Vous êtes sur la page 1sur 30



Equity and Debt The Concepts

Tata is an increasingly powerful multinational conglomerate with a market value of more than $70bn (35bn) and almost 290,000 people in its workforce in 80 countries. During the financial year March 2008, its revenues of about 18bn were equivalent to some 3.2% of India's gross domestic product.

The Mumbai-based group's subsidiaries are major corporations in their own right, active in industries ranging from IT services to power generation, to tea production, to steel. In the UK it already owns Tetley Tea and steelmaker Corus.

The JaGuar &&& The LandRover

Its first model was the 4x4 vehicle that bore the company's name, while Land Rover has also made the Range Rover, the Freelander and the Discovery. Jaguar -- the sleek car which dates back to 1935 -- has been less profitable for Ford since it was bought in 1989. Its vehicles are made at three plants across central and northwest England, while famous models have included the E-type and the long-running XJ series. Britain enjoys a largely successful car-making industry thanks to foreign investment. Japanese car giants Nissan, Toyota and Honda each run large plants in the country.

German manufacturer BMW is meanwhile enjoying successful production of the Mini in Cowley, central England. Last year, however, French car group Peugeot shut its plant in Coventry -- the same region that suffered after MG Rover went bankrupt. 2005.

The JaGuar &&& The LandRover

........ By 1927, car companies progressed to building special bodied cars, which in 1931 resulted in the launch of the legendary SS1, a car which set the stage for the first true Jaguar. Remember the DIE ANOTHER DAY MOVIE .. As the range improved and expanded, it needed a name to reflect its speed, power and sleekness and in 1935 the Jaguar name was born. ........ Jaguar subsequently introduced its new XK120 at the 1948 Motor Show, with an engine output of 160 BHP. ......The Mark VII saloon was unveiled at the 1950 Motor Show and once again Lyons 'stole the show'. . In 1955, the company invested one million pound on designing and developing the Jaguar 2.4 to fill the gap. ....... The E-type was announced in 1961. ....... Some 70,000 Jaguar E-types were built over the next 13 years, with around 60% being shipped to the United States. . In 1968, the XJ6 arrived.

Tatas - the top choice for buying the US auto giant Ford's iconic British brands Jaguar and Land Rover

The firm demolished the competition from rival Indian firm Mahindra and Mahindra
"When a private equity firm buys a company, the cost of buying it often goes onto the companies books. If anything then goes wrong how do you refinance the business?


Tata Motors raised $3 billion (about Rs 12,000 crore) through bridge loans for 15 months from a clutch of banks, including JP Morgan, Citigroup, and State Bank of India. Company charted out plans to raised Rs 7,200 crore, via Rights Issue. The proceeds of which were be used to part-finance the JLR deal of Rs 9,228.75 cr..

The rights issue raised the equity capital of Tata Motors by 30-35 per cent by March 2009. The company also planned to raise $500-600 million through an issue of securities in the foreign markets.

Tatas fund J-LR Deal through Cash Reserves & New Debt
Tata Motors said : The $2.30 billion deal to acquire premium auto brands Jaguar and Land Rover would be funded through a mix of existing cash reserves and new debts. Tata Motors had announced that its Board has approved raising of Rs 4,000 crore (about one billion dollar) from either overseas or domestic markets through issuance of securities. The company had said the funds to be raised would be utilised to part finance overall funding requirement to meet some of its strategic plans. Stating that its expansion plans through organic route over the next 3-4 years might incur expenditure, the company said the acquisition opportunities have to be financed upfront.

TM Planed To Raise Rs 4,000 Crores To Finance J-LR Deal

Auto major Tata Motors planned to raise nearly Rs 4,000 crore by selling securities in the domestic and international markets to part finance its imminent acquisition of Jaguar and Land Rover from Ford Motor.

The Tata Motors board approved the fund raising proposal. The funds were raised to part-finance overall funding requirements to meet some of the strategic plans,

Plans for expanding its position in the domestic and global markets in both the commercial vehicle and passenger vehicle business. This was achieved by upgrading and enhancing the companys product portfolio, expanding manufacturing facilities in India and strategic acquisitions and alliances in India and abroad.

While the organic growth plan required money over the next 3 to 4 years, the acquisition opportunities were to be financed up front. A source close to the development said Tata Motors would borrow from financial institutions to finance the Land Rover-Jaguar deal. The proceeds from the proposed share sale will be utilised to repay the loan, he added.

Tata planned to inject $2 billion in Jaguar, Land Rover

The Tatas - planned to fork out over $2 billion for the acquisition of these marquee brands, which Ford had put on the block to shore up its balance sheet and reduce debt. ET Reports On February 25 : Tata Motors started the process of raising nearly $2.5 billion, mostly from the overseas markets, by giving the mandate to a battery of banks including Citi and JP Morgan, StandardChartered, BNP Paribas and SBI. Funds were raised against the balance sheet of Tata Motors. In other words, the borrowing would have an impact on the balance sheets of Jaguar and Land Rover. Tata and Ford were expected to sign an MoU in the next few weeks. Ford had announced that Tata Motors was the preferred bidder on January 3.

Tata planned inject $2 billion in Jaguar, Land Rover

Jaguar had shown Tata Motors its new model lines and found the Indian automobile giant respectful of its plans. It was learnt that Ford managed to convince Unite, the union representing Jaguar and Land Rover workers, on its plan to sell these two brands in their entirety. Unite was earlier of the opinion that Ford should retain minority interest in these brands. Tata Motors Managing Director Ravi Kant said : That the company had taken bridge loans of $3 billion to fund the acquisition of the two British luxury brands. He said the company planned to replace the bridge loans with long-term debts and equity contribution with funds to be raised through divestment in group companies.

TATA MOTOR JLR Deal process

12/06/2007- Announcement from Ford that it plans to sell Land Rover and Jaguar. August 2007 - Major bidders are identified Likely buyers: Tata Motors, M&M, Ceribrus capital Management, TPG Capital, Apollo Management Indias Tata Motors and M&M arrive as top bidders ($ 2.05b & $ 1.9b) 03/01/2008 Ford announces Tatas as the preferred bidders 26/03/2008 - Ford agreed to sell their Jaguar Land Rover operations to Tata Motors. 02/06/2008 The acquisition is complete

Why did Ford sell?

Reports said losses at Jaguar stood at USD 715 million in 2006. 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. The strong boy Land Rover's profit, on the other hand, was driven by the record sale of 2.26 lakh vehicles, an 18% YoY growth in 2007.. Bringing down production costs and turning around the company successfully will be the challenge, analysts said. 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?

Long term strategic commitment to automotive sector. Opportunity to participate in two fast growing auto segments. Increased business diversity across markets and products. Land rover provides a natural fit for TMLs SUV segment. Jaguar offers a range of performance/luxury vehicles to broaden the brand portfolio. Benefits from component sourcing, design services and low cost engineering

What Tata had got???

100% stake in Jaguar TAMO has acquired the business & initially they will be operated & land Rover independently of the partner. Business

3 Plants in UK

These are well invested plants

2 advanced design & engineering center

26 National sales company

4-5000 engineers engaged in testing ,prototype design & powertrain Engineering , development & integration
Both existing national sales companies of jaguar/land rover & also those that are carved out of current Ford operation

Intellectual property This covers all key technologies to be transferred to JLR & rights perpetual royalty free license on technologies shared with Ford

Capital Allowance
Support from Ford Motor Credit Pension

A minimum guaranteed amount of $1.1 bn which will help managing in Tax going forward
Ford Motor Credit will continue to support the sales of JLR for around next 12 months Ford will contribute $ 600 mn of the Pension Fund


Considering that Jaguar and Land Rover are two of the most well-known automotive names in the world, and that Ford had acquired them for a collective cost of about $5 billion almost a decade earlier, Tata Motors seems to have got them at a steal at $2 billion. Over the years, Ford spent close to a total of $10 billion on the brand but failed to return a profit. After incurring heavy losses for two consecutive years in 2006 and 2007, Ford took this move. Tata Motors has assured the employee union that both these factories will continue to operate without any retrenchments after the takeover. The process which started in 00 and reached new heights in 07 was said to have reached a Zenith with this. The Nanos plans were said to have been targeted towards the down markets but with this deal going through this has been contradicted as Tata was equally bullish in the upmarkets.

Tata Motors - Jaguar - Land Rover DEAL COMPLETED

The biggest buy-out in the automobile space by an Indian company, Tata Motors, was completed on June 3,2008 as it bought the ownership of luxury brands Jaguar Land Rover, its manufacturing plants, design centers and worldwide sales network from US car maker Ford Motor Company (FMC). JLR was acquired on a cash free, debt-free basis. The purchase consideration includes perpetual royalty-free licenses of all necessary intellectual property rights, manufacturing plants, two advanced design centers in the UK, and worldwide network of National Sales Companies.

Revenue synergies A long-term possibility

(Nos) Jaguar Western Europe America Rest of Word Land Rover Western Europe America Rest of world Total Western Europe America 2005 86,651 46,789 32,131 7,731 170,156 97,303 51,634 21,219 256,807 144,092 83,765 2006 72,680 41,367 22,136 9,177 174,940 95,399 53,638 25,903 247,620 136,766 75,774 2007 57,578 33,024 16,836 7,718 202,609 109,785 57,092 35,732 260,187 142,809 73,928 55% 28% 54% 28% 18% 57% 29% 13%

($ m)

TAMO + JLR: Proforma Balance Sheet (CY2007/FY08E)

TAMO ($ m) 2,510 111 2,935 JLR ($ m) 2,246 2,010 conso 4,756 2,121 2,935

Net Tangible assets Net Intangible Assets Vehicle Financing receivables

Net Current Assets




We have assumed TAMO will put $700m as operating cash in JLR on consolidation in JLR. Hence the NCA of TAMO & JLR do not add up The cash equivalents includes shares of Tata Steel worth $400m held at cost of $50m

Cash & eqv



Trade Investments Pension Assets Other Assets

233 696 3 297

233 696 300

Total Assets




TAMO + JLR: Proforma Balance Sheet (CY2007/FY08E)

($ m) Warranty Liabilities & Other provisions Pension Liabilities Def Tax Liability Shareholders' equity Capital Asset Minority Interest Debt Total Liabilities 30 3,302 6,373 5,142 TAMO ($ m) 489 JLR ($ m) 2,667 19 238 2,314 2,456 conso 3,156 19 238 2,314 156 30 6,302 12,215 We have assumed $3bn acquisition debt of which $2.3b is used for paying Ford and the balance as operating cash in JLR Since the acquisition cost ($2.3bn) is less than Net asset value of JLR, there is capital asset instead of goodwill

TAMO + JLR: Proforma Cash flow (CY2008/FY2009E)

Proforma Cashflow ($ m) Cash Profit TAMO 949 JLR 893 SPV (225) Conso 1,617

Chg in operating Working Capital

Cashflow from operating activities Increase in Vehicle loan receivables Capex Trade investments Chg in associates Cashflow from Investing activities








TAMO has a robust working capital management in its auto biz. Inventory and receivable days at around 30 & 9 respectively and creditors at around 40 days
The vehicle loan receivables skew the reported working capital picture as they are shown as part of working capital under Indian GAAP



(813) (38) 16 (834)


(1,447) (38) 16

We estimate operating cashflow from auto biz largely covers TAMOs auto capex . Currently it would be free cashflow neutral to modest +ve.



Proforma Cashflow ($ m)

TAMO + JLR: Proforma Cash flow (CY2008/FY2009E)

TAMO JLR SPV Conso (30) (30)

Chg in minorities

Chg in debt







Cashflow from financing activities Chg in cash







Operating Cashflow Capex




We estimate that JLR has a +ve pretax cashflow

Financial Impact & Valuation of acquisition

Total acquisition cost at $3bn assumed to be debt-funded on TAMOs books We have not considered any asset sales in our calculations Financial Impact: Leverage increases but coverage ratios reasonable Headline Debt/Equity of TAMO would increase to 2.5x from 1x Excluding the vehicle finance biz, leverage would go to 1.2x EBITDA/Interest remains at 5.0 Valuation: TAMO is trading inline/modest discount to global peers EV/Sales (1-yr forward) of 0.5x against 0.4x for global peers P/E (1-yr forward) of 6.5x against 8.5x for global peers

Post LBO Jaguar Land Rover by the TATAs

An ownership change for Jaguar and Land Rover, once emotive emblems of the British auto industry, from Ford to Tata Motors was greeted with approval but regret by a union here on Wednesday. The Unite union welcomed the sale by Ford of the United States to Tata given an undertaking that jobs would be saved, but the union's joint leader Tony Woodley said that the switch was "a big disappointment." Tata Motors later confirmed in New Delhi that it had bought the British luxury icons for 2.3 billion dollars in cash. Unite general secretary Woodley said he was "pleased" Tata was buying the brands and safeguarding about 16,000 jobs in Britain. Commenting on Ford's planned sale, he said: "That is a big disappointment." Woodley added: "We would have much preferred Ford to keep the companies in the family, so to speak, especially with Land Rover being so profitable.

Post LBO Jaguar Land Rover by the TATAs

"But with the commitments Tata have given to the future of Jaguar Land Rover and the long-term supply agreements for components, especially engines from Bridgend and Dagenham (Ford sites in Britain), we're obviously pleased they are in the game." Ford announced it was selling Jaguar and Land Rover last year as part of a restructuring after the US group posted a record loss of almost 13 billion dollars. Tata was expected to keep the current business plans of Jaguar and Land Rover through 2011 and retain Jaguar's headquarters in Coventry, central England, according to British union officials. Land Rover -- also based in central England and which is celebrating its 60th anniversary -- has been largely profitable for Ford since the US group took it over in 2000.

NEW IDENTITY TATAs JaGuar and LandRover

Finally , The Verdict