(AFP) – May 28, 2008

MUMBAI (AFP) — India's top vehicle maker Tata Motors reported a slight fall in annual profit on Wednesday as it announced a capital raising plan to fund its purchase of British luxury icons Jaguar and Land Rover.

The company, part of the steel-to-tea Tata Group conglomerate, reported net profit fell to 21.67 billion rupees (509 million dollars) for the year ending March 2008 from 21.69 billion rupees a year earlier.

The profit decline was due to higher input costs amid soaring global steel prices. Profit was also hit by rising interest rates which hurt domestic demand.

Total income rose 10.4 percent to 359.18 billion rupees for the year as Tata Motors sold 585,649 units for the full year, including exports, the highest ever for the company, up from 580,280 units last year.

The company did not provide fourth-quarter earnings.

Tata Motors, which earlier this year bought Jaguar and Land Rover from ailing US carmaker Ford for 2.3 billion dollars, is set to launch the world's cheapest car at just 100,000 rupees (2,500 dollars) later this year.

The company said it would raise about 72 billion rupees (1.69 billion dollars) through three simultaneous but unlinked rights issues to finance its purchase of Jaguar and Land Rover.

"Though the initial acquisition cost will be financed through bridging loans provided by a syndicate of banks, these banks would be fully repaid through the... capital raising schemes," the company said.

"We're also considering a further 500 million dollar issue of securities in the overseas market," Tata Motors' chief financial officer C. Ramakrishan said.

"These funding proposals will be used mainly to finance the Jaguar-Land Rover acquisition (through a wholly-owned subsidiary of Tata Motors in the UK)," a company statement said.

Company officials said the Jaguar-Land Rover acquisition would be completed by the end of June as scheduled. In March, Tata Motors said it had entered into a definitive agreement with Ford to buy Jaguar and Land Rover.

The company plans to spend 100 billion rupees (2.35 billion dollar) over the next four years to upgrade existing manufacturing plants across the country, managing director Ravi Kant told reporters.

"This would aid the launch of 100 new products and variants in that period," Kant said.

"The launch of new products would help us improve market share and tackle tough market conditions, hit by rising input costs and inflation," he said.

Tata Motors' shares rose 8.15 rupees or 1.3 percent to 634.75 rupees, slightly underperforming the Mumbai stock exchange benchmark 30-share Sensex index which rose 249.78 points or 1.53 percent to 16.525.37.

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