaguar offers a range of
“performance/luxury” vehicles to broaden the brand portfolio.
• The deal gives benefits from component sourcing, design services and low cost
engineering.

WHAT DID TATA GET?

 100% stake in Jaguar & land Rover Business.
 3 well invested Plants in UK.
 2 advanced design & engineering center. These centers have 4000-5000 engineers
engaged in testing, prototype design & powertrain, engineering, development &
integration.
 26 National sales company of both Jaguar and Land Rover also those that are carved out
of current Ford operation.
 Intellectual property rights: All key technologies to be transferred to JLR & perpetual
royalty free license on technologies shared with Ford.
 Support from Ford Motor Credit: Ford Motor Credit will continue to support the sales of
JLR for around next 12 months.
 Pension Contributed by Ford: Ford will contribute USD 600 mn of the Pension Fund.
FINANCIAL IMPLICATIONS: STATEMENTS BEFORE AND
AFTER THE DEAL
TATA Sons Chairman Ratan TATA recently made a statement saying he may have
overstretched by paying 1.15 bn pounds for Jaguar Land Rover just as a recession was around
the corner. A year after the TATA group took over the two of Britain’s most iconic automobile
brands, Jaguar and Land Rover, it is faced with newer and bigger challenges than it would have
expected when it paid USD2.3 bn to Ford for the acquisitions on March 26, 2008.

In FY 2008-09, TATA Motors Ltd posted its first annual loss in at least eight years after
sales at the luxury units, Jaguar and Land Rover plunged amid the global recession. The
consolidated net loss was Rs 2,500 cr in the year ended 31 March, 2009 compared with a net
income of Rs 2,200 cr bn a year ago. Ratan TATA is slashing investments by as much as 38% in
the year to March on slow economic growth.

As soon as the TATA’s acquired JLR the world witnessed a financial crisis that was
caused a credit crunch and resulted in real economy recession. Industries such as steel and
automobiles were among the worst affected. As a result, the sales and revenues of JLR were far
short of expectations. Due to this the TATAs could not meet commitment on their debt and
reduce the degree of leverage. Secondly, much of TATAs debt were of bridge load kind (loans
which after maturity have to be repaid and rolled over to prevent default, they cannot be repaid
after maturity). TATAs had borrowed USD 3 Bn for the JLR deal and refinancing during
recession had become difficult.

Another problem that TATAs faced during this time was that they were trying to
convince the UK government to stand as a guarantor for loans that TATAs wanted to borrow
from the UK banks to bail out JLR. The British government was reluctant to provide these loan
guarantees which created additional challenge to TAT, without UK government’s help they
would have to cut down their investment plans for Jaguar Land Rover (JLR) with possible job
losses and plant closures.

However TATAs managed this remarkable feat. TATA Motors returned USD1.11 bn of
its original bridge loan by mobilizing funds through a rights issue, launching a fixed deposit
scheme and by selling the shares of TATA Steel it held. Second, the TATA group had managed
to win the support of the Indian government. The group always had the backing of the Indian
Government, specially when it was embarking on its overseas acquisition strategy. TATAs
mobilized Rs 42 bn through bond markets with the help of government-owned State Bank of
India. TATAs launched Nano in Apr’09 and received 203,000 advance orders & raised Rs 25 bn
from Indian public. This money was in essence a loan from public at large & TATAs will pay
interest rate on the same. This money was also crucial to the TATAs’ survival strategy.

In FY 2008-09, TATA Motors Ltd posted its first annual loss in at least eight years after
sales at the luxury units, Jaguar and Land Rover plunged amid the global recession. The
consolidated net loss was Rs 2,500 cr in the year ended 31 March, 2009 compared with a net
income of Rs 2,200 cr bn a year ago. Ratan TATA is slashing investments by as much as 38% in
the year to March on slow economic growth.

TATA JLR: ONE YEAR LATER

TATA Motors registered a consolidated net profit of Rs 1,989 cr in the 1st quarter of the
fiscal, a exponential change from a loss of Rs 329 cr in the same period last year. Consolidated
net revenue grew 64 % to Rs 27,772 cr from Rs 16,842 cr.
 The Jaguar and Land Rover reported a net profit of 220 mn (Rs 1,590 cr) in the 1st
quarter as compared to a net loss of 64 mn (Rs 490 cr) a year ago. Net revenue for the 1st quarter
was 2.2 bn (Rs 16,060 cr).

In 2008 and early 2009 JLR had experienced a decline in its business because of
recession but now it has recovered and are reporting profits for the last three quarters. Volumes
grew 59 per cent to 57,153 units.

JLR was facing supply shortage of engines from Ford because demand for JLR vehicles
was very high, according to Mr Carl-Peter Forster, CEO and Managing Director, TATA Motors.
He also commented that "We could have sold more cars if we had more engines." JLR sales have
increased across various markets, particularly China, where they have doubled. They sales were
up by 23 percent in the US and the UK, the two big markets.

Mr Ralf Speth, CEO, JLR, said the newly launched Jaguar XJ had been well accepted
worldwide. Europe and the US were looking good, however the market in China was slowing
down. The company is now gearing for the launch of Land Rover LRX in 2011.

India Assembly plans

In India plans are on to create a local assembly of Land Rover vehicles. Local assembly will help
lower the price and create a new space in the luxury SUV market.

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