Critical Analysis of Tata Jlr

1368 WordsDec 23, 20086 Pages
Last year Ford decided to put two iconic British brands Jaguar and Land Rover on sale and Tata Motors emerged as the preferred buyer. Tata initially valued the two brands at $2.05bn but the deal got finalized at $2.3bn. The latest acquisition also means that Tata Motors now owns one of the most prestigious brands in the global automobile space and can boast a full range of cars, right from the Rs 1- lakh category to Rs 1 crore. Tata Motors will also finally have access to the global market, despite a ten-year presence in the domestic car market. Deal dynamics were conducive from TAMO’s perspective The circumstances could not have been more fortuitous for such a strategic foray for TAMO. The virtual freeze in the credit markets and…show more content…
As we can see JLR is widely present in most of the major markets of the world this will open up many new windows for TAMO’s negligible global presence. The result of this entry to the global markets may not be experienced in the near future but once the pressure would have reduced from TAMO to sustain itself financially it would become one of the most competitive automobile company in the world. Since TML is not taking over the debt of JLR, as the debt owed by JLR to Ford has been set off against the debt owed by Ford to JLR. However JLR would have to raise debt on its own to finance its working capital requirements, which would be backed by TML. It goes without saying that the deal would put pressure on the financials of Tata Motors in the short term. TML would have to step up its capital expenditure and research and development expenses in order to meet that of JLR. Approximately Rs 3,600 crore is spent on JLR 's R&D every year. Also, considering that the pension fund contribution ($600 mn) by Ford to TML covers the deficit upto Oct 31st 2007 only, we believe that TML would have to provide for the same going forward. UK’s pension regulator has agreed to carry out the next actuarial valuation of the JLR’s pension fund in April 2009. This would lead to higher debt burden of the company, which would

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