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09 December 2023

Jaguar deal may mar Tata rating

By Staff Writer



Tata Motors’ credit default swaps hit a record after credit rating agencies warned they are reviewing India’s second-largest car maker after it emerged as front-runner to buy Land Rover and Jaguar brands.

Tata Motors last week emerged as the official front-runner for the two United Kingdom-based luxury vehicle brands after Ford announced it was entering into more “focused” talks with the Indian car manufacturer. The deal is expected to be worth $2 billion (Dh7.3bn).

Credit default swaps on Tata Motors reached 325 basis points on Tuesday, up from 300bps a week earlier, according to Bloomberg data. The company had INR37.7bn (Dh3.5bn) of bonds and loans outstanding, Bloomberg said.

The company’s share price has stumbled since news of the approach first emerged last July, rising about four per cent since then, compared with a rise of more than 36 per cent in the Bombay Stock Exchange Sensitive Index. A deal with Ford would transform Tata Motors – which plans to unveil its $2,500 “people’s car” tomorrow – from an emerging markets specialist into a global producer with the full gamut of products from trucks to small and luxury passenger vehicles.

Chairman Ratan Tata took Tata Motors, then mostly a truck manufacturer, into passenger cars nine years ago, in defiance of market opinion, The Financial Times wrote. The company is the country’s number two car manufacturer.

But analysts question what Tata Motors will bring to the table in terms of turning round Jaguar and expanding the Land Rover franchise. The FT quoted Moody’s senior analyst Elizabeth Allen as saying that Tata Motors has a strong position in low-to-mid-end vehicles in India and some developing markets.

But she said: “The acquisition of the Jaguar and Land Rover brands will expose the company to the luxury product category as well as to broader geographies; these are areas in which Tata Motors lacks experience.”