Ajay Bhat Monnet

Acquire and Impair – Case of Tata’s

The impairment of assets to the tune of Rs. 28000 crores or USD 4 billion by Tata Motors in Jaguar, Land Rover Unit manifests aggressive call taken by Tata Motors at the time of acquisition of Jaguar. Impairment of asset is nothing but over capitalized balance sheet and the value of impairment reflects the value of worthless assets. It is hard to believe that a high quality management of Tata would have taken such a poor decision by paying incredibly high price for an asset, which warranted such a deep haircut. Tata management would have employed competent investment bankers for valuations and due diligence but it appears that the aggregate efforts of all the concerned were based on hypothetical assumptions and projections, which led a very competent Tata board to such poor decision.

When we see impairment of assets by a management with moderate reputation, eyebrows are raised about the past decisions and management of financial affairs and such decisions are generally not welcomed b…