MUMBAI/SINGAPORE (Reuters) – India’s Tata Motors has agreed to inject “tens of millions” of pounds into Jaguar Land Rover to prevent an immediate cash flow crisis, the Financial Times reported on Monday.

The move by Tata, which bought the luxury carmaker earlier this year for $2.3 billion (1.5 billion pounds) from Ford, comes on top of “hundreds of millions” of working capital it has provided to the British firm, the paper said citing sources close to Tata.

Tata Motors, reached by Reuters in Mumbai, had no comment on the report, but analysts said pumping money into Jaguar Land Rover would strain Tata Motors’ finances.

Car makers around the globe have been hit by a collapse in demand as the economic slowdown spreads and access to credit is choked off by the financial crisis.

The Times newspaper reported on Monday that the prospect of British government assistance to help keep Jaguar Land Rover afloat had helped the company’s owners to secure last-minute funding from the banks.

It quoted senior figures in the British civil service as saying that British Prime Minister Gordon Brown, Chancellor (finance minister) Alastair Darling and Business Secretary Peter Mandelson had agreed that assistance for Jaguar would be necessary to prevent its collapse.

A spokesman for Britain’s Department for Business, Enterprise and Regulatory Reform told Reuters: “The government stands ready to help companies in the current difficult economic circumstances but does not have an open cheque book.

“The government has been in regular contact with Tata over Jaguar.”

Last week Mandelson confirmed that he had held talks with Jaguar Land Rover, which he said was under “particular strain”.

Brown said on Friday the government wanted to help the car industry through the economic downturn but the main responsibility lies with the carmakers’ owners.

Trades unions have called on the government to step in to save an industry employing tens of thousands directly and indirectly through suppliers.

The United States last week announced a $17.4 billion loan package to rescue its stricken auto makers.

The Canadian government put up an additional $3.3 billion in emergency loans a day later.

TATA STRAIN

Analysts said any injection of funds by the top Indian vehicle maker would strain its finances. Tata Motors has already struggled to pay off a $3 billion bridge loan it had taken to fund the Jaguar and Land Rover brands.

“Debt funding is not a good option as it has to service that debt and it already has a high debt to equity ratio,” said India Infoline’s auto analyst Jatin Chawla.

Funding options for the company include leveraging the loans it has given to dealers and buyers and also using the group’s assets to raise finance, analysts said.

Earlier this month Standards & Poor’s lowered the company’s corporate credit rating to BB- from BB and placed it on credit watch with negative implications.

Tata Motors is raising about $540 million through term deposits, which analysts expect would also be used to repay the loan. Last October the company’s founders had to come to the rescue of an $850 million rights equity issue which was inadequately subscribed by shareholders.

However, shares in Tata Motors were trading up 4.7 percent on expectations that falling interest rates could boost demand for its vehicles and also on hopes that the UK government would provide assistance to Jaguar Land Rover.

Tata Motors, which has a market value of about $1.5 billion, has dropped 74 percent so far this year while the main index is down more than half.

(Reporting by Janaki Krishnan and Kazunori Takada; Additional reporting by David Milliken in London; Editing by Ranjit Gangadharan and Lincoln Feast)