By Raja Rajeshwari, CNBC-TV18

Jaguar and Land Rover will be prestige boosters for Tata Motors without any doubt. But what else does it offer to Tata Motors and will it be a stretch financially?

The overhang on the stock has been seen over the past few months. The deal was out on June 11 when Ford first came and said that they are putting Jaguar and Land Rover (JLR) on the block. It was trading at around Rs 651 and it rallied to Rs 700 on January 3, when Ford came and said that they are expecting Tata to be the preferred bidder. From then onwards, it has drifted slowly downwards.

There are a lot of questions on how financially viable is it going to be for the company because the deal is expected to be completed between USD 2-2.5 billion. So, one has to add the amount at which the deal is concluded at plus the money they have pumped into their pension liability, which is expected to be around USD 300 million.

If we are looking at a USD 2 or 2.5 billion deal, then the financing methodology will be known in the next few days. Ideally, most people are running with USD 1 billion of debt and USD 1 billion of equity. The equity of USD 1 billion alone would be a 15-16% dilution. If you are looking at USD 1 billion of debt raising at 7-8% rate, that would knock a little over Rs 300 crore from the profits every year.

That would again be a 15% cut off from profit estimates that most people have made. That will be 30% dilution knocking off which we are looking at in terms of debt plus equity. So, depending upon how analysts have taken their calculations, we are expecting an EPS of FY09 and FY010 to take a knock between 15-50%. The main crux is going to be how the structuring of this deal is going to be.

Of course, in the short-term, they are likely to make an SPV like what they have done with Tata-Corus. They could make an SPV, raise a bridge loan over there and go ahead raising the long-term debt and taking the equity dilution, whether it is going to be rights or a preferential stake.

This would be a very good time as the Tata Sons holding is very low in Tata Motors. All of these things will happen in the next 6-8 months.