BANGALORE, India -- Tata Motors has denied a report that it is exploring options for its UK unit, Jaguar Land Rover, that could include selling a stake in the automaker.
Bloomberg reported that Tata was considering options including a minority stake sale or finding a venture partner that would jointly develop vehicles and lower costs.
"There is no truth to the rumors that Tata Motors is looking to divest its stake in JLR," a Tata Motors spokesperson told Reuters.
Tata is holding early-stage talks with potential advisers, and the deliberations may not lead to any transaction, sources told Bloomberg. They said asked not to be identified because the discussions are private.
Tata would be reluctant to give up control of what was once its crown jewel, and it may prefer to seek fresh equity from investors such as a strategic partner or sovereign wealth fund, some of the people said.
Tata Group's Mumbai-listed automotive arm, Tata Motors, currently owns 100 percent of Jaguar Land Rover.
Jaguar Land Rover’s woes have grown in the past few months. Sales in China have continued to fall, and the company said in January it will cut 10 percent of its workers amid flagging demand and uncertainty around Brexit. Tata Motors wrote down the value of the business by 3.1 billion pounds ($4.1 billion).
JLR posted a loss of about $4 billion in the last quarter. Tata warned that JLR would swing to an operating loss in the year to March versus an earlier projection for breakeven, given weak sales.
Big problems
"The UK stays the most important market for JLR and that market has a lot of problems due to Brexit," Deepesh Rathore, London-based director at Emerging Markets Automotive Advisors. "With so many headwinds, JLR needs massive investments to prepare and ride the next upturn of the market."
JLR said last month it was seeking alternative funding sources as conditions were not right to borrow from the bond market. The company needs to raise $1 billion in 14 months to replace maturing bonds and is also burning cash on an investment program for electric cars.
Tata Motors bought the brands from Ford more than a decade ago for $2.3 billion in its biggest-ever acquisition. The company has considered listing a stake in Jaguar Land Rover in previous years, people familiar with the matter have said.
Moody’s Investors Service, S&P Global Ratings and Fitch Ratings all have a negative credit outlook on Tata Motors for risks related to the UK business.
Land Rover still ranks as the most valuable of the marquee brands owned by Tata Group, which also controls Tetley tea and New York’s luxury Pierre hotel. The automotive marque was worth an estimated $6.2 billion last year, according to Interbrand.
In China, not only did Jaguar Land Rover had problems with the distribution network, it also overestimated the price it could charge for its cars made there, said Aston Business School professor David Bailey. And the company tried to compete in segments that were hard to crack because they were occupied by more powerful players, he said.
"JLR also tried to compete head-on with BMW in every segment, which happened to be an impossible job," the academic said. "BMW is four times as big."
Bloomberg contributed to this report
