TATA-JLR: TATA Motors bought the iconic Jaguar and Land Rover operations from Ford for 1.

15 billion pounds in Mar- Apr08. Tata gained the rights to the Daimler, Lanchester, and Rover brand names. In addition to the brands, Tata Motors also gained access to 2 design centers and 3 plants in UK. The key acquisition would be of the intellectual property rights related to the technologies. With the acquisition of Jaguar and Land Rover (JLR), Tata Motors killed several birds with one stroke. The acquisition paves the way for the companys entry into the European car market and gives the company a comprehensive range of models ranging from the luxury Jaguar to the $2,500 Nano. It provides an entry point into Indias growing luxury car market which gives new impetus to the companys development program as well and provides a captive customer base for the component companies of the Tatas. In the long-run TATA Group and TATA Motors footprint in South-East Asia should help Jaguar/Land Rover diversify their geographic dependence from US (30% of volumes) and Western Europe (55% of volume). Analysts believe that TATAs ownership of JLR will open doors for outsourcing of parts from India, particularly from the current pool of suppliers who service TATA Motors in India. Present and Future Plans: A year after Tata group purchased Jaguar and Land Rover, it launched the British iconic luxury brands in the Indian market. The India foray comes at a time when worldwide sales of luxury cars are falling. The global meltdown dragged JLR into huge losses as consumers halted purchases. Sales, after the $2.5 billion takeover by Tata Motors last June, dropped a third to 1.67 lakh vehicles. The bridge from the Nano to Jaguar XF is probably the biggest that exists in the industry. A $2,500 car and a $100,000 car: no other company in the world has a portfolio that wide. Why JLR? Long term strategic commitment to automotive sector Opportunity to participate in two fast growing auto segments Increased business diversity across markets and products Land rover provides a natural fit for TMLs SUV segment Jaguar offers a range of performance/luxury vehicles to broaden the brand portfolio Benefits from component sourcing, design services and low cost engineering

Impact of Current Global Slowdown on TATA-JLR Deal

We went too far with JLR: Ratan Tata Tata Sons Chairman Ratan Tata recently said he may have overstretched himself in paying 1.15 billion pounds for Jaguar Land Rover just as a recession loomed. A year after the Tata group took over the two of Britains most iconic automobile brands, Jaguar and Land Rover, it is faced with newer and bigger challenges than it would have expected when it paid $2.3 billion to Ford for the acquisitions on March 26, 2008. In FY 2008-09, Tata Motors Ltd posted its first annual loss in at least eight years after sales at the luxury units, Jaguar and Land Rover plunged amid the global recession. The consolidated net loss was Rs 2,500 crore in the year ended 31 March, 2009 compared with a net income of Rs 2,200 crore billion a year ago. Ratan Tata is slashing investments by as much as 38% in the year to March

on slow economic growth. At the time of acquisition of JLR by TATA Motors, there were some who called for caution. They pointed out that buying into an automobile major when the market for automobiles was set for a downturn might not reflect good business sense. Moreover, post acquisition, debt at the level of both parent and the United Kingdom subsidiaries in the TATA group was slated to rise sharply. Unfortunately for Tatas, the worst fear of the skeptics has come to pass. Within months of the acquisition, the world witnessed the onset of a financial crisis that triggered a credit crunch and precipitated a real economy recession. Industries such as steel and automobiles were among the worst affected. This had two implications. First, the sales and revenues of JLR were far short of expectations, making it difficult for Tatas to meet commitment on their debt and reduce the degree of leverage. Second, with much of this debt being of a bridge loan kind, loans that mature and cannot be repaid have to be refinanced and rolled over to prevent default. Given the current circumstances, this is difficult, as Tatas discovered this May, when the $3 bn it had borrowed to finance acquisition of JLR was due for refinancing. After the Tatas acquired the company, business challenges were mostly a result of adverse market conditions. In the first half of 2008, Jaguars sales volume was 11.2 % more than in the same period in 2007 while Land Rovers was 0.6 % ahead of 2007. At the end of 2008, Jaguar was 8.2 % ahead of 2007 for the year, while Land Rover had felt the impact of the downturn and its full-year sales were 17.6 % less than in 2007. In the first two months of 2009, Jaguar was 6.9 % ahead of 2008 and Land Rover 45 % down when compared with the same period last year. There have been a series of nonproduction days at all three of its UK assembly plants Castle Bromwich and Solihull in the West Midlands and Halewood on Merseyside. Each plant lost an average of 25 days production, which equated to a volume reduction of approximately 25 per cent month on month. A worsening economic situation could lead to further job losses and even plant closures at Jaguar Land Rover (JLR) in Britain. Tatas bankers are seeking to secure short-term finance of between 500 million and 1 billion to allow Jaguar Land Rover to pay off supplier payments due by the end of the summer and stop it running out of cash. The Tatas are trying to persuade the British government to stand guarantee for loans that they plan to seek from the UK banks to bail out JLR. The British government has been reluctant to provide these loan guarantees so far. If the UK governments help does not come soon, Tata Motors will have to cut down its investment plans for Jaguar Land Rover (JLR) with possible job losses and plant closures. While Tata looks to sustain JLR through the downturn, the UK government's support is crucial as JLR wants it to guarantee a pound 340 million European Investment Bank loan sanctioned in April. Although JLR has the option of getting guarantees from private banks, it may work out to be an expensive proposition. To get the government's help, Tata may have part with some equity interest in JLR, besides giving board representation. According to a recent report in The Economic Times, the company is negotiating at the moment and if there was a large financial package from the UK government to the company then there would be a commensurate level of representation on the board. Despite the challenges, there have been some good news, the companys 14,000-odd workers agreed to a two-year pay freeze on condition of no compulsory layoffs. This is expected to save the company up to 68 million a year. The company also bagged a

significant order from China for supplying 13,000 cars worth 600 million over the next three years. More recently, the UK government approved a grant of 27 million (Rs 192 crore) to JLR for producing a new ecofriendly car based on Land Rovers LRX Concept. Luxembourg-based European Investment Bank is also considering giving a loan of 275 million (Rs 2,100 crore) for research to reduce the CO2 emissions from JLRs future products. What is remarkable is that the Tata group has been able to ride the waves and come ashore safely this time as well. Tata Motors returned $1.11 bn of its original bridge loan by mobilizing funds through a rights issue, launching a fixed deposit scheme and by selling the shares of Tata Steel it held. Second, the Tata group has mobilized the support of the Indian government. Even when the group embarked on its ambitious overseas acquisition strategy, there was evidence that it had the backing of the Indian government, which too was seeking to build India itself as a global brand. Tatas mobilized Rs 42 bn through bond markets with the help of government-owned State Bank of India. Tatas are also in talks with defense establishment to obtain secure orders for the Land Rover. Finally, the Tatas have used innovation to obtain support from the Indian public for its UK operations. Tatas launched Nano in Apr09 and received 203,000 advance orders & raised Rs 25 bn from Indian public. This money was in essence a loan from public at large & Tatas will pay interest rate on the same. This money is also crucial to the Tatas survival strategy. In sum, despite its grievous errors in the form of the crisis-eve, debt-financed acquisition JLR, the Tata group has escaped a group-wide crisis by leveraging its brand, the Indian government and the Indian public. That is indeed remarkable, even if fortuitous to some degree.