Transcript Slide 1

April 28, 2010
Team
Sam Allin, Prakash Hari, Georgina Javor, Federico Ochoa, Gordon Zheng
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India’s largest automobile company
 World’s 4th largest truck, 2nd largest bus manufacturer
 Cars, light to heavy commercial vehicles & engines
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Tata Group
 Interests in steel, autos, IT, communications, power generation
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Financials - 2009
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Gross revenues - $6.04 billion - Growth of 46%
Equity - $1 billion
Sales - 30% growth from 2005 to 2009
Cash flow - $845 million in last 4 years
Global expansion
Acquisition
Joint Venture
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Political
 Historically unstable, but stable and thriving economy since 2002
 President Lula da Silva
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Economic
 GDP - $1.48 trillion ($ 10,514 per capita - PPP adjusted )
 Import Substitution  Export-Oriented Model
 Inflation < 4.2%
 1USD = 1.8 Real; 1 Real = 25 Rupee; as of 2010
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Social
 Population - 198 million
 Uneven wealth distribution - Top 20% has 65% wealth
 Regressive tax system
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Technological
 Major industries : Textiles, chemicals, aircraft & motor vehicles
 Investment in bio-fuel technology, consumes 54% ethanol vs 46% petrol
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Tata Nano
 Cheapest car in the world - India MSRP is $2,500 USD
 Fuel efficiency - 61 mpg / 52 mpg
 Variants: Diesel, electric, hybrid
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Brazil Car Market
 4th Largest producer and consumer of automobiles in the world
 Cheapest new car for the Brazilian market: Fiat Millie USD $11,000
 Export oriented, with 35% import tariff
 1 out of 7 people own a car in Brazil
Fiat Millie
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Joint Venture with Fiat
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Model on the successful joint venture in India
Tata Motors will own the manufacturing plant
Distribute via Fiat’s existing dealership network
Fiat: 25% market share and strong brand in Brazil
Financial Analysis
Selling Price
$3,750
Cost of Manufacturing Plant
$500 million
Profit per Car
$172
Return on Investment
17.15% (At full capacity)
Future access to Latin American Markets
 Mercosur Trade Agreement - Latin America
 Min. 60% indigenous manufacture Traded duty free in the region
Risks
Mitigating Factors
Financial/currency Most expenses are up front; eventually, both revenues and
expenses will be in Reais (ROI risk remains). Central bank
independence.
Suppliers
Source parts from suppliers both in India and Brazil
Joint venture
Relationship with Fiat has been mutually beneficial since 2006
Market/Brand
Fiat’s support together with Tata’s reputation in India
Competition
First mover advantage
Political
Stable political environment over the last 10 years
(democracy, checks and balances)
PROFIT ANALYZIS
Price
SOURCES OF FUNDS
$
3,750
Production
$
2,200
Ethanol increase 10% of production
$
220
Fiat commission
$
188
Total variable costs
$
2,608
Contribution margin
$
1,143
fixed cost per car
$
971
Profit per car
$
172
Expected number of cars to be sold
Total profit
Cash equity from Tata motors
$
250,000,000
Bank financing
$
300,000,000
Total sources of funds
$
550,000,000
Manufacturing plant in Brazil
$
500,000,000
**Other expenses
$
50,000,000
Total uses of funds
$
550,000,000
ROI
42,875,000/250,000,000 =17.15%
USES OF FUNDS
250,000
$ 42,875,000