Tata Motors boosts cash hoard by 87% for acquisitions, business expansion

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 per cent to 397.6 billion rupees ($6.2 billion) as of June 30 from a year earlier, according to data compiled by Bloomberg. Reliance Industries Ltd., India’s biggest company by market value, had 721 billion rupees 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 per cent 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 pounds ($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 June 30. A one-time gain helped Jaguar Land Rover post a 49 per cent jump in profit before tax of 595 million pounds ($806 million). The profit includes a one-time credit of 437 million pounds related to the company’s pension plans. Net income at Tata Motors climbed 42 per cent to 31.8 billion rupees.

“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.

Tata Motors shares, which have declined 14 per cent this year, dropped 0.9 per cent to 408.15 rupees at 12:08 p.m. in Mumbai.

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