Mega mania over Nano: Tata raking in interest-free cash

After selling forms like hot cakes, Tata Motors is now geared up to book as many passengers for Nano which will help it to tide over the credit crunch caused by the Jaguar-Land Rover acquisition.
Tata Motors started bookings for the small car on Thursday which will continue till April 25. The automobile major has signed deals with 18 banks and financial institutions offering loans for the car. A customer willing to book a car will have the option to make a payment between Rs 95,000 to Rs 1,40,000 depending on the car's model or take a loan from one of the financial institutions. It is not guaranteed that every one booking the car will get delivery in the first phase of booking it as deliveries will be based on a lottery.
If the company gets bookings for two lakh cars from self-financed applicants, it will be able to garner over Rs 2,300 crore as booking amount. This is interest-free for almost a year. In the first phase, one lakh lucky applicants will get delivery of the car and they will be sold the car at the price as declared during the time of launch. Those not selected through the lottery will have to pay the prevailing market price at the time of delivery.
However, the applicants not taking a bank loan (self-financing the booking amount) and not getting the car in the first phase will not only have their money blocked for almost a year, they will also not be paid any interest during the waiting period. Those taking a loan will have to foot the interest charged by the financial institutions without being able to enjoy the Nano ride till their names are announced in the second or the third phase. It is during this interest-free period that Tata Motors will have access to the moneys and will be in a position to use it as they feel suitable. It is improbable that more than one lakh will be delivered before March 2010 so the company will have access to the interest-free cash till then. "This year we will produce 50,000 cars from the Pantnagar facility and, as the Sanand facility comes onstream by the end of this year, we will be able to produce 2.5 lakh cars which can be ramped up to half a million per year," the company's managing director Ravi Kant had said at the car's launch.
The Nano project had to be shifted from Singur to Sanand after vehement protests by the Trinamool Congress demanding the company return to farmers the land on which the project was to start. The company spent around Rs 2,000 crore on the Nano project. Within 60 days of closure of bookings on April 25, Tata Motors will process and announce the allotment of 1,00,000 cars in the first phase of deliveries through a computerised random selection procedure. The sale of application forms for the Nano started on April 1 and the response has been "very encouraging", the company said in a statement.