TATA JLR DEAL

01-37-014 Parth Dedhia

01-37-042 Pranav Nerlekar
01-37-056 Shubham Shah
01-37-111 Trushali Hindocha
01-37-133 Viren Palan
01-37-152 Nihar Shah
Tata Motors
Tata Motors Limited, formerly known as Tata Engineering and Locomotive Company (TELCO), is
an Indian multinational automotive manufacturing company headquartered in Mumbai. It is a
part of the Tata group conglomerate. Its products include passenger cars, trucks,vans,coaches,
buses, sports cars and military vehicle.

It has manufacturing and assembly plants in Jamshedpur, Lucknow, Pune, Pantnagar, Dharwad,
Sanand, Argentina, South Africa, Great Britain, Thailand.
Products offered by Tata Motors
Tata Motors Sales Information
Automobile Sector Trend in India in 2008
● The Automobile sector in India was in a growth and expansion state. The government was
opening up the sector and was looking for FDI in the sector. There were a lot of new
launches of models by various companies.
● Tata motors had launched their new Indica Vista in August and the Tata Nano.
● Fiat also made big moves by entering into a joint venture with Tata. They launched the Fiat
500 as a part of improving their image, they then launched the Linea and Punto in order to
establish themselves in the Indian market.
● Maruti Suzuki one of the top players in the market had made great noise. They marked the
25th year of the Maruti 800. They launched their Maruti Swift Dzire in the sedan segment
and the A-Star in the hatchback segment.
Jaguar Land Rover
Jaguar Land Rover Limited is a global automotive manufacturer and leading technology company,
built around two iconic British car brands.

It is now a subsidiary of Tata Motors since 2008.

The company employs around 38,000 people globally. It has assembly plants in the UK, China,
Brazil, India, Austria and Slovakia. In 2019, the company sold around 5,57,706 vehicles in 127
countries over the globe.
JLR Timeline
1930s

2008
1940s
JLR Product Portfolio
a
Reason For the Deal
TATA

● Both strategic and economic gains form the acquisition.

● Enter Global Footprints and Prestigious Segment.
● Reduce the company’s dependence on the Indian market, which accounted for 90% of its
sales.
● Access to Latest Technology which would also allow Tata to improve their core products in
India.
● No other brands with so good research and development facilities were available to Tata at
such a reasonable price.Tata had to pay 2.3 billion whereas Ford paid 5.2 billion for
acquiring JLR.
Reason For the Deal
JLR

● In 2006, losses at Jaguar stood at USD 715 million.

● Jaguar was not performing well as it was unable to provide any profit for Ford due to high
manufacturing costs in United Kingdom.
● The sales of Jaguar and Land Rover in the US market were down by 25.7% and 1.8% in May
2007
● Jaguar lost 15.3 billion dollars in a span of two years and responded by shutting down
plants and reducing the workforce in North America by more than 40,000 workers.
● Bringing down production costs and turning around the company successfully was the
challenge for the company.
Synergy of the Deal
● No significant synergies between Tata Motors and JLR.
● Tata has experience taking over global brands, and its strategy has been to let each
business run its own entity. This is consistent with the view that there are minimal
synergies between the two companies.
● JLR would have synergies with Tata Group as a whole, due to Corus & TCS.
● In the first year after acquisition Tata Motors Mcap plunged, synergy was achieved 3yrs
later as Tata motors was inexperienced in handling the luxury auto segment.
Synergies
● Cost Synergy : The cost competitive advantage as Corus was the main supplier of
automotive high grade steel to JLR and other automobile industry in US and Europe.

● Revenue Synergy : TATA’s footprints in South East Asia will help JLR do diversify its
geographic dependence from US (30% of volumes) and Western Europe (55% of volumes).
LEVERAGED BUYOUT
•‘Leveraged’ signifies a significant use of debt for financing the transaction
•The purpose of a LBO is to allow an acquirer to make large acquisitions without
having to commit a significant amount of capital
•‘Buyout’ suggests the gain of control of a majority of the target company’s equity
TATA Jaguar- Land Deal
•Rs. 1.92 Billion underwriting agreement with J M financial Consultants.
•Rs.1.75 Billion was raised through a deposits scheme from the Public.
•Additional subscriptions by promoter companies such as TATA sons,
TATA Capital and Investment.
•And above that TATA was leveraged by British Government also.
•
DOWNSIZING
•Downsizing is a cutback in a company’s operations and usually implies a
reduction in its employee headcount as well
•Downsizing results from many factors:-
1.Increased global competition
2.New technologies
3.Weaker labor unions
CORPORATE CULTURE
•Culture is a system of Shared values, Beliefs, Behavioral norms, Observed
behavioral norms, Dominant values and Learning the ropes for newcomers
•Culture is needed to organize and administrate a group of people or whole
population
•HR issues are a key factor in unlocking value through the M&A route
 $0.7 billion for
$2.3 billion $3 billion
Working
Deal Financials paid to FORD
Capital
Bridge Loan

•SPV 1 – TML Holdings Pvt Ltd, • SPV 2- Jaguar Land Rover Ltd

•Tata Motors raised $3 billion bridge loan from a clutch of banks, including JP Morgan,
Citigroup, and State Bank of India for a period of 15 months

•$2.3 billion was paid directly to Ford to acquire full ownership of Jaguar & Land Rover.
Remaining $0.7 billion towards working capital

•Ford agreed to pay $600 million towards pension funds

Planned Refinance

But due to extreme stock volatility,

negative outlook of investors and
global credit crisis, the right issue
plan eventually failed. Tata Motors
shifted to Plan B.
Actual Refinance
Post-Deal Analysis
● Immediately after the merger the shares of Tata Motors took an initial hit as
the synergies were yet to be exploited. But, it bounced back after some time
and reported better margins.
● Tata Motors was finding it difficult to access credit to repay the bridge loan of
US$3 Billion
● Tata Motors had no prior experience of luxury and expensive cars. Tata had
the uphill task of not only maintaining its standards but also upgrading them so
that they will be able to compete with other luxurious brands
 Post-Deal Analysis
● Global financial crisis severely affected the global automobile industry. The Company’s
export was declined by 38.6% during the year 2009, due to the meltdown in major
international markets.
Category Industry Sales Nos. Tata Motors sales Nos. Market Share (%)

FY 07-08 FY 08-09 Growth (%) FY 07-08 FY 08-09 Growth (%) FY 07-08 FY 08-09

Commercial 5,03,218 4,15,652 -17.4% 3,12,935 2,65,373 -15.2% 62.2% 63.8%

Vehicle

Passenger 15,33,268 15,25,313 -0.5% 2,18,055 2,07,512 -4.8% 14.2% 13.6%

Vehicle

Total 20,36,486 19,40,965 -4.7% 5,30,990 4,72,885 -10.9% 26.1% 24.4%

Post-Deal Analysis
● Overall sales of JLR saw greater growth
across global markets
● Although sales of the Land Rover softened
in their traditional markets such as
Europe, globally it increased due to high
sales volumes in markets like China and
Russia.
● Jaguar reported a whopping 31% increase
in the sales in West Europe from 2924
units 3836 units in a year.