The Tatas, it is learnt, are not willing to hike the bid price beyond 280 million pounds. Sources pointed out that Tetley is asking for a price of around 300 million pounds.

Sources close to the deal also point out that Nestle is not in the run to buy Tetley. "Neither Nestle's Indian arm nor the parent have bid for the company," said the source.

Senior officials of Tata Sons, the group's holding company, and Tata Tea, through which funds for the proposed acquisition will be routed, had earlier approved hiking the bid price by 10 million to 280 million (approximately Rs 1,900 crore).

It is also learnt that Tatas had made presentations to foreign banks explaining to them the kind of funds that will be required to fund the acquisition and what could be the advantages of such an acquisition.

The deal was expected to come through by the end of June but got stuck on the price issue, "but negotiations are still on," said the source.

In the initial bidding process, the Tatas had far outbid their closest rival Sara Lee, the US-based FMCG major which had put in an offer price of around 200 million.

The proposed deal is expected to be funded through a mix of both domestic and foreign debt. The Tatas, it is learnt, have been gearing up to make presentations to both foreign banks from Friday itself for syndication of overseas loans, as well as local banks for term loans.

Because of the size of the deal, Tata Tea will not be funding the acquistion alone. The company has a net worth of Rs 379 crore, including reserves of Rs 330 crore, and net profit stood at Rs 102 crore on a turnover of Rs 869 crore in the last fiscal.

Tata Sons, as reported earlier in The Financial Express, is likely to convert one of its two Switzerland-based subsidiaries -- Tata International AG or Tata Enterprises (Overseas) -- into a special purpose vehicle (SPV) which will subsequently raise funds by securitising the future cash flows of the Tetley Group.

The SPV could also issue bonds to mutual funds or private equity funds on the strength of the balance sheet of Tata Sons.

Tata Sons and group company Tata Chemicals are also expected to pitch in in the debt-raising programme.