Tata Motors To Sell 9.9% In IPO-Bound Tata Technologies At $2-Billion Valuation

Tata Motors has decided to sell nearly 10% of its stake in Tata Technologies Ltd., ahead of an initial public offering of the wholly owned subsidiary.

“Tata Motors has entered into a share purchase agreement with certain investors for sale of 9.9% stake in Tata Technologies for a total consideration of Rs 1,613.7 crore,” according to an exchange filing on Friday. 

The deal pegs Tata Technologies' valuation at Rs 16,300 crore, or about $2 billion.

TPG Rise Climate SF Pte, a climate-focused private equity fund, will pick up 9% stake in Tata Technologies for Rs 1,467.0 crore, while Ratan Tata Endowment Foundation will pick up the rest for Rs 146.7 crore, the filing said. 

Interestingly, TPG Rise Capital had previously invested $1 billion in Tata Passenger Electric Mobility Ltd.—the electric mobility division of Tata Motors.

“This transaction furthers Tata Motors' deleveraging agenda and is expected to close in the next two weeks on completion of customary closing procedures,” Tata Motors said in a statement accompanying the exchange filing.

The stake sale follows an addendum to Tata Technologies' draft red-herring prospectus that sought to reserve 10% of the pure offer-for-sale for Tata Motors shareholders. Employees have been allocated 0.5% of the paid-up equity share capital.

The Tata Technologies IPO, a first from Bombay House in nearly two decades, will see Tata Motors and other investors offload as much as 23.6% of their stake in the company. The pure offer-for-sale of 9,57,08,984 shares by Tata Motors (8,11,33,706), Alpha TC Holdings Pte (91,76,873) and Tata Capital Growth Fund I (48,58,425) is equivalent to 20%, 2.40%, and 1.20% stakes, respectively. The size of the IPO, proceeds of which will go to the selling shareholders, is yet to be disclosed.

Prior to Friday's transaction, Tata Motors held 74.69% stake in Tata Technologies. That now stands reduced to 64.79%. Alpha TC Holdings and Tata Capital Growth Fund I have 7.26% and 3.63% stakes, respectively.

Tata Technologies, a wholly owned subsidiary of Tata Motors, is a global ER&D services firm that offers product development and digital solutions to original equipment manufacturers not limited to the automotive sectors. It counts Jaguar Land Rover Plc to Airbus SE among its clientele. JLR recently expanded its partnership with Tata Tech for its digital transformation.

On Friday, Tata Motors shares rose 4.76% to Rs 667.15 apiece on the BSE even as the benchmark Sensex ended the day 0.19% lower at 66,282.74 points.