By Shubhra Mani
Behind acquisition of Jaguar Land Rover, Tata Motors had following strategic considerations: 1. Long term strategic commitment to automotive sector.
2. Opportunity to participate in two fast growing auto segments (premium and small cars) and to build a comprehensive product portfolio with a global footprint immediately. 3. Increased business diversity across markets and product segments. 4. Unique opportunity to move into premium segment with access to world class iconic brands since: (a)Land Rover provides a natural fit above TML’s Utility Vehicles/SUV/Crossover offerings for the 4x4 premium category (b)Jaguar offers a range of “Performance/Luxury” vehicles to broaden the brand portfolio 5. Sharing of best practises between Jaguar, Land Rover and Tata Motors in the future 6. Long-term benefits from component sourcing, low cost engineering and design services.
Tata motors meticulously planned its refinancing strategy as follows: •TML raised a 15 month bridge loan of $3bn to finance the acquisition •TML also planned to raise about Rs.92bn ($2,300mn)
–Rs.96bn ($2,400mn) (through issue of equity / equity linked instruments to refinance bridge loan –3 simultaneous but unlinked Rights Issues of about Rs.72bn ($1,800mn) of the following securities (Price range to be determined in due course): o Equity shares upto Rs.22bn ($550mn) – ‘A’ Equity shares carrying differential voting rights upto Rs.20bn ($500mn) o Optionally convertible into ‘A’ Equity Shares after 3 years but before 5 years from the date of allotment (upto $750mn) – Approx USD 500/600mn to be raised through issue of securities in the foreign markets Above equity issues were estimated to increase the then existing equity capital by about 30%-35% in FY09. In the event of CCP conversions between 2011 and 2013, additional increase of about 12% was also estimated. (Source: Ibid)
While formulating this...