Leading Indian public sector banks State Bank of India, Bank of Baroda and Syndicate Bank are close to committing a part of the $3 billion bridge loan that Tata Motors has to raise to finance the acquisition of Jaguar and Land Rover from Ford.
India's largest automobile maker signed a deal to buy luxury brands Jaguar and Land Rover for $2.3 billion in cash on March 26, the largest acquisition by an Indian company in the automobile business.
According to banking sources, banks like BoB with a large international business are expected to commit between $50 million and $100 million, while banks with a limited presence like Syndicate Bank could take exposure between $10 million and $30 million.
The other banks in the reckoning include State Bank of Mauritius, ING Bank, JP Morgan, and Citibank.
The deal is expected to be closed in a week or two.
A Tata Motors spokesperson declined to comment on the issue.
Banking sources said the average interest rate works out to 135 basis points above the London Interbank Offered Rate (Libor). The tenure of the loan is about 15 months, after which the company is expected to tie up long-term funds. The company had announced that it was looking at a combination of equity funding and term loans.
The Jaguar-Land Rover deal will extend Tata Motors' product portfolio span from a price point of $2,500 to $170,000 and expand its distribution network more than four times to 2,700 outlets in 138 countries.
The Tatas will also have to resuscitate demand after Jaguar sales in the US and Europe dropped 33 per cent in 2007. Ford doesn't disclose financial figures for Jaguar and Land Rover, whose biggest markets are the UK and the US.
The Tatas, however, said that the companies are profitable and have a combined turnover of over $14 billion.
As part of the transaction, Ford will continue to supply Jaguar and Land Rover for differing periods with powertrains, stampings and other vehicle components in addition to a variety of technologies, such as environmental and platform technologies. Ford supplies about 90 per cent of components to Jaguar and Land Rover.
