Bangkok /New Delhi/Jamshedpur, Mar 27 : Indian auto giant Tata Motors will keep its newly acquired Land Rover and Jaguar brands separate, its managing director said in Bangkok on Thursday.
Tata Motors announced a 2.3 billion dollar deal on Wednesday to buy the Jaguar and Landrover brands from Ford Motor Company, which gives the Indian automaker a product line-up ranging from the world's cheapest car to some of its more expensive ones.
Analysts have expressed concern about how Tata Motors would fit the luxury brands into its stable of sturdy trucks, buses and functional passenger cars, including the planned Nano, which at 2,500 dollars will be the world's cheapest car.
But Kant said the two brands operated in very different classes to its other products and would be treated separately, with each free to determine its own future.
"The two brands will be treated separately. There is no question of any integration of Tata, Jaguar and Land Rover brands. They operate in different segments, consumer segments, and they have their own personalities, and they will be allowed to chart out their own future," he added.
Asked about concerns that the current global credit crunch may make financing the deal tricky, he pointed out that the strategy to buy the two brands was a long-term one he was sure about.
"There may be some pressures in some geographies today but that doesn't mean that that will change our decision because we are taking it for long term and not for two quarters. You have to understand this. And therefore on that basis we feel that we have done a wise thing by going in for these two brands," said Kant.
He added that he expected the purchase to start adding profitability as soon as it was completed, both at the top and bottomline levels.
Tata has announced plans to raise 4 billion dollars, which is expected to help finance the Ford deal and the manufacture of the Nano. But the deal comes at a time when tight credit markets have raised borrowing costs and scuppered deals. Indeed the cost of borrowing has raised 200-300 basis points since last July when Tata's interest in the brands first surfaced.
Ratings agency Standard and Poors placed Tata Motors on review for possible downgrade in January, citing the potential increase in its debt load from the Jaguar and Landrover acquisition.
Meanwhile, jubilation erupted at the Tata Motors plant in Jamshedpur as workers rejoiced over the deal.
Expressing their happiness over the latest acquisition of Tata, they said: "I'm extremely happy that Ratan Tata acquired Corus and now Jaguar. It is an indication that in the coming years, Tata Motors will become number one in the world and it will continue to acquire many more such firms and will definitely become number one in the world," said M.N. Rao, a worker at Tata Motors.
In India, Tata Motors' shares fell as much as 7.3 per cent on Thursday as analysts said its 2.3 billion dollars deal to buy Jaguar and Land Rover would strain the Indian vehicle maker's balance sheet.
At 2:24 p.m. (0854 GMT), shares in Tata Motors, which has a market value of 6.5 billion dollars, were trading 3.5 per cent down at 655.40 rupees in a Mumbai market that was down 0.1 per cent.
In morning trade, the company's shares had fallen to a one-week low of 630 rupees.
According to analysts, Tata Motors' stand alone earnings could decline by as much as 36 per cent in the 2008-09 fiscal year beginning in April due to increased borrowings and potential dilution of equity.