Wednesday 12 November 2008

Liquidity crunch to haunt India Inc for next yr: Ratan Tata

Its time to pull up your socks - that seems to be the message sent across by Ratan Tata to the Tata group companies - which makes up for some of the largest companies of corporate India.

Here is a verbatim transcript of Kenan Machado’s comments on CNBC-TV18.

Ratan Tata, Chairman of Tata Sons, said the Tata companies’ foreign operations acquisitions were already facing problems in raising capital or line of credit for operations. He added that the Indian operations of the Tata Group companies already are or may soon face major problems in their access to credit domestically.

Tata Group companies are unable to raise equity capital due to depressed stock market and investor confidence erosion and liquidity will continue to be a major problem, accompanied by depression in consumer demand, Ratan Tata said. He does not expect this state of affair to improve over next 12 months and feels that failure to manage this crisis could result in irretrievable positions.

Tata Sons said that the senior management of Tata group companies have advised them to be sensitive and conscious of difficult financial circumstances and added that the management has asked them to focus on cash flow and conserve expenditure.

Though Ratan Tata did not explicitly name any of the companies - the expectations are that the companies within the group to which this message clearly applies is Tata Motors, Tata Steel and TCS. Tata Motors made the massive Jaguar-Land Rover acquisition and that itself is proving not so good in hindsight. Same is the case with Tata Steel with the Corus acquisition. Corus in fact is cutting down production by nearly 30%.

Tata Steel is now the only steel company in India who is not given any indication of cutting down production though steel demand has massively come down within India. So there tough times ahead especially for those companies which made large acquisitions when the entire bull market was in full flow essentially.

Source: Moneycontrol

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