BANGKOK (Reuters) - India's Tata Motors Ltd said on Thursday it was confident its $2.3 billion deal to buy Jaguar and Land Rover from Ford would improve its balance sheet in the long term.
By Arada Therdthammakun
BANGKOK (Reuters) - India's Tata Motors Ltd said on Thursday it was confident its $2.3 billion deal to buy Jaguar and Land Rover from Ford would improve its balance sheet in the long term.
"We have gone through the profit and loss and balance sheet. We think we are pretty confident that they will add positively to our consolidated balance sheet," managing director Ravi Kant told Reuters on the sidelines of Bangkok's auto show.
"We may have some pressure. That doesn't mean we have to change position, because we have a long-term plan," he said without elaborating.
!ADVERTISEMENT!The acquisition and other purchase would boost Tata Motors' sales outside India to exceed those inside India, Kant later told a news conference after the launch of its new Xenon pick-up truck.
"Shortly, the sales outside will be more than the sales of inside businesses because the turnover of Jaguar and Land Rover is more than the turnover of Tata Motors," Kant said.
Tata announced the deal to buy Jaguar and Land Rover, which will give it a line-up ranging from the world's cheapest car to some of its more expensive, on Wednesday.
Tata Motors, which has a market value of $6.5 billion, is a member of Tata Group, one of the leaders of corporate India's offshore expansion. Tata Motors bought the commercial vehicle unit of South Korea's Daewoo Group for $102 million in 2004.
Tata Group comprises 98 companies in sectors including steel, salt, software, energy, cars and trucks, communication and chemicals. It has made a number of overseas takeovers in recent years.
The managements of Jaguar and Land Rover had put forward five-year business plans which included the launch of new models of luxury cars, Kant said.
"I think they both have strong product plans and they both have exciting times waiting for new product lines, and the companies should do quite well," he said.
Kant said he believed strongly the deal was "a good price" and the timing was right as Ford wanted to sell the firms.
Ford is selling Jaguar and Land Rover to focus on turning around its money-losing operations in North America.
Ford says it is on track to return to profitability in 2009, although its restructuring has been complicated by a U.S. economy at risk of tipping into recession and its own more limited success in buying out high-wage union workers, analysts said.
Analysts have also expressed concern about how Tata Motors would fund the deal and how it would fit the luxury brands into its stable of trucks, buses and cars, including the Nano, set to be the world's cheapest car at about $2,500 when it goes on sale later this year.
Tata has announced plans to raise $4 billion, expected to help finance the Ford deal and the manufacture of the Nano, which it unveiled in January.
"We are raising bridge loans for the acquisition of Jaguar and Land Rover. This is only for a certain specific period. During this period, we would come to some long-term arrangements, which will consist of loans and some possible equity," Kant said.
"I think in the next six to eight months, the picture will become much clearer," Kant said.
Kant said he was worried about a possible downgrade by ratings agencies but hoped it would be positive in longer term.
"Certainly, we are concerned with that. But I think they have to understand over philosophy that we are not taking this just for the next two or three quarters," he said.
"We take this for the next 20 to 30 years. So we have to see the value of this transfer for the very long term, rather than a short period," he said.
Rating agencies Moody's Investors Service and Standard & Poor's placed Tata Motors on review for a possible downgrade in early January, when it was named the front-runner for the Ford brands, citing funding and integration challenges.
(Writing by Khettiya Jittapong, Editing by Michael Battye)
