Tata Motors’ talks with the UK government for guarantee of £340 million loan sanctioned

RELATED ARTICLES Tata Motors hikes prices by up to Rs 12,000 JLR plans manufacturing JV with China's Chery: Report Import duty cut to hinder industry growth: Tata Motors Tata Motors sales up 16% in January High Ground buys 15% stake in UK studio Rain Post

by European Investment Bank (EIB) for Jaguar Land Rover (JLR) seem to have failed.

The domestic automobile giant now plans to secure guarantees from designated commercial banks to be able to draw down on the loan to fund its research and development plans.

“Both the parties — Tata Motors and the UK government — have disengaged the talks for the guarantee of £340 million loan sanctioned by EIB to JLR,” said Tata Motors, head- corporate communications, Debasis Ray.

“With the positive trend in the external environment in financial markets and improvement in general liquidity, the arrangements for funds are expected to be concluded without necessitating gua-rantees from the UK government, for which discussions had been ongoing for some time,” Tata Motors said in a statement on Tuesday.

Shares of Tata Motors on Tuesday surged nearly 7 per cent on the Bombay Stock Exchange. The stock closed at Rs 428.25, up 6.81 per cent over the previous close.

In the past, Tata Motors vice chairman Ravi Kant has said that the company had an option to seek the guarantees from designated commercial banks instead of the British government.

The UK government had been asking for a 15 per cent upfront guarantee commission from Tata Motors and attached conditions such as .the right to veto management decisions. It also wanted the right to replace JLR’s chairman and the right to appoint a director on the board, an assurance from JLR that it would not axe any of its 14,500 employees in the UK, and commit the Tatas to infuse another £300 million in the company before it guaranteed any loans.

Nomura Securities analysts in a recent research report said JLR may continue to ‘destroy value’ for Tata Motor's shareholders, either in the form of significant debt raising at a standalone level or through equity issue.

Tata Motors has so far infused $1.4 billion into JLR following the latter’s failure to raise $500 million in working capital on its own books and also to fund the increased requirement on account of falling sales.

The company sold 1,20,000 Land Rovers in the 10 months ended March 31 compared with 1,98,000 a year earlier and Jaguar sales stood at 47,000 in the same period, compared with 48,800 in 2007-08.