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  • GE Caps has undertaken to finance all new production of JLR cars from the time the cars leave the factory for up to 90 days, while the cars are in transit to dealers. Says Sean Neville, European business development director at GE Capital, who structured the deal for GE Caps: “While the cars are sitting in trucks, highways, and ships on their way to markets all over the world, they soak up cash like a sponge. We will squeeze the cash out and make it available to JLR.” A Tata Motors spokesperson said the proposed arrangement was for working capital and not linked to refinancing of debt raised by the Mumbai-based company for the acquisition of JLR. “This deal (with GE Caps) is for working capital.  Source: Tata.com

Tata jlr Tata jlr Presentation Transcript

  • TATA acquires
    Jaguar & Land Rover
    Team Mates
    Ajay Singh
    Gaurav Shahare
    Gourav Palit
    Krishnan Lakshmikanthan
    Maninder Bisen
  • Jargons defined
    Bridge Loan > A short-term loan that is used until a person or company secures permanent financing or removes an existing obligation. This type of financing allows the user to meet current obligations by providing immediate cash flow. The loans are short-term (up to one year) with relatively high interest rates and are backed by some form of collateral such as real estate or inventory
    Debt Free Cash Free > Cash-free, debt-free transaction refers to the amount the buyer would pay if the seller had no debt and no cash on the balance sheet of the company
    Special purpose vehicle > Also referred to as a "bankruptcy-remote entity" whose operations are limited to the acquisition and financing of specific assets. The SPV is usually a subsidiary company with an asset/liability structure and legal status that makes its obligations secure even if the parent company goes bankrupt.  A corporation can use such a vehicle to finance a large project without putting the entire firm at risk.
  • Tata Motor’s Growth Story
    1984: India’s 1st LCV (407 truck)
    Growth Strategy
    To consolidate position in thedomestic market and expand international footprint through development of new products by
    • Leveraging in house capabilities
    • Acquisitions and strategic collaborations to gain complementary capabilities
    1996: India’s 1st SUV (Safari)
    1998: India’s 1st Passenger Car (Indica)
    2004: Acquisition of Tata Daewoo, Korea
    2005: India’s 1st mini-truck (Ace)
    2005: Acquisition of stake in Hispano, Spain
    2007: Formed an international JV with Fiat
    2007: JV in India with Marcopolo of Brazil
    2007: JV in Thailand with Thonburi
    2008: People’s car – Tata Nano
    2008: Acquisition of Jaguar Land Rover
    Source – Tata motors
  • The Land Rover
    4x4 SUV - a premium all-terrain vehicle, with portfolio of 5 brands
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    Ford acquired LR from BMW in 2000 for $2.75bn
    Recorded highest volume sells in 2007 with 18% growth
    Increasing global presence with success of Rover-Sport
    5
    Land Rover working with Jaguar for sharing common technologies like engine, manufacturing facility, etc.
    Source – ENAM Securities Pvt. Ltd
  • The Jaguar
    The premium luxury car brand with portfolio of 5 models
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    Acquired by Ford in 1989 for $2.5bn
    Ford is believed to have invested over $10bn to improve production facilities
    Jaguar has been struggling to find a mass market model over the last few years
    Source – ENAM Securities Pvt. Ltd
  • Why FORD Sold JLR?
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    Losses at JLR stood at $12.6bn in 2006
    High manufacturing costs in the UK
    EU emission norm change in 2012 - a major hurdle for all manufacturers
    With a slowdown, the luxury car and SUV markets are expected to soften
    5
    Expected R&D spend of JLR to be in excess of USD 1.5bn over the next two years
    Source – WSJ, Economist
  • Chronology of Events
    • June 2nd 2008: Share price Tata motors dropped by 6% to Rs 595.15 on the BSE following the company’s fund raising plan to acquire jaguar & Land rover.
    • June 3rd 2008: Ford Motor Co. officially sold jaguar and land rover to Tata Motors with about $2.3 billion.
    • Jun 4th 2008: Global credit ratings agency Moody's downgraded Tata Motors Ltd from Ba1 to Ba2.
    • Jul 31st 2008: Tata motors quarterly profit fell by 30% due to increase in the input costs.
    • Dec 24th 2008: Tata Motors pumped tens of millions of pounds of emergency funding into jaguar land rover to save it from liquidity crisis during downturn.
  • Why TAMO Acquired JLR ?
    Long term strategic commitment to automotive sector
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    4b
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    Opportunity to participate in two fast growing auto segments (premium and small cars) and to build a comprehensive product portfolio with a global footprint immediately
    Increased business diversity across markets and product segments
    Unique opportunity to move into premium segment with access to world class premium brands
    Land Rover provides a natural fit above TMLs Utility Vehicles/SUV/Crossover offerings for the 4x4 premium category
    4a
    Jaguar offers range of “Performance /Luxury” vehicles to broaden the brand portfolio
    Sharing of best practices between JLR and Tata Motors in future
    Long term benefits from component sourcing, low cost engineering and design services
    Source – Tata Motors
  • SPV Structure
    Corporate Guarantee
    Equity Funding – TML Cash Resources
    SPV 1 (Singapore)
    Equity Funding
    Acquisition
    Debt $3bn
    SPV 2 (UK)
    $2.3bn
    100% ownership of JLR
    $0.7bn
    working capital
    $600mn
    JLR pension funds
    Source: Tata Motors
  • Re-Financing Plan
    US $3bn Bridge loan
    USD 1.8bn through rights issue
    USD 500mn equity overseas
    USD 700mn balance through debt
    +
    +
    USD 550mn rights issue of equity share
    USD 500mn rights issue of ‘A’ equity share
    USD 750mn rights issue of 5yr 0.5% CPS
    • Above equity issues will increase the existing equity capital by 35%; in the event of CPS conversions between 2011-2013 additional increase of 12% is estimated.
    • In 2009, Tata Motors and Jaguar Land Rover tied up $250 million in distribution financing from GE Capital, in a unique financing deal, a first of its kind in Europe. This arrangement was for working capital and is not linked to refinancing of debt raised to acquire JLR.
    As a result
    Source: Tata Motors, Enam.com
  • What has TAMO Paid for
  • Valuation of JLR
    TAMO + JLR
    Based on EV of 2.3 Bn$
    Source : Deutsche Bank Research
  • TAMO : Global Peer group Valuation Comparison
    TAMO + JLR
    EV/Sales : 0.48
    EV/EBIDTA: 5.5
    Source : Deutsche Bank Research
  • TAMO + JLR : Leverage and Valuation Ratios
    Source : Deutsche Bank Research
  • TAMO + JLR : Pro forma P&L
    50bps improvement in JLR’s operating margin in CY2009
    Source : Deutsche Bank Research
  • TAMO + JLR : Pro forma Balance Sheet
    Source : Company, Deutsche Bank Research
  • Cost Synergies
  • Cost Synergies
    TATA Technologies:-
    • Provides services like supplier programs , Consulting services and global sourcing.
    TCS:-
    • Provides services like engineering design & manufacturing solutions.
    • Automotive division account for 15% revenues.
    TATA Steel – Corus:-
    • Leader in Automotive grade steel in European markets.
    • Enjoys “Q1” supplier status with Ford.
    TATA Auto Component:-
    • Flagship company of TAMO’s ancillary business.
    • Expert in Manufacturing , Engineering, Supply Chain management.
  • Cost Synergies (Contd.)
    Considerable Reduction in labor & material Cost
  • Revenue Synergies
    In the Long run, TATA Motors’ footprint in South East Asia Will help JLR diversify their geographic dependence from US(28% of volumes) & Western Europe(55% of volumes).
  • Recent Developments
    • May 31st 2011: Tata heating up to compete with  SUVs XC 60 from Volvo India, Audi Q5 from Volkswagen AG and BMW's X3 – Tata Motors plans assemble JLR in India.
    • Jul 19th 2011: Tata plans to start assembly line in China.
    • Jul 20th 2011: Tata JLR eyes joint engine development . Tata’s Pune plant started building the land rover freelander. So far , the engines were produced by Ford.
    • Sep 20th 2011: 355m facility for JLR engine to be built in wolverhampton. This will provide a boost to employment rate and would benefit as much as 150 companies and is estimated to create 2000 positions within supply chain.
  • Why was the deal speculated for failure ?
    • Ford who is known to be a leading Automotive manufacturer could not bring about a change in Jaguar and Land Rover since 1989 and 2000 (BMW).
    • Also more funds will be dispensed to bring about a renovation over the management of the firms.
    • TATA had already incurred huge debt in-order to develop Nano the Rs. 1 Lac Car. Singur Crisis had drained about $300 Million.
    • The amount of loan needed would ask for multiple banks to lend significant amount.
    • The economic downturn was anticipating the deal to be non-profitable in near future.
    • Future technology will have to incorporate alternative energy such a Hybrid Engines as part of Green Technology. Tata owned none such technologies.
    • Indian company has not launched any successful automobile in the global market.
  • Why was the deal speculated for failure ?
    • Over the next 10 months, TATA incurred a loss of $ 468M, seemed the loss spree would continue like it had been with ford.
    • After Acquisition, TAMO posted a loss of $67 million for the quarter, which was $147M profit, for the same quarter, last year.
    • Tata has sunk almost $2billion for operations, R & D of Jaguar and Land Rover
    • Land Rover though a fast moving automobile had its demerits. These machines were massive gasoline guzzlers. To contain the expulsion of CO2 (Should be less than 120 g/km) was a huge expense in itself.
    • TATA has already an existing debt of $6Billion in its books of accounts.
    • Portfolio has the cheapest car even made in the history of Automobile. The speculation was that this would damage the brand name of Jaguar and LR.
    • However, the acquisition was given a clear note. i.e., There were no controversies as conveyed by PHD Chamber of Commerce Industry.
  • TATA Motors : Success Spree
    • Tata Motors has managed to sell a whooping 244,000 Jaguar & Land Rover cars globally in 2010.
    • In Jun 2011, 80 percent or $1.7 billion of its bumper $2.04 billion annual profits came from the JLR unit alone.
    • TATA has successfully made its mark in Luxury car segment with a global presence with high technology automobile.
    • Almost $1.1 Billion invested on R & D for lining up the fleet for 2011 spectacular launches of Luxury Segment car.
    • 4 New models rolled out from Land Rover in 2010 with latest technology .
    • 4 New Models rolled out from Jaguar Line up. Starting from £29900 – £75500.
  • Your Heading Here
    Your Body Text Starts Here.
  • Referecnces
    • Tata Motors
    • Enam Research
    • Emkay Research
    • www.jaguarlandrover.com
    THANK YOU