Tata Motors to raise Rs.4,000 crore for expansion and acquisitions
India's leading automobile maker, Tata Motors, which is currently in the final stages of talks for takeover of Jaguar and Land Rover brands from the American car company, Ford Motor, is planning to raise Rs.4,000 crore to part finance its expansion and acquisition activities.
"The Board of Directors of Tata Motors, at its meeting held today, has in principle approved, subject to other approvals as may be required, raising of additional long term resources up to Rs.4,000 crore by issue of appropriate securities in foreign or domestic market," the company said in a statement.
A company spokesperson declined that the move was brought about by the imminent acquisition of Jaguar and Land Rover from Ford Motor saying, "The funds are being raised to part-finance overall funding requirements to meet some of the strategic plans."
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.
"This will be achieved by upgrading and enhancing the company's product portfolio, expanding manufacturing facilities in India and strategic acquisitions or alliances in India and abroad," the company added.
Incurring expenditure for the next 3 to 4 years would be needed by the company for organic growth but the upfront financing for the acquisition needs to be addressed immediately.
The company's growth plan is to prioritize the acquisition of the UK luxury car brands Jaguar and Land Rover from American car company Ford Motor, and also to their world acclaimed, $2,500 'dream car', Nano, in October 2008.
The company is trying to tap international markets for about $3 billion in loans, ahead of the proposed acquisition. They hope that the acquisition of Land Rover and Jaguar will improve its global branding and distribution networks and boost its technology.
The Tatas are likely to pay over $2 billion for the acquisition of the luxury British auto brands, which Ford put on the block to support 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.
The funds raised will be over and above the Rs.10,000-12,000 crore capital expenditure (capex) plan announced earlier by the company.
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