After dumping UK guarantee terms, Tata Group to raise funds for JLR revival

After rejecting the UK government's onerous terms for underwriting less than half of EIB's €366 million euro loan (See: Tata Motors rejects Jaguar Land Rover loan guarantee terms) for just six months against a loan tenure of three years, the Tata Group is reported to be seeking to fund JLR on its own terms from external sources. 

The Tata Group is reported to have asked its financial adviser, Citigroup, to look for a consortium of banks or investors to underwrite part of the £340 million loan sanctioned by the European Investment Bank last month for making low-emission cars. (See: Tata's JLR receives £340 million from EIB)

As per the terms of the EIB loan, the sanctuioned amount can only be disbursed after it is underwritten by a guarantor.

Since JLR also needs about £500 million in short-term working capital to run its day-to-day operations, the Tata Group may source this money through the debt markets and put up any shortfall, if any by pumping in its own money.

But the financial health of JLR currently is precarious since it has to settle £100 million suppliers bill this month as well as other miscellaneous bills pending for 12 months.

Since it is now looking at external funds, which are expected to come at a high interest cost, JLR may be forced to cut more costs, mainly on investments for its new models and cut more jobs from its 15,000 workforce.