The Biz of Coding

Tata Group Buys Jaguar & Land Rover for $2.6 Billion

by Ujwal Tickoo on March 26th, 2008

Tata Group known in the IT circles for TCS (Tata Consultancy Services) is expanding its diversified business interests. Tata Motors has bought Jaguar and Land Rover (official Press Release from Tata Group) for $ 2.6 billion from Ford. Tata Motors gained world wide attention when it launched Nano a couple of months ago.

There is scepticism. Some folks wonder whether Tata's can run a luxury segment highend car business and even crack unfair jokes of finding a Jaugar Vindaloo. On a more serious note The Economist points out that the acquistion is not value building for Tata's:

Tata Group…may be India’s biggest industrial conglomerate but there are concerns that this time it may have bitten off more than it can chew. When the deal was first mooted, S. Ramnath of SSK Securities, a Mumbai stockbroker, feared that passion rather than logic was in the driving seat. Balaji Jayaraman of Morgan Stanley added that buying Jaguar and Land Rover (JLR) was clearly “value-destructive given the lack of synergies and the high-cost operations involved”.

The reasons for such trepidation were plain enough. Land Rover has recently turned a corner (it made a profit of about $1.5 billion last year), but Jaguar cost Ford some $10 billion during its 18-year stewardship and its sales were in headlong decline, especially in America, its most important market. Industry analysts also struggled to see what value Tata could add that had eluded Ford, and what synergies there could be between a maker of trucks and basic cars (including the tiny new $2,500 Tata Nano) and two luxury marques.

I think Ratan Tata is a visionary and can pull this off. He is building an end-to-end cars business with the Nano and Jaguar. Many people said a big "No it wont work" when he launched Indigo and Indica in the Indian Market. They were proven wrong. What do you think?

POSTED IN: India