Tata Shareholders Not Thrilled with Proposed Jaguar, Land Rover Purchase
February 21, 2008

A lot of people — investors, specifically — are not thrilled with India’s Tata buying Jaguar and Land Rover from Ford. They insist the company should focus on the $2,500 Tata Nano microcars, not $100,000 Jaguars.

Bloomberg News reported a number of investors, including A.S. Thiyaga Rajan, who manages a $250 million fund, are dumping their Tata stock.

Rajan wouldn't disclose the size of his stake in Tata Motors, which he began accumulating five years ago for his Singapore-based Aquarius Investment Advisors Pte. But he has ditched 99 percent of his Tata shares, he told Bloomberg. “Integrating the acquisition isn't going to be easy at all,”' he told the financial wire service in an interview. “I can't see an iota of fit in this deal.”'

Rajan insists Tata should stick to investing in India, the second fastest–growing major auto market behind China. And it should focus on the $2,500 Nano microcar, not $100,000 Jaguars.

He added investors shouldn't be distracted by enthusiasm in India for a domestic takeover of two UK brands whose roots date to the days of British colonial rule. “Patriotic ebullience doesn't rub off on the shares,” he is quoted as saying to Bloomberg.

Rajan isn't alone in dumping the stock. Tata stock is down 11 percent since Jan. 3, when it was named Ford's preferred bidder. Bloomberg reports holders such as Alliance Bernstein Japan Ltd. and Waddell & Reed Financial Inc. sold their stakes after the overture for UK-based Jaguar and Land Rover was reported in July. Another large shareholder, Blackrock Investment Managers, ditched more than 1 million shares, or 87 percent of its stake, according to a Dec. 10 filing.

Buying Land Rover and Jaguar may cost Tata Motors $1.7 billion, or four times 2007 earnings, and cut fiscal 2009 per-share profit by 42 percent, Merrill Lynch & Co. analyst S. Arun told Bloomberg. Morgan Stanley's Balaji Jayaraman recommends selling the stock and says it may fall 11 percent in 12 months.

The cost of shutting it down if it doesn’t fit could be even more — close to $5 billion, said Gulbir Madan, who manages about $400 million in Indian equities, including Tata Motors shares, at Neptune Capital Management LLC in New York.

Ratan Tata, chairman of parent Tata Group, insists Tata is not overreaching with the purchase of Jaguar and Land Rover.

Tata and Ford are expected to seal the deal for Jaguar and Land Rover by the end of March.

Posted by Michelle Krebs at 7:19 AM under Commentary , Companies , Ford , Personalities | Comments (1) | digg this | Seed Newsvine