The Hindu Business Line : Tata Motors: Funding new launches

Tata Motors’ announcement to raise up to Rs 4,000 crore is in keeping with its ambitious growth plans both in the domestic and in the international markets.

The company had earlier outlined a capex plan totalling Rs 13,000 crore over FY07-10. This was primarily towards setting up a new plant at Uttarakhand for the mini-truck Ace, developing new platforms for the Indica and the Indigo and for building a new UV (utility vehicle) and a global truck platform.

The company has unveiled a host of new vehicles such as the Indica Dicor, Indigo CS, Sumo Grande and Xenon, a pick-up truck at the Auto Expo, besides the Rs 1-lakh car, Nano.

International spread

Further, the company could also need further funds for its investment in the joint venture with Fiat. Under this joint venture, the company is setting up a new facility to cater to the Fiat Punto and Linea and is also manufacturing engines and transmissions. It has already spent over Rs 400 crore for this purpose.

The company is planning to launch a ‘global’ pick up truck in Turkey, South Africa , Europe and South East Asian markets and a ‘global’ truck in US and Europe in FY09. Besides, the company is also investing in setting up a base in Latin America and Thailand for manufacturing pick-ups.

Further, it will also require a massive Rs 8,000-10,000 crore to fund its acquisition of Jaguar and Land Rover from Ford, if the deal comes through.

Investors need to watch out for a possible expansion in equity that will arise from this fund raising. Further, once the Jaguar Land Rover deal is done, it would also face challenges on the margin front in the near term, given that the brands are loss making.