SBI, others to raise $3 bn for Tata Motors
State Bank of India (SBI) led consortium will raise $3-billion loan by April for Tata Motors’ acquisitions abroad, including the $2-billion Jaguar and Land Rover deal. Apart from SBI, the consortium will include leading entities like Citibank, Standard Chartered, BNP Paribas, JP Morgan, Tokyo Mitsubishi UFJ and Mizuho Financial Group.
SBI has emerged as the leading merchant banker in the country over the past two years and has sealed around 40 deals worth about $27 billion in 2007-08 contributing significantly to the bank’s revenues. Financiers in the consortium will normally receive commissions in the range of 0.50-1% of the deal amount, but it may vary according to the period of funding and the amount to be raised.
SBI may approach leading state-owned lenders such as Bank of Baroda and Punjab National Bank which have a strong presence overseas as well as the capacity to raise funds. Though the amount Tata will have to pay Ford Motors has not yet been disclosed, market source estimate it to be around $2 billion. Apart from funding the Jaguar and Land Rover (JLR) deal, Tata Motors is understood to have plans to utilise the excess amount raised to finance its other strategic plans, including picking up stakes in other companies.
Ford’s decision to the sell the JLR has been interpreted as the company’s incompetency to continue as a profit-making entity in recent years. The company reported a loss of $12.7 billion for the fiscal ended December 30, 2006, which was followed by the sale of Ford’s luxury brand, Aston Martin to a UK-based company for an estimated $848 million in March last year.
Tags: Ford, Jaguar and Land Rover, State Bank of India, Tata motors