Tata Motors Ltd is considering several strategic options for subsidiary Jaguar Land Rover, including a potential divestment of its stake in the luxury vehicle manufacturer. The automotive major is exploring options ranging from minority stake sale to forming a joint venture for future development of vehicles, according to a Bloomberg report. The company is holding initial discussions with potential advisors and there is no surety of the deliberations leading to a deal yet.
The British luxury carmaker has been struggling for a while now due to a slowdown in China and a shift in consumer preference away from diesel and combustion engines. JLR has also been negatively impacted by concerns over a disruptive Brexit, which has led some companies to shift manufacturing to other countries. Impacted by the headwinds at JLR, Tata Motors had reported the biggest quarterly loss in the history of corporate India last month. The automaker reported a consolidated loss of around Rs 270 billion in Oct-Dec, primarily due to a one-time exceptional non-cash charge for asset impairment of $3.1 billion at JLR.
"There is no truth to the rumours that Tata Motors is looking to divest its stake in JLR, and we would not like to comment further on any market speculation," Tata Group told the media agency. The company is not in favour of relinquishing control of the luxury brands and would prefer equity infusion by strategic partners or sovereign wealth funds instead.
Tata Motors bought the brands from Ford Motor Co more than a decade ago for $2.3 billion at a time when the Tata Group was enamoured with foreign acquisitions. Group company Tata Steel had bought European steelmaker Corus for 6.2 billion pounds just a year earlier in 2007. Tata Motors has also considered listing a stake in JLR in previous years. Land Rover remains the most valuable brand in the Tata stable, which also owns Tetley tea and New York's luxury Pierre hotel. According to Interbrand, the automotive brand was worth an estimated $6.2 billion last year.
The problems of JLR have accentuated in the last few months due to a continued fall in China sales. The company has announced a 10 percent cut in workforce amid slowing demand and uncertainty around Brexit. "With so many headwinds, JLR needs massive investments to prepare and ride the next upturn of the market," Deepesh Rathore, London-based director at Emerging Markets Automotive Advisors told Bloomberg.