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Wed, Dec 24, 2008 - Page 10 News List

Tata struggles to salvage acquisitions amid crisis

THE GUARDIAN , NEW DELHI

Tata may have agreed to pump millions into Jaguar Land Rover, but the Indian conglomerate has problems nearer home as it struggles to deal with the world economic downturn.

Reports in India said the group was planning to raise more than 150 billion rupees (US$3 billion) as it tries to cope with the collapse of some of its core businesses and looks for ways to salvage acquisitions such as the US$2.3 billion Ford brands and Corus, the British steelmaker, bought for £6.7 billion (US$10 billion) nearly two years ago.

The US$3 billion is on top of US$2.76 billion it banked last month from the sale of its stake in telecom company Tata Teleservices.

The reports have led to speculation that not all is well in the Tata empire, which started out making textiles but now spans sectors from steel to solar power to tea.

“Until last year the Tata Group was cash-rich, but after borrowing heavily for acquisitions abroad even its flagship companies, such as Tata Steel and Tata Motors, are now under tremendous pressure thanks to the fall in demand for their products,” a Mumbai-based business analyst said. “Tata Motors, for instance, is the country’s largest commercial vehicle manufacturer but is in serious trouble as demand for trucks has come down by almost 60 percent.”

Tata Motors needs to repay by next June a US$3 billion bridge loan that financed the purchase of Jaguar Land Rover and its initial working capital requirement.

It held a US$1 billion rights issue earlier this year and has tried to raise cash through public deposits.

A car analyst with a Mumbai securities firm said: “There’s no doubt Tata Motors is in a tight spot. That’s why any fiscal package from the UK government to bail out Jaguar will go a long way in meeting the urgent working capital requirement.”

Debasis Ray, a Tata Motors spokesman, declined to comment on reports that the company was seeking funds for its domestic operations as well as to invest in Jaguar Land Rover.

New Delhi has unveiled a fiscal package to boost domestic demand, but the Tata Group wants the government to do more. Tata Motors managing director Ravi Kant complained to the Times of India yesterday that the government’s fiscal package is “just too small.”

“In this kind of situation, the government should go for a big-bang approach,” he said, and appealed to banks to pass on the extra liquidity provided by the government. “People who want to buy commercial vehicles are not being able to do so without help.”

Tata Motors’ much-touted Nano “people’s car” is also running well behind schedule.

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