Shares in vehicles maker Tata Motors(TAMO.BO) on Tuesday were down in early deals on

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apprehensions of equity dilution and lower earnings per share after it approved raising $1 billion through equity and convertible bonds to reduce debt and for expansion.

"In the long term no doubt, it is good for the company as it will reduce debt, but the immediate impact on investor sentiment is equity dilution and lower earnings per share," said Arun Kejriwal, strategist with research firm KRIS.

By 9:37 a.m. (0407 GMT), Tata's shares were down 0.57 percent at 783 rupees, while the main index was down 0.41 percent.

On Monday, the Tata board approved raising $1 billion through shares and convertible debentures to meet its debt obligations and for its growth plans.

The funds raised would result in an equity dilution of about 10 percent to 12 percent, according to estimates by analysts.