Tata Motors - Financing the Acquisition of Jaguar and Land Rover

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Case Details:

Case Code : FINC050
Case Length : 21 Pages
Period : 2008-2009
Pub. Date : 2009
Teaching Note : Available
Organization : Tata Motors
Industry : Automobiles
Countries : UK/India

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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.

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Excerpts Contd...

...Go Haywire

The rights issue of Tata Motors was open between September 29 and October 20, 2008. When the rights issue was announced, the price of the ordinary shares represented a discount of 18.6% over the closing price at the National Stock Exchange which was at Rs.417.80. But just a day before the offer opened, the share price dropped to Rs.374.55, effectively reducing the discount to 9.2%...

JLR Requires More Funds

While Tata Motors was finding it difficult to repay the bridge loan, it needed to pump in additional funds to keep the operations of JLR going.

When JLR was acquired, Tata Motors was of the view that both Jaguar and Land Rover would be able to generate funds for the working capital internally, as the Land Rover was recording high sales, and at the same time Jaguar was also picking up. But the global liquidity crunch had an adverse impact on the demand for luxury vehicles...

The Road Ahead

In late 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 higher interest rate of LIBOR + 400 basis points was expected to add to the company's interest burden. The financial burden on Tata Motors was expected to increase further with the pension liability of JLR coming up for evaluation in April 2009...


Exhibit I: Tata Motors - Stock Price Chart (January 2008 - January 2009)
Exhibit II: International Acquisitions by Tata Group
Exhibit III: Tata Motors - Product Timeline
Exhibit IV: JLR - Unaudited Statement of Assets and Liabilities (2004-07)
Exhibit V: JLR - Unaudited Income Statements
Exhibit VI: Tata Motors - JLR Acquisition Structure
Exhibit VII: JLR - Wholsale and Production Volumes (January - December 2008)

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