Mumbai: Tata Motors Ltd, the owner of luxury car brands Jaguar Land Rover, is building a war chest that will allow it to expand its business and acquire rivals.
Cash and equivalents at the Indian maker of the Tiago and Hexa cars surged 87% to Rs39,760 crore ($6.2 billion) as of 30 June from a year earlier, according to data compiled by Bloomberg. Reliance Industries Ltd, India’s biggest company by market value, had Rs72,100 crore in cash in the period. The most among the nation’s companies.
Tata Motors, which has reported three straight quarters of sales declines, gets 78% of its revenue from the luxury brands and plans to use its record cash pile to add new products, technology and manufacturing capacity, according to C. Ramakrishnan, group chief financial officer at Tata Motors. Jaguar Land Rover has said it will spend about £4 billion ($5.3 billion) to expand in the next three years.
“JLR also may have capital expenditure opportunities going forward while there are emerging areas like electric vehicles and autonomous cars where Tata may decide to dip their feet,” said Deepesh Rathore, director at Emerging Markets Automotive Advisors in London.
Brokerages including Morgan Stanley and Ambit Capital cut their recommendations for Tata Motors after the company missed analyst’s estimates for the three months ended 30 June. A one-time gain helped Jaguar Land Rover post a 49% jump in profit before tax of £595 million ($806 million). The profit includes a one-time credit of £437 million related to the company’s pension plans. Net income at Tata Motors climbed 42% to Rs3,180 crore.
“JLR operates in more than 170 countries with varying degrees of economic volatility and cyclicality and hence there is always requirement to maintain sufficient liquidity to take care of fluctuating working capital movements in a year, and any unexpected events,” Ramakrishnan said. Bloomberg