Tata Analysis

8/6/2019 Tata Analysis

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TATA TEA

Background

Strategic Objectives

first M&A for TATA.Acquired Tetly- Feb 2000

Growth opportunitiescommodity tea producer tobrandedpackaged tea producersales presence-advanced market


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Value Proposition Tetly 3 times size, biggest acquisition-eye o

Brand Tetly- global tea brand

Financial Aspect

Management, HR Tetly management unchanged

MarketTechnological better tea packaging activities

Domino Effect

Leverage buyout through SPV

Further acquisition- Good Earth, EightO'Clock Coffee, Jemca, 30% stake in EBI


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Global Footprint

Role of Tata Centre

Stock /Listing Status

Domestic Expansion

Pre Acquisition


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TATA STEEL

Acquired- NatSteel Asia, Millenium Steel


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Increased presence- Aus, Malaysia, Philippines, Vietnam, Chin


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Improve competitiveness in liberalising Indian economy-benchmarking costs, waste reduction, new technology,revamped sales, marketing operations, reduce workforce,greenfield developments.


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TATA HOTELS(IHC)

purchase of two adjacent properties in London in 1982,51 Buckingham Gate and the St. James Court

Hotel,Sydney's W Hotel in December 2005, the Ritz-Carlton, Boston, in November 2006, and Campton Placein San Francisco inApril 2007. Besides India, Taj Hotels Resort and Palacesare located in the United States of America, England,Africa, the Middle East, Maldives, Mauritius, Malaysia,Bhutan, Sri Lanka and Australia

IHC's strategyfor globalization shifted to a preference formanagement contracts with small equity positions inproperties instead of outright ownership


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Global access and hotels such as ginger, gateway and vi


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Tata Motors

Tata's Motors was Tata's largest company -reputation for building sturdy hotels; HugeLoss of $105 Million in 2000-01;It is the 5thlargest medium and heavy commercialvehicle manufacturer in the world.

Pressure to Internationalize because ofIntensifying foreign competition in localmarkets and also facing heat fromcompetitors such as from top car makerMaruti Suzuki India Ltd, Hyundai Motor,Renault and Volkswagen. ;Challenge of De-risking the cyclical nature of its commercialtruck business and therefore move to lightcommercial vehicles and buses andexpanding its commercial business intoforeign markets; move into foreign marketscould anticipate what would soon migrate intoindian market


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Long term strategic commitment toautomotive sector;Opportunity to participatein two fast growing auto segments- Luxurycars and all terrain vehicles;Improvement inglobal market position through a combinationof resources and strengths;

Sharing of best practices in manufacturingand quality assurance systems andprocesses;Benefits from component sourcing,design services and low cost engineering

Upscale its brand value in world's largestmarkets such as US by acquiring luxurybrands Land Rover and Jaguar(On organicegrowth; it would have taken 25- 30 years toactually participate in US due to high

marketing expenditures and quality of itsproducts

Usually Tata Motors upgrade its products butstill continue to target middle incomesegments;challenge is to cater to top ofpyramid;some of examples are:- inexpensivetruck Ace, Nano; Another market US largestmarket- reason for acquiring landrover and

Jaguar


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After a loss of 105 million, Tata motorsfocussed into into internationalization;focussed on key market areas; SouthAfrica,Middle East and Korea; attempt topartner with MG Rover in 2003 to introduceIndica into European market as City Rover butpartnership dissolved in 2005; Tata acquiresDaewooCommercial Vehicle of Korea in

2003;Purpose:- for product development ofheavier trucks and cut time to produce higherlevel products in india and overseas; Tataacquires 21% stake in Spanish bus- makerHispano Carrocera in 2005; Collaboration withMarcopolo in Brazil Purpose:- Launching Padfor Possible Entry into region including China;

JV with Thonburi Automative Assembly Plantto build pick up trucks in

Thailand.Collaboration with Fiat ofItaly;Overall Purpose is to increase Company'sConsolidated revenues increased from 5% in2002-2003 to 18% in FY 2006-2007...

For Hispano Carrocera there is an increase of0.36% in overall price of shares in three dayperiod


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Background

Financial

Market

Why Ford Selling JLR?


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Why Tata Purchasing JLR?


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Issues in Acquisition for Tata


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Jaguar Land Rover

Ford brought it for 2.75 billion fromBMW;jaguar is majorlyunsuccessful;32% reduction in no. of

cars compared to last year;;biggestcontributor to losses;

Ford acquired Land Roverfor 2.5 billion in 1989

in order to hide the losses ; fordformed PAG

Higher end brand and it is expected

to grow as arival to mercedes andBMW; Models price ranges from$34995 to $92500 in us

Land rover has grown areputation of ruggedvehicles and popularamong farmers and even

militaries.Models priceranges from $42150 to$92750 in us

Ford Incurred a loss of 12.6 billion;biggest in 103 history; Focussing onrestructuring of organisation


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*Unions control- Tata cannot closeany of three JLR factories; Ford must

maintain a minority: British media isopposing takeover tactics; Hugepension schemes;Close associationof both Landrover and Jaguar andnot possible of separate Sales;Significant pressure as Tata hasalready decided to invest 120 billionon other expansionactivities( Daewoo+ Nano).Burdenon Loss making Tata Motor Groupwhose cash flow is alreadynegative;Fund raising required for

acquisition could lead to higher debtto equity ratio which is currently at94.6%; JLR( takeover targets) couldlead to very long payback periodsdue to current high losses; Changemanagement as tata is keeping thecurrent management in all majoracquistions;


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Tata Motors


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to tata motors; advancedmarket distributionchannels; global reach;express Inorganicgrowth;Unique opportunityto move into premiumsegment with access toworld class iconic

brands;Jaguar offers arange ofPerformance/Luxuryvehicles to broaden thebrand portfolio; Costeffective synergy:- Tatacan actually leverage onits diverse operations andcan benefit from Long-term benefits fromcomponent sourcing, lowcost engineering and

designservices( e.g.Technologyfrom Tcs, steel from TataSteel). Tata Group canrealise synergies of evenacquired acquisitions


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Documents

Tata Analysis