Tata Motors plans $1.7 billion rights issue

India’s top vehicle maker, Tata Motors, has announced it is to raise 72 billion rupees (US$1.7 billion, £885 million) via three separate rights issues to help fund its purchase of the Jaguar and Land Rover brands from Ford.

Ford has been exploring the possible sales of the two brands since June 2007.

Tata, which is the country’s third largest car manufacturer after Maruti Suzuki and South Korea’s Hyundai Motor, is taking out loans to buy the brands for $2.3 billion and hopes the rights issues will help pay them back.

Commenting on the rising cost of raw materials including steel and oil, Tata’s MD, Ravi Kant, said this is probably the most difficult environment for the auto industry that we have seen.

The company plans to spend 100 billion rupees to increase production and offer a wider number of products.

Among the products it plans to make is the Nano vehicle, costing around $2,500 and targeted at people in developing countries.

Tata has been in discussions with US carmaker Ford since it was chosen as the front-runner to buy the units at the start of 2008. Other bidders included fellow Indian carmaker, Mahindra & Mahindra, and investment firm OneEquity.

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