Tata likely to get $570 Million as Nano expects 300,000 bookings
By siliconindia   |   Wednesday, 25 March 2009, 19:30 IST   |    1 Comments
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Mumbai: As Tata Nano car vendors are expecting around 300,000 immediate applications from customers for buying the base model of the car, the company is likely to get Rs 2,850 crore cheap money, according to an estimate by mint daily. The firm has so far spent at least Rs 2,000 crore ($570 million) on the Nano. Tata Motors has fixed the Nano's booking amount at about 80 percent of the purchase price across its three models - a strategy now considered as the most cost-effective way of financing a large part of the project cost, provided the consumer response is overwhelming. The company plans to allot 100,000 cars in the first phase. Those who will not get the car in that phase will have the option of keeping the booking amount with the company and waiting further for delivery. The booking amount for the base model is Rs 95,000. Assuming that all the bookings are for this model, the successful 100,000 applicants who get allotment in the first phase would have deposited Rs 950 crore in April. Deliveries would commence by July and it would be a while before monthly deliveries ramp up to even 3,500. According to three vendors who spoke on condition of anonymity, the Pantnagar factory in Uttarakhand is not expected to reach its peak capacity of 3,500 cars till at least July. Therefore, a large part of the Rs 950 crore that the firm receives will remain with it for a considerable period before deliveries are completed. Assuming that the balance 200,000 applicants retain their bookings, that would result in a cash inflow of another Rs 1,900 crore for Tata Motors. Indeed, this is not free money. Tata Motors will give 8.5 percent interest on any deposit that lies with it for over a year and 8.75 percent for deposits above two years. This is, however, much cheaper than what it had paid for the fixed deposits that it recently raised from retail investors - about 10.5 percent for one year and 11.5 percent for three years. It has raised Rs 1,300 crore from a public issue.

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