Tata Buys Jaguar, Sensex Down

123jump.com Staff
26 Mar, 2008
New York City

Tata Group agreed to purchase Jaguar and Land Rover brands from Ford Motor company for $2.3 billion. The deal financed with short term debt may challenge the management at Tata. Jaguar despite receiving more than $10 billion in investment from Ford in the last fifteen years has failed to generate consistent profit and lost sales. In January of 2007, Tata purchased Corus for $11.3 billion. Tata Group generates more than third of its revenue from international sales.

[R]10:00AM New York, 7:30PM Mumbai - Tata Motors buys Jaguar and Land Rover but the deal may be difficult to justify.[/R]

Indian markets drifted lower on Wednesday, ending the previous two-day rally in a volatile trade. Large cap companies Reliance Industries, Hindustan Unilever and ICICI bank led the fall.

At close, the benchmark index Sensex fell 0.8% or 130.66 at 16,086.83 levels.

In the broader markets the National Stock Exchange index Nifty dropped 1% or 48.65. The 50-share index closed at 4,828.85 levels.

Of the BSE traded stocks, 1,733 stocks advanced, 978 stocks declined and 50 stocks were unchanged.

Tata Steel, Housing Development Finance Corporation, ITC, HDFC Bank and Satyam Computers were among the advancers in the Sensex index.

Hindustan Unilever, Bharti Airtel, Jaiprakash Associates, Bharat Heavy Electricals and Reliance Communications were among the decliners in the index.

The March 2008 derivative contracts will expire on Thursday and according to news reports, the rollover of derivative positions from March 2008 to April 2008 se stood at 38%, while that of Nifty was 41% by Tuesday.

Trading Turnover

Daily turnover on the BSE stood at 6,100 crore rupees and at the NSE was 12,479 crore rupees.

Reliance Capital was the most active stock with a turnover of 385.64 crore rupees on BSE followed by Axis Bank, Indiabulls Financial Services, GSS America and Reliance Industries.

Tata agrees to pay $2.3 billion for Jaguar and Land Rover

Tata will pay $2.3 billion to Ford and Ford will contribute $600 million to the pension fund for the employees at Jaguar and Land Rover. Ford will not have any equity stake in the deal. Several private equity funds in partnerships with various auto makers also attempted to purchase these brands but none was willing to keep the labor force intact in the UK.

Much of the deal is funded with short term debt of $3 billion from Citigroup and JP Morgan and other consortium of banks. Tata will have to quickly identify cost savings or increase sales in Europe and the U.S. which looks increasingly difficult.



Chidambaram projects 9% annual economic growth

Finance minister P Chidambaram said on Wednesday that the economy would grow 9% in the fiscal year ending in March despite current global market volatility.

The minister said problems stemming from the credit markets would affect India, even though only one Indian lender had exposure to U.S. subprime mortgages.

Gainers and Decliners

ICICI Bank, India''s largest private bank led the decliners in the Sensex index. The stock dropped 4.17% at 843.25 rupees.

Tata Steel surged 3.8% to 657.85 rupees and Housing Development Finance Corporation rose 2.7% to 2,660.35 rupees.

ITC climbed 2.1% to 195.10 rupees and Satyam Computer gained 0.5% to 413 rupees.

Among the Sensex declines were Hindustan Unilever which fell 4.3% to 234.40 rupees, Bharti Airtel was down 3.8% to 803.10 rupees, Jaiprakash Associates fell 3% to 226.05 rupees.

State Bank of India declined 1.5% to 1,713.60 rupees and Federal Bank lost 0.5% to 214.25 rupees.

ONGC lost 1.1% to 1,063 rupees and Essar Oil was down 1.1% to 209.35 rupees. Sterlite Industries gained 0.8% at 709.90 rupees.

TCS gained 0.4% at 879.30 rupees and Infosys Technologies jumped 0.2% at 1,495.60 rupees. However, Wipro fell 1.3% at 429 rupees.

Shipping firm Mercator Lines rose 6.8% to 76.15 rupees after the company said its subsidiary Mercator Lines in Singapore announced entered into negotiation with Refined Success for a time charter.

Reliance Update

Oil refiner Reliance Industries lost 0.7% to 2,298.70 rupees and Reliance Natural Resources was down 2.5% to 99.75 rupees.

Reliance Communication fell 2.3% to 526.10 rupees.