Tata motors plans to raise Rs4000 crore to finance Jaguar, Land Rover deal

12 Mar 2008

Mumbai: Tata Motors plans to raise nearly Rs4,000 crore through the issue of long-term securities to part finance the company's growth plan that includes the acquisition of the UK car brands Jaguar and Land Rover from American car company Ford, and the launch of the world's cheapest car, Tata Nano, in October 2008.

The company is trying to tap international markets for about $3 billion in loans, ahead of the proposed acquisition. The group hopes that the acquisition of Land Rover and Jaguar will improve its global branding and distribution networks and boost its technology.

The Tata Motors board approved the fund raising proposal on Tuesday, through equity-linked instruments in domestic or overseas markets, in one or more portions. The company has major growth plans for expanding its position in the commercial and passenger vehicle businesses, both in the domestic and global markets by improving its product portfolio, expanding its manufacturing facilities in India, and strategic alliances and acquisitions.

Tata Motors share were down 2.21 per cent at Rs659 on BSE on Tuesday, subsequent to the fund raising announcement. "Whilst the organic growth plan requires money over the next 3-4 years, the acquisition opportunities will have to be financed up-front," Tata Motors said in a statement.

Tata Motors plans to borrow from financial institutions to fund the Land Rover-Jaguar deal. The proceeds from the proposed share sale will be utilised to repay the loan, according to sources close to the development.

The Tatas are likely to have to pay over $2 billion for the acquisition of these marquee UK auto brands, which Ford put on the block to shore up its own balance sheet and reduce debt. Tata Motors had started the process of raising nearly $2.5 billion, mostly from the overseas markets, by giving the mandate to leading banks including Citi, JP Morgan Chase, Standard Chartered, BNP Paribas and SBI.