The all-cash deal is part of Tata's efforts to grow outside Asia, but analysts have questioned how the Indian firm - maker of the Nano, the world's cheapest car - will absorb the two high-end marques into its operations.

'We are very pleased at the prospect of the Jaguar and Land Rover being a significant part of our automotive business,' Tata group chairman Ratan Tata said, pledging to keep the identities of the famous brands 'intact'.

Tata, part of the sprawling tea-to-outsourcing Tata Group empire, said the 'total amount to be paid in cash' would be US$2.3 billion and added Ford would contribute up to about US$600 million to the Jaguar and Land Rover pension plans.

The purchase, which has been the subject of speculation for months, comes amid an economic downturn which has put the squeeze on demand for prestige vehicles.

In January, Tata unveiled the Nano at a price of US$2,500, hoping that the no-frills car could revolutionise travel for millions of people in India and elsewhere. But with the acquisition, Tata would be in the unusual position of making the cheapest car in the world as well as some of the most expensive.

The company is looking at making a major technological leap by gaining access to the sophisticated engines of the Land Rover and Jaguar. Troubled US giant Ford announced it was selling the two brands last year as part of a restructuring.

Tata has announced plans to raise up to an additional US$1 billion in domestic and or foreign markets to fund its domestic and global expansion.

AGENCE FRANCE-PRESSE