India Watch : Tata Motors to raise $1B to trim JLR debt

Automotive News Europe/Bloomberg, 29th June, 2010

MUMBAI (Bloomberg) — Tata Motors Limited, the Indian owner of Jaguar and Land Rover, plans to raise as much as 47 billion rupees ($1 billion) to expand operations and pare debt accumulated for the purchase of the luxury brands.

“The timing and structure of the issues will be decided depending upon market conditions post shareholders’ and other approvals,” Tata Motors said in the statement today.

Tata Motors, India’s largest commercial vehicle maker, had debt of 185.3 billion rupees, according to Bloomberg data. The company took on loans to purchase the luxury vehicle unit from Ford Motor Co. for $2.5 billion in 2008.

“Tata may take about six months to one year to raise the full amount,” said Umesh Karne, a Mumbai-based Analyst at BRICS Securities Limited. “They may be able to get good valuation as the Indian auto industry is doing very well and there are no big concerns in the short term.”

Jaguar Land Rover is targeting growth in emerging markets by opening more showrooms in India and setting up a sales company in China, where its full-year deliveries doubled from 8,821 in a 10-month transitional period ended March 2009. Setting up production in China would require one to two years after the company made any decision on partners and a location, CEO Carl-Peter Forster said May 28.

Tata may take about six months to one year to raise the full amount. They may be able to get good valuation as the Indian auto industry is doing very well and there are no big concerns in the short term.” Umesh Karne, a Mumbai-based Analyst at BRICS Securities Limited

In October, Tata Motors raised $750 million selling global depository receipts and convertible bonds. The size of the offering was increased 25 percent after the initial fund-raising target had been met in less than an hour.

The automaker sold a 20 percent stake in its construction equipment venture to Japanese partner Hitachi Construction Machinery Co. for 11.6 billion rupees in March. Tata Motors also offered in the same month to convert some of the bonds into shares about a year early to reduce its debt and preserve cash.

The maker of the world’s cheapest car, the Nano, raised 41 billion rupees through a rights offer in October 2008. The company’s founders, the Tata Group, invested 30 billion rupees by subscribing to the offer. Tata Group’s other businesses include making steel, computer software, tea and power.

Tata Motors returned to a profit in the fiscal year ended in March after the luxury unit had a pretax profit and sales gained amid economic growth.

Jaguar Land Rover had a pretax profit of 32 million pounds ($48.23 million) in the year ended in March as the global economy began to recover from the worst recession since World War II. Tata also reduced its work force to cut costs at its UK-based luxury vehicle unit.

[Source: Automotive News Europe]

Clive Goldthorp

About the Author:

Clive claims that his interest in the BMC>MG story dates back to his childhood in the 1960s when the family’s garage premises were leased to a tenant with an Austin agency. However, back in the 1920s and 1930s, his grandmother was one of the country’s first female Garage Proprietors so cars probably run in his genes! Admits to affairs with Alfa Romeos, but has more recently owned an 06/06 MG TF 135 and then a 15/64 MG3 Style… Clive, who was AROnline’s News Editor for nearly four years, stood down from that role in order to devote more time to various Motor Racing projects but still contributes articles on as regular basis as his other commitments permit.

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