S&P cuts Tata rating over Jaguar Land Rover worries

A leading global ratings agency on Tuesday downgraded the credit rating of India's top vehicle company Tata Motors, citing worries over its struggling British luxury car unit Jaguar Land Rover. Standard & Poor's Ratings Services said it had lowered its long-term corporate credit rating on Tata Motors Ltd to 'B' from 'B+', pushing the company's ratings deeper into "junk debt" territory.

It also gave its long-term corporate credit rating a "negative outlook," meaning a possible further downgrade for Tata Motors, which recently launched the Nano, the world's cheapest car that retails for just over 2,000 dollars. "We lowered the rating on Tata Motors to reflect the challenging operating performance at Jaguar and Land Rover for the year ended March 31, 2009, and our expectations of a similar operating performance in fiscal 2010," said Standard & Poor's credit analyst Suzanne Smith.

"This, along with a high debt level, has placed significant pressure" on Tata Motors' finances," Smith said in a statement. The downgrade came as Britain's Observer newspaper reported that Tata was close to agreeing a financial aid package with the British government for Jaguar Land Rover (JLR) after a year of difficult negotiations.

Tata Motors announced a surprise 58 percent jump in first-quarter net profit to 5.13 billion rupees (105 million dollars) last week, helped by a change in its accounting policy. But the company still has to announce consolidated financial results for the first quarter of the financial year that would include its loss-making JLR subsidiary. The negative credit rating outlook "reflects our view on the uncertainty over when JLR's operating performance will improve, given the weak global auto market conditions," Smith said.

"It also factors in Tata Motors' highly leveraged financial risk profile, given extremely high debt levels," she said. Tata bought motoring icons Jaguar and Land Rover from Ford Motor Co last year for 2.3 billion dollars. Their sales have been hit by the global downturn, which has hurt the market for luxury vehicles. The company's vice-chairman Ravi Kant said in June that Jaguar Land Rover global sales for the 10 months ending March fell by 32 percent to 167,000 vehicles from 246,000 the previous year.

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TATA's ASEAN strategic business hub possibly in Thailand

The TATA Group is actively considering using Thailand as a strategic marketing hub for promoting its products in the ASEAN region, revealed that country's Industry Minister, Chanchai Chairungruang, who is currently on a six-day visit to India. Interacting with media after meeting with Indian businessmen here, Chairungruang said TATA Motors (TATAMOTORS.BO : 369.45 +7.45), one of India's best known automobile manufacturers, is looking to expand its export market in ASEAN countries, and plans included introducing the TATA Motor's truck range, an eco-car and possibly the TATA Nano (the world's most economically priced passenger car).

A TATA Motors, Thailand, representative said talks for the launch of the Nano were still at a very preliminary stage, but acknowledged that the project could form part of the Thailand-India Free Trade Agreement (FTA) expanded negotiations that are to take place later in the year. For TATA Motors to think of Thailand as a future investment base does not come as a surprise, as the country has evolved into the largest vehicle producer in South East Asia since constructing its first automotive plant in 1961.

Today, Thailand's automotive products are exported to 130 countries worldwide. The country is also the world's largest producer of one-ton pick-up trucks, the seventh largest automotive exporter and the 14th largest automotive producer overall. TATA Motors appears interested in bidding for an eco-car project, as the Board of Investment of Thailand (BOI) and the Thai Ministry of Finance is offering the maximum incentives to manufacturers of eco-cars.

Under the new incentives program, the BOI will offer projects with a minimum investment value of five billion Baht (approximately 144 million USD), a corporate income tax holiday of eight years, regardless of location, and duty-free importation of machinery. On its part, the Thai Finance Ministry will allow eco-car manufacturers to pay a reduced excise tax of 17 percent on cars with engines smaller than 1300 cc for petrol-powered cars and 1400 cc for diesel powered cars.

This is significant in that the excise tax currently levied on standard passenger cars in Thailand ranges between 30 to 40 percent, and if reduced for eco-cars, it would be the equivalent of 2000 USD on the car's retail price. The finance ministry is also offering a three-year exemption of import duties on auto parts used to make vehicles E85 ready and which cannot be produced in Thailand.

Cars using E85 will have their excise taxes reduced to 25 to 35 percent depending on the size of the engine. Excise tax on petrol in this category of car will also be reduced from 3.6850 Baht per liter to 2.5795 Baht per liter.

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You can pay Rs 70,000, book a Nano by Feb-end

Tata Motors’ Nano, the small car seen as a symbol of India’s expertise in frugal engineering, is likely to be launched on March 3. Billed as the world’s cheapest, the small car’s first recipients may be celebrities, including political leaders, social workers, sports stars and film stars.

Government officials said the company had chosen March 3 as the launch date because it is the birth anniversary of Tata Group founder, Jamsetji Tata. However, the details had not yet been firmed up.Bookings for the Rs 1 lakh Nano will begin by February end. The booking amount for the world’s cheapest car will be around Rs 70,000.

But, even after paying 70% of the car’s total cost, the wait could be quite long.Sources familiar with development said that all dealers of Tata Motors and branches of the State Bank of India (SBI) will accept bookings simultaneously across the country in the next three weeks. SBI will initially engaged 100 branches and take the number eventually to 1,000.

Tata Motors and SBI have entered into an exclusive arrangement for the Nano car. SBI will not only act as sole lender to buyers but also offer its branches for bookings.As Tata Motors is eyeing initial bookings of over one lakh cars, the company hopes to collect around Rs 700 crore in just a few weeks.

Allotment will be made through a draw and, going by projections even during this recession, those at the top of the draw would have the choice of becoming proud owners of the first Nanos, or getting a premium in the black market.

Nano would be launched in March 2009 with cars rolling out from the Pantnagar plant in Uttranchal. This plant can produce only 3,000 cars per month — just a fraction of the demand.

Things will ease only after the cars roll out of Sanand plant near Ahmedabad which will have an initial capacity of producing 2,50,000 cars per annum. But the Gujarat plant will take at least one year to start production.Nano’s launch had been scheduled for 2008 but plans got derailed when Tatas were forced out of Singur in West Bengal.

When contacted, a spokesperson for Tata Motors said, "We have not announced an official date or any marketing plans so far."Sources in the government, however, said: “The Tatas are planning to give Nano to celebrities initially. Senior Tata officials had discussed this at the Vibrant Gujarat Summit recently.”

Those likely to figure in the list include President Pratibha Patil, Prime Minister Manmohan Singh, Congress President Sonia Gandhi and Opposition Leader LK Advani.The company may also reserve a Nano for Buddhadeb Bhattacharjee, the chief minister of West Bengal, where it was to be made initially. Others likely to get it are sports stars like Sania Mirza, Sachin Tendulkar and Mahendra Singh Dhoni. Still others may be those who endorse Tata brands, like actors Aamir Khan, Ajay Devgan and Kajol.

Narendra Modi, the chief minister of Gujarat, who was instrumental in attracting the Nano plant to Gujarat after it failed to take off in West Bengal owing to political controversy over land acquisition, may also be given the car."This marketing strategy will help the Tatas brand the common man's car as people's car. It will be a car for the masses," sources said.

However, the masses may have to brave a waiting period as Tata Motors dealers will start taking bookings for the car before the Sanand factory reaches full production. The booking amount is likely to be Rs 70,000 a car.

The standard model will be available for Rs 1 lakh and there will two other models priced at Rs 1.24 lakh and Rs 1.34 lakh. Tata Motors had touched an intraday high of Rs 136.75 and an intraday low of Rs 132. At 10:14 am, the share was quoting at Rs 136.30, up Rs 5.20, or 3.97% on the NSE.

The company may roll out Nano on March 3, reports Business Line. It was trading with volumes of 318,474 shares. Yesterday the share closed down 3.21% or Rs 4.35 at Rs 131.10.

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