The Tatas' big deal

By the time you read this, the Tatas’ Rs 1-lakh car and to a lesser extent the new Indica will be the talk of the town. But at the other end of the spectrum, there are also the premium auto brands, Jaguar and Land Rover, which Tata Motors looks set to acquire from Ford. As a company spokes-person puts it: “We hope both parties can reach an agreement in the forthcoming weeks, though these are complex discussions and there is still much work that needs to be done. We are…very positive about the prospects of this business.”

Unfortunately not every one is as positive about the prospects of the Tatas acquiring these iconic brands. And it’s not just the dealers of Jaguar in the US who are unhappy about this prospect. A section of analysts—particularly the rating houses—would rather the transaction falls through. ICRA, for instance, has placed the company’s ratings on negative watch.

Another credit rating agency Moody’s too didn’t rule out a cut in ratings if the sale went through. The reasons for this caution? Tata would have to take on a sizeable wage bill, as well as dollops of debt, to see the acquisition through. Integration too, feel the analysts, would be a challenge, as a visibly low-cost manufacturer hooks up with high-end auto producers.

Of course, in the long term the buyouts could be a perfect fit for Tata, whose product range could straddle the entire price spectrum. But it’s the integration in the nearer term that could make or break this marriage.