Tata Motors acquired Jaguar and Land Rover from Ford in 2008 for $2.3 billion, using a special purpose vehicle structure. The acquisition was speculated to potentially fail due to Jaguar and Land Rover's past losses under Ford, and the significant debt Tata would take on. However, Tata Motors has since successfully turned around Jaguar Land Rover, with 80% of its $2 billion profits in 2011 coming from the unit. Tata Motors has also invested over $1 billion in research and development, launching several new models.

1. TATA acquires Jaguar & Land RoverTeam MatesAjay SinghGaurav ShahareGourav PalitKrishnan LakshmikanthanManinder Bisen

2. Jargons definedBridge 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 inventoryDebt 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 companySpecial 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.

3. Tata Motor’s Growth Story1984: India’s 1st LCV (407 truck)Growth Strategy To consolidate position in thedomestic market and expand international footprint through development of new products byLeveraging in house capabilities

4. Acquisitions and strategic collaborations to gain complementary capabilities1996: India’s 1st SUV (Safari)1998: India’s 1st Passenger Car (Indica)2004: Acquisition of Tata Daewoo, Korea2005: 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 Brazil2007: JV in Thailand with Thonburi2008: People’s car – Tata Nano2008: Acquisition of Jaguar Land RoverSource – Tata motors

5. The Land Rover4x4 SUV - a premium all-terrain vehicle, with portfolio of 5 brands1234Ford acquired LR from BMW in 2000 for $2.75bnRecorded highest volume sells in 2007 with 18% growthIncreasing global presence with success of Rover-Sport5Land Rover working with Jaguar for sharing common technologies like engine, manufacturing facility, etc.Source – ENAM Securities Pvt. Ltd

6. The JaguarThe premium luxury car brand with portfolio of 5 models1234Acquired by Ford in 1989 for $2.5bnFord is believed to have invested over $10bn to improve production facilitiesJaguar has been struggling to find a mass market model over the last few yearsSource – ENAM Securities Pvt. Ltd

7. Why FORD Sold JLR?1234Losses at JLR stood at $12.6bn in 2006High manufacturing costs in the UKEU emission norm change in 2012 - a major hurdle for all manufacturersWith a slowdown, the luxury car and SUV markets are expected to soften5Expected R&D spend of JLR to be in excess of USD 1.5bn over the next two yearsSource – WSJ, Economist

8. Chronology of EventsJune 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.

9. June 3rd 2008: Ford Motor Co. officially sold jaguar and land rover to Tata Motors with about $2.3 billion.

10. Jun 4th 2008: Global credit ratings agency Moody's downgraded Tata Motors Ltd from Ba1 to Ba2.

11. Jul 31st 2008: Tata motors quarterly profit fell by 30% due to increase in the input costs.

12. 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 sector12344b56Opportunity 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 segmentsUnique 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 category4aJaguar offers range of “Performance /Luxury” vehicles to broaden the brand portfolio Sharing of best practices between JLR and Tata Motors in futureLong term benefits from component sourcing, low cost engineering and design servicesSource – Tata Motors

13. SPV StructureCorporate GuaranteeEquity Funding – TML Cash ResourcesSPV 1 (Singapore)Equity FundingAcquisitionDebt $3bnSPV 2 (UK)$2.3bn100% ownership of JLR $0.7bnworking capital$600mnJLR pension fundsSource: Tata Motors

14. Re-Financing PlanUS $3bn Bridge loanUSD 1.8bn through rights issueUSD 500mn equity overseasUSD 700mn balance through debt ++USD 550mn rights issue of equity shareUSD 500mn rights issue of ‘A’ equity shareUSD 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.

15. 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 resultSource: Tata Motors, Enam.com

16. What has TAMO Paid for

17. Valuation of JLRTAMO + JLRBased on EV of 2.3 Bn$Source : Deutsche Bank Research

18. TAMO : Global Peer group Valuation ComparisonTAMO + JLREV/Sales : 0.48EV/EBIDTA: 5.5Source : Deutsche Bank Research

19. TAMO + JLR : Leverage and Valuation RatiosSource : Deutsche Bank Research

20. TAMO + JLR : Pro forma P&L50bps improvement in JLR’s operating margin in CY2009Source : Deutsche Bank Research

21. TAMO + JLR : Pro forma Balance SheetSource : Company, Deutsche Bank Research

22. Cost Synergies

23. Cost SynergiesTATA Technologies:-Provides services like supplier programs , Consulting services and global sourcing.TCS:-Provides services like engineering design & manufacturing solutions.

24. Automotive division account for 15% revenues.TATA Steel – Corus:-Leader in Automotive grade steel in European markets.

25. Enjoys “Q1” supplier status with Ford.TATA Auto Component:-Flagship company of TAMO’s ancillary business.

26. Expert in Manufacturing , Engineering, Supply Chain management. Cost Synergies (Contd.)Considerable Reduction in labor & material Cost