UPDATE 2-India Tata Motors to raise $935 mln in rights issues

(Adds quotes from news conference, share price close)

By Narayanan Somasundaram

MUMBAI, Sept 2 (Reuters) - Tata Motors Ltd (TAMO.BO), India's top vehicle maker, said on Tuesday it would raise 41.5 billion rupees ($935 million) through two rights issues that are expected to open around the end of September.

Tata Motors (TTM.N) said the proceeds would be used to make an early repayment on some of the short-term funding of its $2.3 billion acquisition of Jaguar and Land Rover from Ford Motor Co (F.N). The $3 billion bridge loan expires in June 2009.

The company, which plans to launch the Nano, billed as the world's cheapest car, around October, also said it planned to go ahead with previously announced plans to raise $500-600 million overseas by selling equity or equity-related instruments.

The rights issues would result in equity dilution of about 33 percent, N.A. Soonawala, director of Tata Motors and vice-chairman of holding firm Tata Sons, said at a news conference.

The company said it would offer one ordinary share at 340 rupees for every six held to raise 21.9 billion rupees.

It also said it would offer one 'A' ordinary share, which has different voting and dividend rights, for every six shares held, at a price of 305 rupees to raise 19.6 billion rupees.

Tata Motors shares, which have slid 32.3 percent since May 28 when the rights issue was announced, ended 1.8 percent down at 429.85, in a Mumbai market .BSESN up 3.8 percent, as investors were concerned about the equity dilution.

A class 'A' shareholder will get one vote for every 10 'A' shares held, and will receive a dividend 5 percentage points higher than ordinary shares. Soonawala said the additional cost under the current dividend policy would be 38 million rupees.

"A large number of investors are not particularly interested in voting rights. Therefore we can give them something attractive," he said.

The company had planned three rights issues to raise a total of 72 billion rupees, but scrapped a part of the offering last month due to souring capital markets.

It now plans to raise between 20 billion and 30 billion rupees through the phased sale of some investments, preferably to other Tata Group firms, to make up the shortfall. It has already sold some investments worth 3 billion rupees, Soonawala said.

Funds raised through share sales by companies in India in the first six months of 2008 fell 66 percent from a year earlier to $5.85 billion, hurt by falling stock markets, Thomson Reuters data showed.

The BSE share index is down more than a quarter this year. ($1=44.4 rupees) (Editing by John Mair/Will Waterman)