Tata Motors plans to raise $1 bn for Jaguar-Land Rover takeover

Auto giant Tata Motors, which is revving up for the last lap in its bid to buy Ford Motor Co’s luxury brands...

Auto giant Tata Motors, which is revving up for the last lap in its bid to buy Ford Motor Co’s luxury brands Land Rover and Jaguar — expected to cost around $2.7 billion-3 billion — plans to raise additional long-term funds of up to Rs 4,000 crore ($1 billion). The company said that it has “major growth plans for expanding its position in the domestic and global markets both in the commercial and passenger vehicle business,” and would achieve it by upgrading and enhancing its product portfolio, expanding manufacturing facilities and through strategic acquisitions and alliances within the country and abroad.

While this may involve expenditure for organic growth over the next three-four years, “the acquisition opportunities will have to be financed upfront”, the company said in a statement. The funds will be raised through securities issued in the foreign and/ or domestic market and would be partly used in financing some of the strategic plans, it said.

Tata Motors shares were down 2.28 per cent to Rs 658.55 on the Bombay Stock Exchange (BSE) today. The company’s shares have fallen 12 per cent since Ford’s announcement of Tata Motors as the preferred bidder on January 3.

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Analysts see Tata Motors’ move to buy the Ford brands as positive, but arranging loans may be quite a problem, they say. PricewaterhouseCoopers partner Abdul Majeed, who leads the auto practice, explained “Since the liquidity position in the global market is tight, money will not come in cheap.” He added that the company would strike a deal with banks ready to borrow at competitive interest rates, considering the cash crunch in the market and leveraged balance sheet of Tatas after the Corus deal.

Earlier this year, Ford had named Tata Motors as the frontrunner to buy its luxury UK brands, and talks are going on. “There are no major roadblocks but these are complex and detailed discussions. There is still some work before any agreement can be announced,” said a Ford spokesperson, adding that all the parties are committed to ensuring that the final agreement is robust, rigorous and expeditious.

“We have consistently stated that we anticipate an agreement early this year, and we are still on track to achieve this goal,” he added. This deal will further Tata Motors’ presence overseas after its successful purchase of Corus Group Plc for $13 billion last year, the biggest ever by an Indian conglomerate.

According to reports, the company is looking at raising money from banks including Citigroup Inc, JPMorgan Chase & Co, BNP Paribas SA, Standard Chartered Plc and the State Bank of India Ltd. In 2006-07, Tata Motor’s revenues stood at Rs 32,426 crore ($7.2 billion).

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