Tata Motors in trouble-What will happen to Jaguar/Land Rover
12-01-08, 09:46 PM
#1
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Tata Motors in trouble-What will happen to Jaguar/Land Rover
http://www.bloomberg.com/apps/news?p...AIY&refer=home
Dec. 2 (Bloomberg) -- Tata Motors Ltd., the maker of Jaguar and Land Rover vehicles, declined the most in almost two weeks in Mumbai trading after sales declined in India and Credit Suisse downgraded the stock.
Tata Motors fell as much as 5.8 percent to 125 rupees and changed hands at 129.55 rupees at 10:44 a.m. in Mumbai, having declined 82 percent this year. The company's American depositary receipts yesterday slid a record 18 percent to $3.75 in New York, the most since they began trading on Sept. 27, 2004. They have declined 80 percent this year.
The Mumbai-based company's vehicle sales plunged 30 percent in November, the most in at least four years, as higher loan rates and a slowing economy damped demand for trucks and cars.
``The slowdown in the car market hurts Tata Motors's business particularly hard as it lacks the brand to compete effectively,'' Govindarajan Chellappa, a Mumbai-based analyst at Credit Suisse, wrote in a note dated yesterday. ``Jaguar and Land Rover will also likely face severe demand contraction over the next year due to negative wealth effect.''
The automaker yesterday turned to the public to raise loans for the first time in 13 years as the credit crunch limits its ability to refinance $3 billion of bridge loans taken to buy Jaguar and Land Rover.
India's biggest truckmaker yesterday said total vehicle sales declined to 32,696 in India and overseas last month, compared with 46,947 a year earlier. Tata Motors doesn't give monthly sales of its luxury units. The company's commercial vehicle sales in India fell 40 percent to 16,229, it said.
Stock Downgrade
Credit Suisse's Chellappa downgraded the company to ``neutral'' from ``outperform.''
Tata Motors is offering as much as 11 percent annual interest on three-year deposits to raise money from the public, spokesman Debasis Ray said yesterday. A government bond with a similar maturity offers a 6.97 percent yield.
The company needs money to replace the loans it had used to fund the $2.4 billion purchase of the U.K.-based luxury units from Ford Motor Co. A global credit crunch after the bankruptcy of Lehman Brothers Holdings Inc. has cut the availability of financing for companies amid a worldwide recession.
Tata Motors needs to repay the entire $3 billion loan by June 2009. It has already repaid about $890 million using funds raised from a rights offer of shares, Chellappa wrote.
Tata Motors will need to raise 114 billion rupees through in the fiscal year ending March 31 or next year, he wrote. It may have to sell more equity as the debt market is frozen, he wrote.
Refinance Bid
The company is seeking to raise $1.2 billion in loans to refinance debt from the acquisition, International Financing Review said, without saying where it got the information. The company is in talks with banks about a five-year loan to its Tata Motors U.K. unit, IFR reported.
Tata Motors will pay around 600 basis points above the London interbank offered rate, the largest spread on any loan from an Indian company, IFR said. A basis point is 0.01 percentage point.
The fundraising comes as Moody's lowered Tata Motors's rating by two levels to ``B1,'' four ranks below investment grade on Nov. 28 and said its credit outlook is negative. Moody's last lowered the rating on June 3.
Dec. 2 (Bloomberg) -- Tata Motors Ltd., the maker of Jaguar and Land Rover vehicles, declined the most in almost two weeks in Mumbai trading after sales declined in India and Credit Suisse downgraded the stock.
Tata Motors fell as much as 5.8 percent to 125 rupees and changed hands at 129.55 rupees at 10:44 a.m. in Mumbai, having declined 82 percent this year. The company's American depositary receipts yesterday slid a record 18 percent to $3.75 in New York, the most since they began trading on Sept. 27, 2004. They have declined 80 percent this year.
The Mumbai-based company's vehicle sales plunged 30 percent in November, the most in at least four years, as higher loan rates and a slowing economy damped demand for trucks and cars.
``The slowdown in the car market hurts Tata Motors's business particularly hard as it lacks the brand to compete effectively,'' Govindarajan Chellappa, a Mumbai-based analyst at Credit Suisse, wrote in a note dated yesterday. ``Jaguar and Land Rover will also likely face severe demand contraction over the next year due to negative wealth effect.''
The automaker yesterday turned to the public to raise loans for the first time in 13 years as the credit crunch limits its ability to refinance $3 billion of bridge loans taken to buy Jaguar and Land Rover.
India's biggest truckmaker yesterday said total vehicle sales declined to 32,696 in India and overseas last month, compared with 46,947 a year earlier. Tata Motors doesn't give monthly sales of its luxury units. The company's commercial vehicle sales in India fell 40 percent to 16,229, it said.
Stock Downgrade
Credit Suisse's Chellappa downgraded the company to ``neutral'' from ``outperform.''
Tata Motors is offering as much as 11 percent annual interest on three-year deposits to raise money from the public, spokesman Debasis Ray said yesterday. A government bond with a similar maturity offers a 6.97 percent yield.
The company needs money to replace the loans it had used to fund the $2.4 billion purchase of the U.K.-based luxury units from Ford Motor Co. A global credit crunch after the bankruptcy of Lehman Brothers Holdings Inc. has cut the availability of financing for companies amid a worldwide recession.
Tata Motors needs to repay the entire $3 billion loan by June 2009. It has already repaid about $890 million using funds raised from a rights offer of shares, Chellappa wrote.
Tata Motors will need to raise 114 billion rupees through in the fiscal year ending March 31 or next year, he wrote. It may have to sell more equity as the debt market is frozen, he wrote.
Refinance Bid
The company is seeking to raise $1.2 billion in loans to refinance debt from the acquisition, International Financing Review said, without saying where it got the information. The company is in talks with banks about a five-year loan to its Tata Motors U.K. unit, IFR reported.
Tata Motors will pay around 600 basis points above the London interbank offered rate, the largest spread on any loan from an Indian company, IFR said. A basis point is 0.01 percentage point.
The fundraising comes as Moody's lowered Tata Motors's rating by two levels to ``B1,'' four ranks below investment grade on Nov. 28 and said its credit outlook is negative. Moody's last lowered the rating on June 3.
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12-02-08, 05:32 AM
#9
Lexus Test Driver
I will have to look closely at my next service bill to make sure that there isn't an additional billion dollars on it 
It really was a timing problem, Tata made the transaction in the worst year possible.
It really was a timing problem, Tata made the transaction in the worst year possible.
12-02-08, 08:15 AM
#11
Keeper of the light
iTrader: (17)
I wouldn't say "makers" of Jag and Land Rover. They haven't owned it long enough to liquidate the cars they bought in the first place, much less build more. It's possible that Tata hasn't produced much of anything.
12-02-08, 08:15 AM
#12
Toyota needs to be able to "micromanage." That's how they maintain utmost quality. They've tripped up recently with huge growth and less maintenance in the past few years. I think taking Land Rover will further deteriorate their build methods...
In everything but making cars.
Just like how Volvo does trucks, buses, construction equipment, and aerospace components; but their cars are a bit lack luster.
They haven't had enough time to reorganize anything. However, with the tough world economic crisis, I don't think they'll have the resources to do it properly and efficiently.
Tata has two options: ride it out like everyone else struggling, or just let it die, which would be catastrophic in the automotive world.
Last edited by PhilipMSPT; 12-02-08 at 08:22 AM.
12-02-08, 08:57 AM
#13
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Man these American car makes are like the plague anyone who touches them gets into deep dongus. I remember when Mercedes bought up Chrysler Benz quality went to the dirt and that is the first in over 150 years. Not suprisingly after MB dumped them their quality went back up again.
I felt sorry for Tata now they cought this disease and don't know what to do with it.
I felt sorry for Tata now they cought this disease and don't know what to do with it.
12-02-08, 09:10 AM
#14
Jaguar can go, although I'll miss the XF quiet a bit...
Land Rover on the other hand needs to be saved. Although the reliability is in the s***-hole but the overall built quality is top notch. Also, no one does off-roading luxury utility better than LR in the car business, the only competitor I could come up is the Lexus LX.
Land Rover on the other hand needs to be saved. Although the reliability is in the s***-hole but the overall built quality is top notch. Also, no one does off-roading luxury utility better than LR in the car business, the only competitor I could come up is the Lexus LX.
