Tata Motors and the Rumble in Singur

India's Tata Motors (TTM) is still slugging it out in Singur, but with the debut for its Nano looming, it could pull out any day now.

Tata Motors was planning to construct its Nano vehicle, billed as "the world's cheapest car", at a factory in Singur, but the company has been beset with protests that kept workers locked in its factory for days and blocked major highways to and from the city all because of something that has more to do with the West Bengal government than it does Tata Motors.

The state of West Bengal declared the Indian version of imminent domain on the land it sold to Tata for its Singur factory. And one political party has used the complaints of a few farmers who were unhappy with the price they received for their land, which may not have even been legally theirs (property rights are somewhat vague and amorphous in West Bengal), to stir up a four-year-long controversy.

Tata managed to withstand years of vandalism, violence and bad-for-business press, but the Singur factory must begin production within the next few weeks to meet the company's deadline for the Nano debut. And it doesn't look like that's going to happen.

Tata has already threatened to move its business elsewhere, perhaps expanding one of its four existing factory complexes in other parts of India. And the Karnataka state government in southern India has offered new land that comes without the threats of angry farmers attached. But the move and selection of an alternative site may have been nothing but a threat for West Bengal at this point.

How long will Tata hold out in West Bengal? No one is sure. The company can produce a small amount of Nanos from factories in Uttarakhand (in northern India) or Pune, but it will need a new facility if it wants to roll out 250,000 cars in the next year as planned.

In the meantime, the company is setting up a $914 million new rights offer for shareholders, and its stock has lost half its value in the last five months. Tata must do something, and soon, to bring back investor confidence.

Comments

[nbkdk6q:]

Well, the way I see it, there are many local goverments that are trying to get Tata to relocate to their regions, thereby boosting the local economy and producing much needed jobs. It could be concievable that there might be an informal 'bidding-war' between these states to win over Tata, which might include reduced pricing for the land, or maybe in come cases (depending on how that tax system works), possible tax deductions, etc.

I think that this company is a great company, has an excellent repuation, and is a wonderul corporate citizen. These near-term set backs may cost the company some money upfront ($350 MM), but I wouldn't be surprised to see if some local goverments seeking to make Tata a home wouldn't somehow help out with that bill.

2008 Sep 25 08:17 AM

[andyn:]

The Tata group have been doing business very successfully in India for the past 100 years and trust me, they know how to get the political goodies from another state for the Nano plant. They have other plants that can produce Nano.
Once the nano starts rolling out from Pune or Pantnagar plant, all of this talk will subside. Also, the winter is the festival/wedding season and generally Indians spend a lot now. I wont be surprised if TTM starts climbing to the mid teens by year end.
Buy Jan 09 $10 calls and sit back for now.

2008 Sep 25 08:53 AM

[phxcrane:]

How can I find out more about Tata motors Financials?
Thanks

2008 Sep 25 10:06 AM

[phxcrane:]

How can I find out more about Tata motors Financials?

Thanks

2008 Sep 25 10:06 AM

[stockezy:]

I would like to add another perspective to this discussion and draw attention to the plight of the satellite industry owners who have invested a good amount of money for the Nano. Early unconfirmed reports suggests that the auto parts supply industry which was set up around Singur will cause a loss of $40-50 million. This does not include loss for Tata. These industry owners will be put on the back foot if Tata decides to move out of West Bengal and trigger a feedback effect to worsen the economy of India. I think intervention from Central Government is key to resolve this crisis. And there should be effort to keep Tata's in WB.

2008 Sep 25 05:52 PM

[WillG:]

The update was that Tata was leaving Singur for Sanand in Gujarat, and I say good for them!

The local politicians were not interested in the well-being of their constituents, but rather their own power. Even the communists wanted Tata to stay, but the local ruling party only wanted agitation.

I read a great article titled "Tata Says 'Tata' to Singur" at economicefficiency.blo...

2008 Oct 16 02:49 PM