Tata Motors is understood to have signed a deal with a consortium of banks, including the country's largest lender State Bank of India, to raise close to $3 billion (Rs 12,000 crore). The funds would be used mainly for acquiring the British car brands Jaguar and Land Rovers, sources said.
The amount will be raised through short-term bridge financing with a duration of one year from Citigroup, Standard Chartered, BNP Paribas, JP Morgan, Tokyo Mitsubishi UFJ and Mizuho Financial Group.
JP Morgan and Citi are the advisors to Tata for the acquisition.
However, Citi, JP Morgan, SBI and Tata Motors declined to comment on the issue.
The Tatas need a little over $2 billion to buy out Jaguar and Land Rover from Ford. "The remaining money will be used for the company's capital expenditure programme," a source said.
The Tatas are raising additional funds given the increasingly difficult credit market condition across the world. “There is a credit crunch globally. And if you are raising over $2 billion for an acquisition, it makes sense for a corporate house to raise more so that the immediate capital expenditure can be taken care of,” said an investment banker.
Earlier this year, US carmaker Ford, which plans to sell the iconic British car brands, Jaguar and Land Rover, selected Tatas as the preferred bidder. The managements of Tata Motors and Ford are in advanced negotiations and a formal deal is expected by the end of this month.