Tata Motors To Raise Over Rs 10,000 Crore In 18 Months To Acquire Iveco

Tata Motors-Iveco Deal: Tata Motors is looking to raise about one billion euros (nearly Rs 10,000 crore) through equity in the next 12-18 months as part of its plans to term out the 3.8 billion euros bridge financing facility for acquiring Italian commercial automaker Iveco Group.

The deal will catapult Tata Motors to the fourth largest big truck maker globally. Before the proposed acquisition, Tata Motors Group was the sixth largest with 1.8 lakh units, and Iveco was 17th with 50,000 units annually.

India's leading automaker announced on Wednesday that it would acquire Iveco Group, excluding its defence business, for euro 3.8 billion (nearly Rs 38,240 crore) in a deal which is set to be its single-biggest buyout.

Addressing a conference call, Tata Motors Group CFO PB Balaji said, "The funding of 3.8 billion euros has been secured through bridge financing facility committed by Morgan Stanley & MUFG and this is expected to be syndicated, subsequently termed out by a combination of equity and long-term debt over next 12 to 18 months after the closure of the transaction."

He further said, "We expect this transaction to close sometime by April next year, assuming all the regulatory approvals come through.' When asked how much fund Tata Motors is looking to raise through equity, Balaji said, 'We have not yet made up our mind in terms of the magnitude of the equity raise. It obviously has to be discussed with the rating agencies as well, but we believe close to about 'a billion euros kind of a raise' is what the ballpark range will come on, to how much exactly it will be."

On the significance of the acquisition, Balaji said, "Strategically, this ranks right up there in terms of the top acquisition that the (Tata) group has done. From a commercial vehicle business perspective, it is very strategic and something that is 'a very, very large move' from an industry perspective, as it is a very consolidated industry," he noted.

As per an investor presentation by the company, after combining Iveco's volumes, Tata Motors Group will have a total sales of 2.3 lakh units annually in the over six tonne trucks category same with the Volvo Group in the fourth position behind leaders Daimler Group (3.5 lakh units), CNHTC Group (2.5 lakh units), and Traton Group (2.4 lakh units).

The acquisition, once completed, will not only provide access to products, platforms and manufacturing facilities, but it will also give Tata Motors access to a very strong network for sales and after-sales, not just in Europe, but also in Latin America, which otherwise takes a lot of time, Tata Motors Executive Director Girish Wagh.