Tata Motors denies JLR listing plans
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Mumbai: Tata Motors Ltd, India’s largest vehicle maker, denied a news report that the company is considering an initial public offering of its UK luxury unit Jaguar Land Rover Automotive Plc.
“It’s untrue. We don’t have any plans of listing JLR,” said a Tata Motors spokesperson.
Late on Monday night, Bloomberg reported Tata Motors is considering an initial public offering of JLR citing people with knowledge of the matter. The report said the company has held preliminary internal discussions over the past few months about the potential listing. It is weighing London and New York as possible listing venues for Jaguar Land Rover, it said.
Shares of Tata Motors rose 3.28% to Rs467.15 on BSE, while the benchmark Sensex declined 0.04% to 31,297.53 points.
Equity analysts tracking the company said speculation about a JLR listing has been doing the rounds for many years and there’s no truth to it. The business is generating enough cash to support future expansion. Moreover, it has been raising funds by issuing bonds from time to time and also has unutilized credit lines from the banks, should the need arise.
JLR, which Tata Motors acquired from Ford Motor Co. in July 2008 for $2.3 billion has been the cash-cow for the Tata group flagship. It accounts for more than 80% of revenue and almost all of profits for the consolidated entity.
A potential listing can help the company reduce debt out of proceeds of JLR listing if it were to happen, but it will be at the cost of dilution of promoter’s equity, said Bharat Gianani, an analyst at Sharekhan. “Why would they want to do so when JLR is generating enough cash?”
JLR does not really need to be listed separately unless they have a very big capex to be met and Tata Motors cannot infuse the same, which doesn’t seem to be the case currently, he added.
JLR on an average, has been investing £2 billion to £3 billion in its business every year. In the year that ended in March 2017 stood at £3.4 billion, while the cash profit after tax stood at £3.22 billion.
Tata Motors consolidated gross debt at in the same year was Rs78,582 crore against Rs69,303 crore a year ago.
“This rumour has been doing the rounds for many years now. I don’t think there’s any truth to it,” said Nitesh Sharma, an analyst at Phillip Capital India Ltd. The listing may help the standalone business which has been burning cash, it will be bad for the stock as people are invested in Tata Motors because of JLR and not because of its domestic business, he said.
So it makes little sense to list JLR separately, he added.