New Delhi: Homegrown auto major Tata Motors on Tuesday said it will raise USD 1 billion (Rs 7,500 crore) in its passenger electric vehicle (EV) business from TPG Rise Climate at a valuation of up to USD 9.1 billion.
The fund will be used to partly fund investment of USD 2 billion (over Rs 16,000 crore) in the next five years by a new subsidiary of the company for expanding its EV business, including launching of 10 EV models.
Tata Motors Ltd (TML) and TPG Rise Climate, the dedicated climate investing strategy of private investment firm TPG, have entered into a binding agreement, under which the latter along with its co-investor ADQ, will invest in a subsidiary of Tata Motors that will be newly incorporated, the company said in a statement.
TPG Rise Climate along with co-investors shall invest Rs 7,500 crore in compulsory convertible instruments to secure between 11-15 per cent stake in this company translating to an equity valuation of up to USD 9.1 billion, it added.
ADQ is a strategic partner of Abu Dhabi's government and is one of the region's largest holding companies with direct and indirect investments in more than 90 companies locally and internationally.
Commenting on the development, Tata Motors Chairman N Chandrasekaran said,"I am delighted to have TPG Rise Climate join us in our journey to create a market-shaping electric passenger mobility business in India. We will continue to proactively invest in exciting products that delights customers while meticulously creating a synergistic ecosystem."
He further said the company is "committed to playing a leading role in the government's vision to have 30 per cent electric vehicles penetration rate by 2030."
The new EV company will leverage all existing investments and capabilities of TML and will channelise the future investments into electric vehicles, dedicated BEV platforms, advanced automotive technologies and catalyse investments in charging infrastructure and battery technologies.
"Over the next 5 years, this company will create a portfolio of 10 EVs and in association with Tata Power Ltd, catalyse the creation of a widespread charging infrastructure to facilitate rapid EV adoption in India," the statement said.
Addressing a virtual press conference, Tata Motors Group CFO P Balaji said the new subsidiary, currently called 'TML EVCo' will invest in excess of USD 2 billion (over Rs 16,000 crore) over the next 5 years in products, platforms, drive trains, dedicated EV manufacturing, charging infrastructure and advanced technologies.
"We are very, very prudent with our investment choices that we have been making," he said adding the existing passenger vehicles (PV) business will be "fund constrained to support this aggressive EV aspirations" and there is a need to continue to build momentum in EV to retain competitive advantage.
Balaji, however, did not share timelines about future fund raising plans, while clarifying that the current investment in the EV unit is only for the passenger vehicles and does not include the company's commercial vehicles EV business.
He further said TML EVCo will leverage all existing investments in technologies, brands, manufacturing capacities and sales network of Tata Motors PV business, which will play the role as toll manufacturer and provider of services.
"It ensures minimal duplication while accelerating speed to market," Balaji said.
Commenting on the investment, TPG Rise Climate Managing Partner and Founding partner of TPG, Jim Coulter said,"There is a significant momentum around India's EV movement, supported by the government's vision and policies, as well as growing consumer demand for greener solutions. The investment aligns with TPG Rise Climate's focus on decarbonized transport and builds on TPG's long history in India."
Tata Motors said the first round of capital infusion is expected to be completed by March 2022 and the entire funds will be infused by the end of 2022.
Morgan Stanley and JP Morgan are the joint financial advisors to Tata Motors, while BofA Securities India Ltd are representing TPG Rise Climate for the deal. On the other hand, Khaitan & Co are legal advisors to Tata Motors, while Shardul Amarchand Mangaldas & Co, Cleary Gottlieb are legal advisors to TPG Rise.
Commenting on the development, Tata Motors President (Passenger Vehicle Business Unit) Shailesh Chandra said the company aims to go in for deeper localisation of parts for the EVs.
He noted that Tata Motors has currently 71 per cent market share in the PV electric vehicle space with two products-- Nexon EV and Tigor -- and the company plans to increase its sales network for EVs further.
The company plans to expand its EV reach beyond existing micro-markets and go over 100 cities and 255 touchpoints in FY22, while it is also working to increase options to access Tata EVs through methods such as subscription model.
"We have sold over 10,000 electric cars so far.. with price increase happening on the conventional PV segment and rising fuel prices, customers have now started considering EVs," Chandra stated.
Going ahead, he said multiple factors like government incentives and schemes were all set to encourage faster adoption of EVs in the country.
With demand increasing, Tata Motors would bring in EVs with various bodystyles to cater to different set of customers, he added.
PTI
