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Land Rover, Jaguar bid fits into Tata strategy

The group's bid to buy premium vehicle brands may bolster Tata Motors' image as a global firm, helping it go upscale, reports Ravi Krishnan.

autos Updated: Nov 08, 2007 00:08 IST
Ravi Krishnan

The Tata group's bid to buy premium vehicle brands such as Land Rover and Jaguar may bolster Tata Motors' image as a global company and help it go upscale, in much the same way that previous acquisitions such as Tetley Tea Ltd and Corus Group Plc. did for Tata Tea Ltd and Tata Steel Ltd, respectively.

Ratan Tata, the 71-year-old chairman of Tata Sons Ltd, the holding company of the group, had said in an August interview with a television channel that Tata Motors Ltd, which is India's largest auto maker by revenues, was interested in acquiring the brands from Ford Motor Co., to increase its global reach and scale. He didn't say for how much.

According to a recent report in The Times (London), Tata Motors is one of the three bidders shortlisted by Ford and has been invited to meet union leaders on 20 November.

Both Land Rover and Jaguar have the one thing Tata's vehicles can hardly boast of-a premium tag. And that might be the one reason Tata is willing to put an all-out bid even though the units are loss-making, say analysts.

The cheapest Land Rover retails at the equivalent of Rs15.5 lakh in the UK, where it's made. On the other hand, Tata Motors has been in the news mostly for developing the world's cheapest car, which it plans to sell for Rs1 lakh next year.

"If one wants a brand, which is recognised as one of the top brands in a space, one has to play in the premium end of the market," said Bharti Gupta Ramola, head (financial advisory services) at PricewaterhouseCoopers. "Mergers and acquisitions is perhaps the only quick way to build a brand. To do from scratch requires a lot of time and investment," she added.

Strategic marketing experts say it's about taking the company to a different market segment. Says Harish Bijoor, who runs consultancy firm Harish Bijoor Consults: "The Tata strategy is essentially a top-down strategy. You can acquire the image of a high quality, manufacturing facilities of high quality...; you don't acquire liabilities, but brand assets."

This strategy is not new to the Tata group. In 2000, it bought the loss-making UK-based Tetley Tea-its first major global acquisition-which was several times its size, but more upmarket, making Tata Tea the world's No. 2 branded tea maker. The group's last major acquisition was Corus Group, a maker of high-grade steel, again, larger than Tata Steel. That cost a whopping $12 billion (Rs 50,400 crore in January).

In 2005, the Tata group's Indian Hotels (the Taj hotels brand in India) agreed to operate and manage The Pierre hotel at New York's Fifth Avenue, where diners at the fashionable Café Pierre have to wear a dinner jacket for evening meals. Indian Hotels operates five-star hotels in India, but the Pierre is synonymous with top-line luxury and operated as a Four Seasons property before it came to the Tata group.

Overall, the Tata group has spent around $15.5 billion in acquiring foreign companies.

If the group does acquire the Land Rover-Jaguar portfolio, it will likely be the second most expensive buy for the group after Corus. Various newspaper reports, which couldn't be independently verified by Mint, said the deal was valued between $1.5 billion and $2 billion.

xLand Rover, Jaguar bid fits into Tata strategy

Ravi Krishnan

New Delhi, November 7

The Tata group's bid to buy premium vehicle brands such as Land Rover and Jaguar may bolster Tata Motors' image as a global company and help it go upscale, in much the same way that previous acquisitions such as Tetley Tea Ltd and Corus Group Plc. did for Tata Tea Ltd and Tata Steel Ltd, respectively.

Ratan Tata, the 71-year-old chairman of Tata Sons Ltd, the holding company of the group, had said in an August interview with a television channel that Tata Motors Ltd, which is India's largest auto maker by revenues, was interested in acquiring the brands from Ford Motor Co., to increase its global reach and scale. He didn't say for how much.

According to a recent report in The Times (London), Tata Motors is one of the three bidders shortlisted by Ford and has been invited to meet union leaders on 20 November.

Both Land Rover and Jaguar have the one thing Tata's vehicles can hardly boast of-a premium tag. And that might be the one reason Tata is willing to put an all-out bid even though the units are loss-making, say analysts.

The cheapest Land Rover retails at the equivalent of Rs15.5 lakh in the UK, where it's made. On the other hand, Tata Motors has been in the news mostly for developing the world's cheapest car, which it plans to sell for Rs1 lakh next year.

"If one wants a brand, which is recognised as one of the top brands in a space, one has to play in the premium end of the market," said Bharti Gupta Ramola, head (financial advisory services) at PricewaterhouseCoopers. "Mergers and acquisitions is perhaps the only quick way to build a brand. To do from scratch requires a lot of time and investment," she added.

Strategic marketing experts say it's about taking the company to a different market segment. Says Harish Bijoor, who runs consultancy firm Harish Bijoor Consults: "The Tata strategy is essentially a top-down strategy. You can acquire the image of a high quality, manufacturing facilities of high quality...; you don't acquire liabilities, but brand assets."

This strategy is not new to the Tata group. In 2000, it bought the loss-making UK-based Tetley Tea-its first major global acquisition-which was several times its size, but more upmarket, making Tata Tea the world's No. 2 branded tea maker. The group's last major acquisition was Corus Group, a maker of high-grade steel, again, larger than Tata Steel. That cost a whopping $12 billion (Rs 50,400 crore in January).

In 2005, the Tata group's Indian Hotels (the Taj hotels brand in India) agreed to operate and manage The Pierre hotel at New York's Fifth Avenue, where diners at the fashionable Café Pierre have to wear a dinner jacket for evening meals. Indian Hotels operates five-star hotels in India, but the Pierre is synonymous with top-line luxury and operated as a Four Seasons property before it came to the Tata group.

Overall, the Tata group has spent around $15.5 billion in acquiring foreign companies.

If the group does acquire the Land Rover-Jaguar portfolio, it will likely be the second most expensive buy for the group after Corus. Various newspaper reports, which couldn't be independently verified by Mint, said the deal was valued between $1.5 billion and $2 billion.