Business Standard reported that the timing of the acquisition couldn't have been worse. Just days after TATA Motors bought Jaguar Land Rover for EUR 1.15 billion 4 years ago, the world's financial markets collapsed.
While funds became scarce and sales plummeted, TATA Motors posted a huge loss. Though domestic sales were robust, what brought the company down was the shoddy performance of the British car division.
The roles seem to have been reversed.
In fact, if JLR had not paid a dividend of INR 1,312 crore to TATA Motors in the second quarter of the current financial year, the parent company would have declared a loss a point made by Mr C Ramakrishnan CFO of TATA Motors while declaring the company's results.
JLR is now the crown jewel of TATA Motors contributing 67% of revenues and 81% of operating profits in FY12.
In the last financial year, the launch of Range Rover Evoque helped the company boost its sales by nearly 30% to 310,000 units. The company reported a 37% rise in its revenue to EUR 13.5 billion and a 43% jump in its net profit to EUR 1.48 billion in FY12 more than the acquisition price in 2008.
Obviously, Mr RK Krishna Kumar director of TATA Sons director is elated. He said that "In the long run, shareholders have benefitted from our daring move, JLR being one of them."
The company now has a 30 product actions planned for the next 3 to 5 years that has the potential to expand the market and boost profit. All aluminum product line ups targeting new customer segments and better geographical penetration are also in the works.
Bumpy beginning, then turnaround
The deal hasn't been without hiccups. Analysts' initial worry about the deal was that the JLR acquisition increased TATA Motors's debt equity ratio 3.03 in 2008-09 from 1.1 a year ago.
Just after taking over, TATA Motors faced its toughest challenge when it incurred a EUR 300 million loss in the first year, with JLR sales slumping by a third. This was followed by labor problems and negotiations with the British government for access to loans and guarantees.
However, in August 2009, it raised EUR 469 million through global depository shares. It was the beginning of the turnaround story.
Since then, the company has raised money through several bond issues, which allowed it greater strategic flexibility to invest in modernization of plant, product development and expansion into emerging markets.
When Mr Ralf Speth current CEO of JLR joined the company about 2 years ago, TATA Motors retained most of the management including the heads of marketing, product development and production. They continue to oversee the execution of its product strategy expansion and investments.
