1. TATA Acquisition of Jaguar & Land Rover

2. Agenda
 Why did TaMo acquire JLR?
 The Deal & its financing
 Profile: Tata Motors Passenger Cars
 Profile: Jaguar & Land Rover
 Key Challenges for Tata JLR
 Valuation: Assumptions & Model
 Conclusions
Institute of Management Technology, Ghaziabad : Acquisition of Jaguar & Land Rover by Tata Motors

3. Why did Tata Motors Acquire JLR
 Diversification of Markets –
Mix of Developed & Emerging Markets.
 Cost Synergies –
Pooling of Resources of Tata group.
 Potential Technological improvements in existing products.
 Opens up US & European Markets.
 Brand Appreciation – TaMo joins the league of International Automobile makers.
Internationalization
Mix of different Takes care of
–Acquiring
Emerging & Cyclical industries
Companies,
Developed Markets. like Automobile.
Resources & Assets
Institute of Management Technology, Ghaziabad : Acquisition of Jaguar & Land Rover by Tata Motors

4. Cost Synergies
Tata Steel
 Leader in automotive grade INCAT
steel in the European markets  Provides services like supplier
programs, consulting services and
 16% of revenue from auto steel global sourcing
division
 Major customers are
 Enjoys “Q1” supplier status with Chrysler, Ford, GM, Honda and
Ford to supply steel for Jaguar Tata Nissan
INCAT
and Land Rover Daimler- Steel
Chrysler, FIAT
JLR
TCS TACO
TCS
Tata Auto Comp (TACO)
 Provides services like engineering
 Flagship company of TAMO’s
design, manufacturing solutions and
ancillary biz
sourcing services
 Manufacturing, Engineering and
 Automotive division accounted for
Supply chain management
15% revenues
 Customers include Global OEMs like
 Major customers are Chrysler, Ford,
Ford, Daimler-Chrysler, FIAT
GM
Institute of Management Technology, Ghaziabad : Acquisition of Jaguar & Land Rover by Tata Motors

5. What Tata Motors Acquired
Assets and Other Commitments gained by TaMO
100% stake in JLR business
3 plants in UK
2 advanced design and engineering centres
26 national sales companies
Intellectual property rights
Capital allowances – A guarantee of $1.1 bn
Ford to support credit sales for JLR for next 12
months
Pension fund contribution of $ 600 mn
Institute of Management Technology, Ghaziabad : Acquisition of Jaguar & Land Rover by Tata Motors

6. How the deal was Financed
$ 2.3 $ 0.7
$ 3 billion
billion billion
Tata Bridge
paid to towards
Loan
Motors Ford Wcap
SPV-1
Singapore
 SPV-1: TML Holding Pvt Ltd. SPV-2: Jaguar Land Rover Ltd.
 TaMo raised $ 3 billion bridge loan from Citi group and JP Morgan for a
SPV-2 UK period of 15 months.
 $ 2.3 billion was paid directly to Ford to acquire full ownership of Jaguar
& Land Rover. Rest $ 0.7 billion towards working capital.
Ford
 Ford agreed to pay $ 600 million towards Pension funds.
Institute of Management Technology, Ghaziabad : Acquisition of Jaguar & Land Rover by Tata Motors

7. This is how TaMo planned to Re-finance
Right issue Equity
shares: Rs 22 billion
Right Issue: $ 1.8 Right Issue ‘A’ Equity
billion shares: Rs 20 billion
Bridge Loan $ 3 Equity Overseas $ Right Issue 5Yr 0.5%
billion 500 million CPS: Rs 30 billion
Debt: $ 700 million
But due to extreme stock volatility, negative outlook of investors and global
credit crisis, the Right issue plan eventually failed.
As situation changed in Apr 2008, TaMo shifted to Plan B.
Institute of Management Technology, Ghaziabad : Acquisition of Jaguar & Land Rover by Tata Motors

8. Actual Re-financing of bridge loan..
Point in Time Source Amount
Jan 2009 Sale of stake in Tata steel $ 1.11 billion
& Tata Teleservices to
other group companies
Jan 2009 Right Issue
April2009 Secured Non Convertible $ 0.89 billion
Debentures (NCD)
May 2009 External Commercial $ 1 billion
Borrowing (ECB)
Refinance concluded in May 2009 Total: $ 3 billion
Institute of Management Technology, Ghaziabad : Acquisition of Jaguar & Land Rover by Tata Motors

9. TaMo Closing Price & Developments
900
800
700
600
500
400
300
200
100
0
Sept 08–
TaMo Jan 09 – May 09 –
announces Sells Stake ECB raised
Mar 08 – right in Tata $1.1 bn.
Deal issue, met steel & Bridge loan
Announced with failure. others refinanced.
Jun 08 – Dec 08 – April 09 –
Acquisition TaMo NCD raised
Completes announced $0.89 bn
public
borrowing
Institute of Management Technology, Ghaziabad : Acquisition of Jaguar & Land Rover by Tata Motors

10. Tata Motors: SWOT Analysis
• Brand Equity & Legacy in Indian • Minimum Presence in
Markets European & US markets
• Global renowned for CV • Poor technical base as
• Sound Presence in Asian compared to global leaders.
Markets • Confined to Cost Focus
• Strong Parent Base Strategy
Strengths Weakness
Threats Opportunities
• Huge Investments for JLR can • Exposure to Western Markets
reduce company to cashless through JLR
position
• Potential rise in profitability
• Tata Nano Singur Plant
• Tata Nano creating new
Controversy can hamper
markets.
revenues.
• The conflict of Strategies.
Institute of Management Technology, Ghaziabad : Acquisition of Jaguar & Land Rover by Tata Motors

11. Tamo (Passenger Car + Commercial Vehicle + LCV) Performance
Revenues TaMo (Rs 1000 Cr) ROE 2008
40
35 Ashok Leyland 20
30
M&M 24
25
20 Maruti Suzuki ROE
24
15
10 Tata Motors 23
5
18 20 22 24 26
0
2001 2002 2003 2004 2005 2006 2007 2008
Tata Motors -Close Price
1200
P/E 2008
1000 14
11.3 11.8
800 12 10.4
600 10
400 7.3
8
200 6
0 4
Date
3-Apr-07
20-Apr-06
24-May-06
28-Jul-06
27-Feb-07
10-May-07
17-Jul-07
21-Aug-07
24-Sep-07
6-Feb-06
1-Sep-06
10-Nov-06
30-Nov-07
8-Feb-08
14-Dec-06
7-Jan-08
13-Mar-06
26-Jun-06
6-Oct-06
19-Jan-07
13-Jun-07
29-Oct-07
14-Mar-08
2
0
Tata Motors Maruti Suzuki M&M Ashok Leyland
Institute of Management Technology, Ghaziabad : Acquisition of Jaguar & Land Rover by Tata Motors

12. Tata Motors: Passenger Cars
Institute of Management Technology, Ghaziabad : Acquisition of Jaguar & Land Rover by Tata Motors

13. Tata Motors in Passenger Car Market
Category TaMo Product TaMo Mkt Shr Major Competitors
A Tata Nano NA Maruti 800, Alto
B Tata Indica 16% Maruti A star, Wagon-R; Hyundai Santro, Getz
C Tata Indigo 12% Maruti SX4; Hyundai Verna; Honda City;
D No Product 0% Honda Accord; Skoda Octavia; Toyota Corolla
E No Product 0% Skoda Superb, Mercedes C class, E class, BMW 5 Series
F No Product 0% Mercedes S class, BMW 7 series
SUV Tata Safari, Sumo 20% M&M Scorpio, Ford Endeavor, Honda CRV, M Balero
MUV No Product 0% Toyota Innova, GM tavera
 Currently TaMo lacks the right portfolio mix.
 Major improvements required to consolidate share in category B & C.
 TaMo will look forward to add new segments with acquisition of JLR.
Institute of Management Technology, Ghaziabad : Acquisition of Jaguar & Land Rover by Tata Motors

14. Market Performance in 2007-08
Market Share (%)
 Market Share Lost 20
TaMo losses share to new product 15
launched by competitors. 10
 Category B: Indica 5
Competitors product with better 0
engine performance & more feature
Jul/07
Apr/07
May/07
Feb/07
Aug/07
Sep/07
Nov/07
Dec/07
Feb/08
Jan/07
Mar/07
Jun/07
Oct/07
Jan/08
Mar/08
hitting sales.
 Category C: Indigo
A number of new diesel launches Market Share by Volume
dented growth. Jan/08
 JV with Fiat aiming at improving Oct/07
engine performance & production Jul/07
capacity Apr/07
Jan/07
0 5000 10000 15000 20000 25000
Product Launched Product Launched
Hyundai i-10 (A2) Nov 2007 Maruti SX4 (A3) May 2007
Skoda Fabia (A2) Jan 2008 M&M Renault (A3) April 2007
Maruti A Star (A2) Oct 2008 Fiat Linea(A3) 2009 (E)
New Products launch hitting TaMo

15. Tata Motors in Light Commercial Vehicle
• Market Share: 24%
Passenger Carrier (>5 T)
• Competitor: Force Motors
Passenger Carrier • Market Share: 63%
( 5-7.5T) • Competitor: Mazda
• Market Share: 66%
Goods Carrier (>5T)
• Competitor: M&M
Goods Carrier • Market Share: 66%
(5-7.5 T) • Competitor: Eicher
Tata Motors is the Market Leader in three of the four categories.
 TaMo betting on Tata Ace with indigenously developed technology, project of
Rs 2 billion over next 5 years. Initial Capacity of about 70,000 units/year.
Institute of Management Technology, Ghaziabad : Acquisition of Jaguar & Land Rover by Tata Motors

16. Tamo Performance in 2008
Tamo made a sales of Rs. 403 billion, up
10.1% of 2007 figures. Sales (Rs billion)
Ashok Leyland
 However, TaMo behind in growth
numbers, mostly because of slump in M&M
passenger car market share. Maruti Suzuki
 EBITA up by 13% on 2007 figures Tata Motors
compared to 18.5 % improvement in 0 100 200 300 400 500
Maruti Suzuki numbers.
ROCE (%) YoY Sales Growth
25.0%
Ashok Leyland
20.0%
M&M 15.0%
Maruti Suzuki 10.0%
5.0%
Tata Motors
0.0%
0 5 10 15 20 25 30 35 Tata Motors Maruti Suzuki M&M Ashok Leyland
Institute of Management Technology, Ghaziabad : Acquisition of Jaguar & Land Rover by Tata Motors

17. Land Rover
Institute of Management Technology, Ghaziabad : Acquisition of Jaguar & Land Rover by Tata Motors

18. Land Rover Sales -Volumes
250000 226395
198000
 Ford Acquired LR from BMW in 2000, has put 200000 162000 161000
177000
150000
substantial efforts to improve technology. 100000
 Highest ever sales achieved in 2007 of about 50000
0
225000, lead by model ‘Rover Sport’. 2003 2004 2005 2006 2007
 Business mainly located in Europe & US, 100% 7 11 7 11
18
contributing about 80% of sales. 90%
80%
 LR gradually moving to newer markets, targeting 70%
24 22 26 21
20
60%
Middle East, China and other Asian economies. 50%
 Estimated revenues of LR are about $ 11 billion 40%
30% 60 60 60 60
52
in 2008, and expected to be profitable. 20%
10%
0%
2003 2004 2005 2006 2007
 Major competitors – Toyota, Mitsubishi & GM
 Major Criticism – High pollution emission
ROW Asia Pacific America Europe
Institute of Management Technology, Ghaziabad : Acquisition of Jaguar & Land Rover by Tata Motors

19. Jaguar
Institute of Management Technology, Ghaziabad : Acquisition of Jaguar & Land Rover by Tata Motors

20. Jaguar
Sales by unit Volumes
140000
 Jaguar was acquired by Ford in 1989 for 120000
120000 120000
90000
$ 2.5 billion to compete with Toyota Lexus. 100000
75000
80000
60000
 Ford invested over $10 billion in course of time 60000
40000
to improve the production capacities. Jaguar 20000
0
has now three state of art plants in UK. 2003 2004 2005 2006 2007
 However, Jaguar has never found stronghold
100%
markets even in US or Europe. 90%
80%
 Sales eroded by all most 50% between 2004-07. 70% 42 42 36 25 25
60%
 Major Competitors: Audi, Mercedes & Porsche. 50%
40%
30% 54 58 60
48 50
20%
 New model ‘XF’ to be launched in Mar 2008, 10%
0%
is the latest bet Jaguar has. 2003 2004 2005 2006 2007
ROW Asia Pacific America Europe
Institute of Management Technology, Ghaziabad : Acquisition of Jaguar & Land Rover by Tata Motors

21. JLR in search of strong hold markets
Land Rover Jaguar Land Rover
Jaguar 7% 2% 5%
2%
Audi
Audi
11%
22%
Merc
Merc 35%
34%
BMW
46% BMW
36%
Model wise volume in US 2007 Model wise volume in Europe 2007
Product portfolio facelift
 Jaguar has lacked a high volume luxury car akin to
BMW-3 series
 Earlier attempts with the X-type built on a Ford-
Mondeo platform have not yielded results.
 As per industry experts Jaguar needs to clock annual
volumes of 100k for operations to turn around.
Institute of Management Technology, Ghaziabad : Acquisition of Jaguar & Land Rover by Tata Motors

22. Key Concerns for JLR
 Global Slow down
After recession in US and most economies in Europe, market for luxury cars & SUV
expected to soften.
 Emission deadline difficult to meet
EU emission deadline of 130g/ kg will be difficult to meet as none of the JLR model
satisfies the limit.
 Booming R&D costs
Improving technology for market penetration & convergence with Emission norms
will require an estimated $1.2 bn in next three years for JLR.
 Future funding of Pension fund
Ford contributes $ 600 million for pension deficit.
Institute of Management Technology, Ghaziabad : Acquisition of Jaguar & Land Rover by Tata Motors

23. Key Assumptions for Valuation* – taking a conservative approach
 Revenues of JLR expected to grow at 6% for the period. (CAGR for previous four
years stands at 11.9%)
 Estimated growth for TaMo is taken as follow –
Year Estimated Growth
2008-09 6%
2009-10 8%
2010-11 10%
2011-12 12%
2012-13 12%
 Assuming long term growth at 4%.
 Difference in cost between long term debt and short term debt is 400 basis points.
 Depreciation at 4.5% and Capex at 6% of Sales.
 Debt/Equity stands at 0.41 will be maintained after 5 years.
 New Equity is raised by issuing rights and warrants only.
*Valuation is done considering we are in March’ 2008

24. Financial Valuation from perspective of the Investors
Tata JLR Deal- An Investor Perspective
Institute of Management Technology, Ghaziabad : Acquisition of Jaguar & Land Rover by Tata Motors

25. Acquisition of Jaguar & Land
Rover by Tata Motors
December 10, 2011
Institute of Management Technology
Ghaziabad
This presentation has been prepared as a part of
course requirement for Mergers, Acquisitions and
Corporate Restructuring, at Institute of
Management Technology, Ghaziabad by the
following students of second year – Post Graduate
Diploma in Management, Dual Country
Programme.
Sumit Chugh 10DCP-042
Sumit Chugh
Vatan Lunia 10DCP-046
Akash Jauhari 10DCP-056
Alok Kumar Mishra 10DCP-057
Ankit Bhardwaj 10DCP-060
Raghav Agarwal 10DCP-087