Tata Motors - Speed Breakers Galore


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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

Case Details:

Price:

Case Code : FINC062 For delivery in electronic format: Rs. 400;
For delivery through courier (within India): Rs. 400 + Rs. 25 for Shipping & Handling Charges

Themes

Corporate Finance / Capital Financing
Case Length : 25 Pages
Period : 2007-2009
Pub. Date : 2010
Teaching Note : Available
Organization : Tata Motors / Jaguar and Land Rover
Industry : Automobile
Countries : India, UK

Abstract:

The case discusses the problems faced by Tata Motors Limited, the largest automobile company in India in the domestic and international markets. The company posted a net loss of Rs. 25.05 billion for the financial year ending March 2009, its first loss in eight years. Earlier, in June 2008, Tata Motors had completed the acquisition of Jaguar and Land Rover (JLR). Immediately after the acquisition of JLR, Tata Motors started facing problems as the sales of JLR started decreasing. The global financial crisis impacted the sales of luxury vehicles heavily. Against the expectation of Tata Motors, JLR could not generate the funds for working capital, requiring Tata Motors to pump additional funds to keep the operations going. Things turned for the worse by the end of 2008, with demand shrinking further.

To finance the acquisition of JLR, Tata Motors took a bridge loan of US$ 3 billion. To refinance bridge loan, Tata Motors came out with two rights issues. When the rights issues were opened in September-October 2008, the share price of Tata Motors fell drastically, and the rights issue had to be bailed out by the promoters of the company. Then Tata Motors called for deposits from public and issued non-convertible debentures. However, as of May 2009, Tata Motors was yet to refinance US$ 1 billion of the bridge loan. With the global economic slowdown hampering the growth of global automobile industry, Tata Motors had a tough task ahead to bring JLR back on the growth track.

Issues:

Analyze the problems faced by Tata Motors and suggest probable solutions.
Evaluate the reasons behind Tata Motors's decision to acquire JLR.
Understand the advantages and disadvantages of JLR's acquisition for Tata Motors.
Deliberate if acquisition is the right method to go global.
Understand the influence of macroeconomic environment on businesses.
Study the reasons for the global financial crisis and its impact on the economies of developed and developing countries.
Analyze the impact of global financial crisis on the automobile industry.
Understand the problems a company could face in financing acquisitions.
Evaluate the importance of global business environment for the success of the organization.

Contents:

  Page No.
Tata Motors Reports Loss 1
Background Note 3
The Problems 4
The Road Ahead 10
Exhibits 12

Keywords:

Tata Motors Limited, Jaguar and Land Rover, Global Financial Crisis, Subprime Crisis, Rights Issue, Bridge Loan, Debt Management, Macroeconomic Environment, Merger and Acquisition, Refinancing Debt, Non-convertible debentures, Fixed Deposit Schemes, Credit Availability, Financing Issues, Working Capital Requirement, Private Placement, Nano, Global Recession, Global Automobile Industry

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