TATA MOTORS IN TROUBLE

TATA MOTORS
Tata

Motors Ltd. formerly TELCO. Headquartered at Mumbai, India. Its products include passenger cars, trucks, vans and coaches Worlds 18th largest motor vehicle manufacturing company Has vehicle assembly operations in India, the United Kingdom, South Korea, Thailand, Spain and South Africa.

Financial Performance(In Rs. Millions)

Q3 FY 09 Revenue 47586.2 Q3 FY 08 72518.3 9M FY 09 187659.2 9M FY 08 199813.0

EBITDA

916.5

8197.4
6651 4990.5 82568

11186.3
2839.5 4098.4 195192

21608.6
18784.2 14926.5 215313

Profit Before (4191.5) Tax Net Profit (2632.6)

Volume Summery Total 49546 Commercia l Vehicles Total Passenger Vehicles Exports Total Volumes 42187

49284

142507

153475

7027 98760

12756 144608

29177 366876

40488 409276

Stock Prices(1st January 20081ST January2009)

ACQUISITION OF JLR

Ford acquired Jaquar from British Leyand Ltd. in 1989 and Land Rover from BMW. Over the years the operations of Jaquar and Land Rover were fully integrated. Ford reported losses in 2006 as it was more concerned about the interests of the workers employed with JLR than the price. January 2008, Ford announced it has chosen Tata Motors for the JLR deal. March 2008 deal comes through. Though the deal received support from labour unions, reactions from industry experts were not encouraging.

FINANCIAL ISSUES
To repay the bridge loan

Repayment Of Bridge Loan

 Renegotiation

of underwriting with JM Financial Consultants Change in the Promoter Holding and Decrease in the Equity Debt Ratio Deduced Two Schemes to raise money from public

SCHEME A QUATERLY INCOME PLAN

PERIOD 1 YEAR 2 YEAR 3 YEAR

MIN.AMOUNT (RS) 20,000 20,000 20,000

RATE OF INTEREST 10.00% 10.50% 11.00%

PERIOD

MIN.AMO UNT

PLAN 1 YEAR
2 YEAR

SCHEME B CUMULATIVE DEPOIT

20,000 10.00% 22,076 10.38%

RATE OF MATURITY INTEREST(P. VALUE A) (P.A)

YIELD (P.A)

20,000

10.50%

24,607

11.52%

3 YEAR

20,000

11.00%

27,696

12.83%

Problems with the JLR Deal

JLR Sales (units)

14000

12000

10000

8000 JLR Sales (units) 6000

4000

2000

0 2004 2005 2006 2007 2008 2009

100 90 80 70 60 50 40 30 20 10 0 2004 2005 2006 2007 2008 2009 Jaguar Land Rover

Problems
Month/Year Problems

September 2008

Decrease in sales by 11.4% compared to previous quarter (Land Rover 19.1% Decrease) (Jaguar 17.5 Increase)
Huge funds were provided in spite of liquidity crunch.

September 2008

October 2008
November 2008 January 2009 December 2008 January 2009

Luxury Car makers suffer badly due to Global Recession.

198 Employees opted for VRS/ 850 Agencys Staff Cut down. 400 Employees leave the Job. Tata announced an investment 670 Million Pounds . JLR announced 400 Jobs. (Incl. 300 Manger Jobs.)

January 2009
June 2009

Sales Volume of JLR reduced by 35.2%

Demand of JLR Cars reduced drastically (Global Marlet).

Problems in Domestic Market

2008

-09 1st quarter 30% drop on profits Sales volume grew 3.9% 2008-09 2nd quarter 34.1% drop on profits 3.47 Billion + Sales Volume drop Economic slowdown and credit crunch Lack of financing

The TATA Nano Project

Initiated

Tata. Goal to make the worlds cheapest car. Target group Two wheeler owners & other lower income groups. R&D - $380-&420 million. 623 cc, 2 cylinder engine, Euro IV. The plan roll out 2,00,000 Nanos by 2009

in 2003, brain child of Mr. Ratan

TATA Nano continued..

2008

- The Singur problem Shifting of the production facility to Sanand, Gujrat. Q3 2008-09 TATA Motors reports loss of INR 2.3 Billion.

Is the worst over?

The

$3 billion bridge loan for JLR. January 2009 - British govt.s aid of 2.3 bn. Pounds. Since October 2008 RBI announced measures to stimulate the economy. Also, the GOI announced fiscal stimulus package.

Growth forecast of the Indian Auto industry

The Passenger Vehicle market of India will even cross Japan by selling about 7 million Vehicles by 2017-18. The Indian auto exports was about $5.62 billion in the year ending March 2011 and the same will grow to $17.64 billion in 2015-16. Indias share in global auto exports may also triple by 2016. Indias passenger vehicle production projections :

In 2010 2.6 million Vehicles By 2015 5.1 million Vehicles By 2020 9.7 million Vehicles

Recommendations for TATA Motors

Expand

Nano operations overseas Sri Lanka, Malaysia, South Africa, Europe. Launch JLR in developing economies. Fresher launches by JLR. The TATA Pixel

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