Sources close to the deal told The Financial Express that the equity infusion was being made by Tata Tea on the insistence of international bankers who will finance the debt.

This will make the 320-million pounds Tetley a wholly-owned subsidiary of the Rs 901-crore Tata Tea, and will also insulate the latter from vagaries that Tetley may face in the future.

The deal size will be in the 270-280 million pounds (Rs 1,800 crore) range and without Tetley's interests in coffee in the US which is presently in the process of being hived off.

As the due diligence is currently on, sources indicated that the final deal size may be brought down marginally as Tetley would now be acquired sans its US coffeebusiness.

The balance amount (of around 200 million pounds depending on the final price), to be raised as debt from the international markets for which four options are currently being weighed and a decision on this is expected soon. The forex debt will be securitised against the future cash flows of Tetley and will be raised by a special purpose vehicle (SPV).

The Tatas have appointed Rabobank as the sole financial advisor to the deal, which will be the largest ever acquisition made by any Indian company in the country or abroad. Two other foreign banks, HSBC and Credit Suisse First Boston, along with Rabobank will arrange for the loans that will be raised from the international markets.

The Tatas had initially bid 270 million pounds for Tetley, and later agreed to hike it to a maximum of 280 million pounds . It then also included Tetley's coffee interests in the US.

The acquisition will give the Tatas instant access to vast matured markets in the US, Canada, Europe and Australia, along withestablished brands. If Tata Tea was to do that on its own, it would have faced obvious entry barriers.

Besides catapulting Tata Tea into the position of the second largest tea company in the world, the extensive retail reach that the acquisition will give to the Tatas may prompt it market products of group companies as well.

It will also enable the group to position the Tata brand internationally, a step that the group has not yet been able to take. It will go a long way in projecting the Tatas as just not India's largest conglomerate, but as a global-scale player as well.

The retail reach is also important for Tata Tea as it has been looking at a foray into branded foods for quite some time now. Though the branded foods market in India has yet to mature, it is the reverse in the countries where Tetley has a strong presence.

The acquisition also has obvious synergies: While in India Tata Tea is seen mainly as a producer of medium quality teas, Tetley blends and packages premium tea and has severalflavoured varieties that Indian consumers are not yet familiar with.