When Indian automaker Tata purchased Jaguar-Land Rover for $2.5 billion in 2008 from Ford, few could have predicted that today they might be worth $14 billion. A report from Automotive News suggests that’s exactly the case, and says an initial public offering (IPO) could be in Jaguar-Land Rover’s future.
The two British brands have introduced the Jaguar XF and XJ sedans as well as the stunning Range Rover Evoque since the ownership change four years ago. The result of the changes at Jaguar-Land Rover can be seen in Tata's plan to more than double investment in the two companies' product development and capital expenditure over the next 5 years, according to Automotive News. Despite having big future plans that include entering a partnership with Chinese automaker Chery Auto, and a product strategy that specifies 40 new or upgraded models over the next five years, Tata Motors thus far has given no indication an IPO is coming.
The company instead expects to fund Jaguar-Land Rover’s future endeavors through internal cash accruals, according to Tata Motors spokesman Debasis Ray. In an email to Automotive News, Ray said, “However, we will continue to consider opportunities for capital structure management as done in the past.”
Some financial experts consider the conditions right for an IPO, especially with Jaguar-Land Rover’s planned expansion into China expected to cost in the billions over the next five years. Still, others like Juergen Maier, fund manager at Raiffeisen Capital Management, say Tata may prefer to fund its plans through a bond issue, so not to dilute ownership of its largest profit-maker.
“Two years ago, it would have made sense for Tata Motors to have sold a stake in JLR,” Maier told Automotive News. “Today, there is still growth and liquidity is not a problem.”
Whatever financial plans Tata has, if you’ve been hanging on to Jaguar-Land Rover stock, then chances are it might soon be worth more than it was when Ford sold the brands.
Source: Automotive News (Subscription required)