Telco is India's largest truck-maker. It started making cars in early 1999 and the fledgling venture has blown a hole into the firm's earnings triggering speculation the company may spin off the division.

"We went into the passenger car business to be in the passenger car business, not to hive it off," Tata told Reuters in an interview.

He disagreed with analysts, who have said Telco - part of the Tata Group, India's biggest business conglomerate - would not make a profit unless it hived off the car project.

"It is very easy for analysts to say, well if they hive it off, it would be fine," he said. "But then consider that three years down the road, you would have hived off something that would add considerably to Telco's fortunes."

The firm's net loss swelled to Rs 743.4 million in the three months ended June 30, compared with a loss of 335.3 million in the same period of last year.

Its shares stood at Rs 100.05 Rupees on the BSE on Tuesday, less than a third of the level reached a year ago.

Tata said hiving off was advisable only for strategic gains.

"If the management does choose to hive it off, it should be done with some slightly more strategic view in mind, rather than just saying it affects the bottomline," he said.

Global partner sought
Tata said the company was talking to four international firms for a possible collaboration, but declined to name the companies.

"We are looking at alliances with people who can swap products with, who might be willing to take some of Telco's products abroad ... or even (bring) products here," he said.

"We haven't come to a stage where that has been established. Most probably it will be a commercial alliance," he said.

The car venture hurt Telco's profits, as it had not reached break-even sales of 90,000 units on an annualised basis, but this would change next year.

"By the end of this financial year (April-March), we should be at the rate of 90,000, so the hole will be filled," he said.

He said he was pleased with the performance of Indica cars.

"Actually, it is doing quite well. We now will have sold over 60,000 cars. We are exporting the car to Malta and to Italy. So we are quite pleased with what has happened with Indica, and we have some variants of Indica following," he said.

Mr. Tata said it was facing strong competition and understood the need to expand its product range.

"The passenger car business is going to be very competitive. We can't be a one product company, we will have to give several products, we would like to have facelifts of those products."

Tata had told shareholders in July that it had revised downwards its sales target for the currrent year to 70,000 cars from earlier estimates of 90,000.