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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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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Introduction Contd...

Initially, it was expected that Jaguar and Land Rover (JLR), owned by the India-based Tata Motors Limited (Tata Motors), would benefit substantially from the package. Later, it was announced that the financial aid would be capped at 250 million per company. Imposition of the limit came as a big blow for JLR which was expecting around 1 billion loan from the government.

Though Tata Motors had infused millions of pounds and announced an additional 670 million infusion in December 2008, JLR desperately needed funds from the government to ease the flow of liquidity, as credit was not easily available.

According to David Smith (Smith), CEO, JLR, "What we have been trying to impress on Mandelson is that it doesn't address the urgent nature of the problem. Tata has already put in significant amounts of additional funding, but what we can't access is normal commercial facilities. Like a lot of large companies rolling over existing loans, we are finding it difficult to get refinancing - it requires the government to put in loan guarantees to do that."6

Tata Motors had acquired JLR from the US-based Ford Motor Company (Ford) for US$ 2.3 billion, in June 2008. Tata Motors took a bridge loan of US$ 3 billion from a consortium of banks and intended to repay it through the rights issue, issue of securities overseas, and divesting its portfolio of investments. However, the company's plans to secure funds went haywire.

Initially, Tata Motors had proposed to secure funds through three simultaneous rights issues, one of which was of 0.5 percent convertible preference shares...

Excerpts >>

6] "JLR to Seek 1 billion Facility, Pay Cuts: Report," www.livemint.com, February 1, 2009.

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