A day before Tata Motors unveils its consolidated results with Jaguar Land Rover (JLR), the company said on Thursday that it obtained a ?340-million loan from the European Investment Bank (EIB) for JLR.
The facility is an eight-year amortising loan and is structured with guarantee support from banks, with Credit Suisse working in the lead with JLR and Tata Motors in arranging the structure. Other guarantors include State Bank of India, Bank of India, Bank of Baroda, Standard Chartered Bank, Deutsche Bank and JP Morgan. Tata Motors had been scouting for guarantors for the EIB loan, following a series of failed talks with the UK government.
The loan is granted under the European Clean Transport Facility and will be used in the development of micro and full hybrid drive trains and research into more energy efficient car bodies for the premium car segment by JLR.
Ravi Kant, vice-chairman, Tata Motors, said, ?This (loan) will support the progress of a turnaround in JLR?s business in challenging market conditions, alongside cost cutting measures, increase of volumes and improved margins strategy currently being implemented by JLR. We view JLR as a key part of Tata Motors and we feel confident about its outlook for the future.?
The EIB loan completes the last major element of the funding plan for JLR. In 2009, Tata Motors secured over ?500 million for JLR, including facilities from State Bank, Standard Chartered Bank, Bank of Baroda, ABC International Bank, GE Capital, and Burdale Financial, a subsidiary of the Bank of Ireland.
Further, the company also managed to complete the refinancing of $3 billion bridge loan in October last year that it took to acquire JLR in June 2008. In the September 2009 quarter, JLR posted profits of ?41 million or Rs 313 crore against a loss, before tax, of ?62 million or Rs 496 crore for the June 2009 quarter. That was after cost-cuts and dealer volume growth of 23% (around 11,800 cars) over the three months to September 2008. Between April 2009 and January, JLR global sales stood at 153,247 units, a fall of 20%.
Simon Brooks, EIB vice-president for lending operations in the UK, said, ?The bank is pleased to be able to work closely with Tata Motors and JLR to make a lasting contribution to automotive research that will enable the production of more environmentally-friendly and energy-efficient vehicles at a time of significant challenges for the European car industry.?
Commenting on the overall financing efforts being made by Tata Motors, C Ramakrishnan, chief financial officer, Tata Motors, said, ?We have taken significant steps to meet our financing requirements and strengthen our balance sheet over a short timeframe in challenging and adverse market conditions. We are thankful to have received the support of Tata Sons, all investors and relationship banks. The business performance of our Indian and international operations have improved significantly and we feel comfortably positioned for the future.?