Tata investors cold on firm's pursuit of Jaguar

Tata Motors Ltd's pursuit of Ford Motor Co's Jaguar and Land Rover luxury units spurred A.S. Thiyaga Rajan to sell 99 percent of his shares in India's biggest truckmaker. He isn't alone in dumping the stock.

The Mumbai-based company is down 11 percent since Jan 3, when it was named Ford's preferred bidder. 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.

Investors are complaining that Tata Motors may not be able to spend enough in India, the second-fastest-growing major auto market behind China. The company should focus on the $2,500 Nano microcar, not $100,000 Jaguars, said Rajan, who manages $250 million at Singapore-based Aquarius Investment Advisors Pte.

"Integrating the acquisition isn't going to be easy at all," Rajan said. "I can't see an iota of fit in this deal." He wouldn't disclose the size of his stake in Tata Motors, which he began accumulating five years ago.

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 estimates. Morgan Stanley's Balaji Jayaraman recommends selling the stock and says it may fall 11 percent in 12 months.

Tata Motors and Ford, the world's third-largest automaker, are in final talks on a deal to give the Indian company access to advanced engines and powertrains and control of two of the world's best-known luxury brands after only 10 years of making cars.

"We are very satisfied with the progress of the discussions," Tata Motors spokesman Debasis Ray said, declining further comment.

While 18 analysts including Arun in a Bloomberg survey call Tata Motors a buy, the shares fell 18 percent in the 12 months ended yesterday while India's Sensex index rose 45 percent.

Agencies

(China Daily 02/22/2008 page16)