Tata Motors to raise Rs 4,000cr

Tata Motors, the country's leading bus and truck maker and third-ranked passenger vehicle maker, plans to raise Rs 4,000 crore ($1 billion) by issuing appropriate securities in the foreign and domestic markets.

Its board of directors at a meeting held today gave an in-principle approval for the fund raising plan, to be raised in one or more tranches.

The funds raised will be over and above the Rs 10,000-12,000 crore capital expenditure (capex) plan announced earlier by the company for increasing capacity and launching new products in the Indian and overseas markets.

The Rs 4,000 crore thus raised would only part-finance the company's acquisition plans or alliances in India and abroad, said a company release. The company may use the proceeds to partly fund the acquisition of luxury brands -- Jaguar and Land Rover.

"The company has major growth plans for expanding in the domestic and global markets in both the commercial and passenger vehicle businesses. This may require expenditure on organic growth over the next 3-4 years and the acquisition opportunities will have to be financed upfront," said a Tata Motors release.

The company is also believed to be in the final round of negotiations with Ford Motor Co (FMC) to buy Jaguar and Land Rover (JLR), an announcement in this regard is due before March-end.

Collectively, the deal is expected to set Tata Motors back by $3 billion (Rs 12,000 crore), according to international media reports.

These funds may also be used for immediate expansion of the Nano car project. This project would require quick response from the company as the demand for the car was expected to go through the roof after the bookings open in June, said an analyst.

Currently, acquisition financing has become tough as companies face higher prices for raising high-yield bonds for takeovers, according to the analyst. Tata Motors is involved in advanced talks with leading banks around the world to raise funds to finance the JLR deal.

The loan, expected to be mostly short-term bridge financing, is larger than the expected purchase price, estimated to be around $2 billion. Citigroup and JP Morgan are the advisors to the deal.

The company's stock has taken a beating at the Bombay Stock Exchange ever since it was named as the preferred bidder on January 3 by Ford. The stock has fallen by almost 14 per cent from Rs 763 per share.

The stock closed 2.28 per cent down or Rs 15.35 on the volatile BSE at Rs 658.55 per share as against its previous close of Rs 673.90 per share.