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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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