Tata Motors investors post gains as Jaguar, Land Rover now worth $14B

Article by Andrew Christian, on April 19, 2012

British luxury car brands Land Rover and Jaguar are worth $14 billion, according to three analysts' average forecast based on Bloomberg News survey. This is more than that of Suzuki or Fiat. In 2008, when Tata Motors acquired the two premium vehicle brands from Ford Motor Co. for $2.5 billion, investors responded to it by selling their share.

Those who had held on may be rejoicing a huge gain. According to FIM Asset Management Ltd. and Kim Eng Securities Pvt., conditions are right for an initial sale of shares considering that there is a planned $12 billion in product development and capital spending over five years as well as a proposed alliance with Chery Automobile in order to expand in China. 

After the acquisition of the two British brands, Tata Motors appointed KPMG International and Roland Berger Strategy Consultants to assist in reducing costs at the luxury unit.

The company launched new models such as the XJ sedan, the XF sedan and the Evoque compact SUV, according to a presentation in June 2009. It also started to target new promising markets including China and Russia. 

Money manager Taina Erajuuri at Helsinki-based FIM Asset Management commented that by listing Jaguar Land Rover, investors who are not focused on India will be able to invest in Tata Motors. FIM Asset Management oversees around $1.2 billion, including the shares of Tata Motors. Erajuuri added that the new models planned for JLR need a huge amount of investment, especially if the company wants to continue Evoque's success.

The stock of Tata Motors is the second best performing vehicle manufacturer share worldwide in 2012. The company has extended its gains after Jaguar Land Rover posted its record monthly sales in March, offsetting the slowdown in the annual deliveries of Tata-branded passenger automobiles in India, where fuel prices and interest rates have adversely affected consumer confidence. 

The Indian carmaker previously disclosed in August that it will increase its annual spending by 100% on capital expenditure and product development at Jaguar Land Rover to 1.5 billion pounds or $2.4 billion in the next five years to finance an expansion which includes a pipeline of 40 upgraded or new car models. This is more than the $2 billion in profit which Tata Motors achieved during the fiscal year 2011. [source: Autonews]

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