TATA JLR

1. TATA JLR Mahiman Roll No 21 Manu Agarwal Roll No 23 Pawan Chaudhary Roll No 31 Sidharth Arya Roll No 50 Vishal Sharma Roll No 63

2. Contents • Developments post2006 in JLR • TATA wins JLR deal • Motivation behind the acquisition • What constituted the deal • Was the valuation justified • Land Rover-The Profit Center • Jaguar-The trouble point • JLR –Portfolio and Roadmap • Due Diligence • Structuring the deal • Financing the deal • Post Integration Developments • Present Status

3. Developments post 2006 in JLR • Ford had bought Jaguar for $2.5 billion in 1989 and Land Rover for $2.7 billion in 2000 • Cash-hungry Ford, which lost $12.6 billion in 2006, looking to sell JLR • Ford had mortgaged JLR’s assets to borrow money to stay operating and was expected to burn up $12 billion to $14 billion until 2009, when it planned to return to sustained profitability • JLR had been hit by unfavorable exchange rates & high production costs in Britain

4. TATA wins JLR deal • Tata was vying for JLR with another Indian automaker, Mahindra & Mahindra, as well as U.S. private equity firm One Equity Partners, in the race, who had submitted bids ranging from $1.5 bn to $2 bn • After nine months of negotiations, in Mar’08 Tata Motors closed the $2.3 bn deal with Ford for JLR • Ford was to contribute approx $600 mn to pension funds of two British automakers, so net consideration for Ford was only $1.7 bn • It is important to note that Tata motors negotiated the deal from the position of strength and JLR was out of debt and had shown signs of returning to profitability by end of 2007 • The deal may have other motivations but in a way,it symbolizes the might of an Indian company which has bought high-profile and prestigious Automaker of the former colonial power UK

5. Motivation behind the Acquisition • Tata Motors wanted to gain more market power & JLR turnover was 2 times that of Tata motors in FY08 • Increased business diversity across markets and products • Presence in High End segment made it only Auto maker to be present in Top as well as bottom end • Developed markets, Tata Motors had no significant presence • JLR brings world class Power train and Chassis knowledge • High inflation and slowdown in Indian market, loomed over the profitability. Such situation would have made Tata Motors vulnerable to acquisition • Differential Managerial Efficiency- Having already closed the Daewoo deal successfully, Tata Motors believed that they could turn JLR to profitability with their better managerial efficiency as compared to that of Ford

6. What constituted the deal

7. Was the valuation justified

8. Land Rover-The Profit Center

9. Jaguar-The trouble point

10. JLR Portfolio and Roadmap

11. Due Diligence (1) • Cleared concerns w.r.t • debts in the book, • Additional hidden costs • long-term arrangement with Ford on R&D & engineering, and, • Profitability of the 2 businesses • None of JLR cars meet the 2012 European Union Emission norms and penalty was stringent. However, JLR was hopeful of some exemptions for certain period because of its low volumes • Rs 3,600 cr required annually for R&D on JLR as opposed to Rs 797 cr Tata motors spent in 2007 • Experience from Corus. Tata had done well with Corus deal, worked with UK-based companies & employees

12. Due Diligence (2) • Possibility of getting components from Indian suppliers was not possible however, introducing JLR range to Indian market was feasible • Financing and cost cutting options had to be worked out • Pension & retail financing problems were taken care by Ford, for 1 year • perpetual royalty free licenses • Agreement include supply of engines for 79 years manufactured by JLR and Ford

13. Structuring the deal • Firstly, Tata motors had to outbid the competitors in the bid to buy JLR in a all cash deal • Secondly, the company had decided to float a special purpose vehicle (SPV), considering the mammoth amount involved in the deal to acquire the JLR brands. And in the long run, the company would merge the SPV with it. • Thirdly, the nature of the negotiations and the non-compete agreements that the management was to freeze with Ford and its dealers as well as the suppliers and worker unions. • Lastly, the turnaround of JLR and long term goals of the combined entity were to be realized to transform the deal into a successful venture, for its stakeholders.

14. Financing the the Deal

15. Post Merger Integration • Tata Motors formed an integration committee with senior executives from JLR & Tata Motors, to set milestones & long-term goals for acquired entities • Aggressive cost cutting measures have been initiated at JLR, incl lowering headcount, imposing a wage freeze and sourcing components from cheaper markets • TML’s efforts to trim costs at JLR • About 20% of JLR's components are now sourced from low-cost countries, compared to 15% earlier; aim is to take this to 30% • Staff costs have also been trimmed by reducing employee count to 14,000 from 16,000 at the time of the acquisition

16. Present Status • Auto Industry veteran, Dr Ralph Speth is the new JLR CEO (Feb’10) • JLR gets £340-m European Investment Bank loan, for R&D (Feb’10) • JLR boosts TAMO profits • TAMO post Rs 650-crore net Profit (JLR contributed 417 Cr) for Qtr ending Dec’09 (Feb’10) • JLR global sales in Jan’10 were 16,269 vehicles, higher by 195%, same month last year • Leverage from 0.15x to 1.2x, excl. vehicle financing business • Luxury division is finally starting to make profits, thanks to cost cutting, a better product mix and improving global economy. • JLR made a profit of 4.17 billion rupees ($90 million), compared to a loss of 11.8 billion rupees a year earlier. • CONCERNS ON POST SOFT DEMAND OUTLOOK & TAMO’S EXECUTION ALMOST OVER !!!

17. Thank You !