Tata Motors To Raise Rs 7,500 Crore From TPG Rise Climate, ADQ For Electric Vehicle Unit

TPG Rise Climate and co-investors will pump in Rs 7,500 crore through compulsory convertible instruments for a 11-15% stake.

<div class="paragraphs"><p>A Tata Motors Ltd. logo sits on glass on the company’s stand&nbsp; (Photographer: Chris Ratcliffe/Bloomberg)</p></div>
A Tata Motors Ltd. logo sits on glass on the company’s stand  (Photographer: Chris Ratcliffe/Bloomberg)

Tata Motors Ltd. said it will raise up to $1 billion (about Rs 7,500 crore) for a new passenger electric vehicle subsidiary from TPG Rise Climate and its co-investor ADQ.

The investors will pump in the funds through compulsory convertible instruments for an 11-15% stake in the newly incorporated unit, Tata Motors said in a media statement. That would give the company an equity valuation of up to $9.1 billion, it said.

TML EV Co. will be an asset-lite subsidiary that will house all of Tata Motors' dedicated EV talent and design capabilities. The unit will invest over Rs 16,000 crore in the next five years for products, platforms, drive trains and dedicated EV manufacturing and charging infrastructure, an exchange filing said.

The new arm will aim to create a portfolio of 10 electric vehicles over the next five years. It shall channel the investments in developing battery technologies and collaborate with group company Tata Power Co. to create widespread charging infrastructure for faster EV adoption in the country.

That comes as Tata Motors is aggressively looking to capture India's small EV market. Chairman N Chandrasekaran had earlier said that the maker of Tiago hatchback was scouting for a strategic partner for its EV business.

It plans to turn electric at least 25% of its portfolio. The group currently has two fully electric variants among its domestic portfolio. It has sold over 4,000 electric variants of the Nexon compact SUV since the launch last year. Tata Motors' luxury car arm Jaguar Land Rover has already laid out plans to electrify its whole lineup.

Deal Structure

The capital infusion by TPG Climate Rise will be done in two tranches. The first round is expected to be completed by March 2022 after the subsidiary is incorporated. The balance funding will be paid by the third quarter of 2022 on achieving "Go Live" actions, the filing said.

The subsidiary will issue compulsory convertible preference shares to the investors that can be converted into equity shares on the basis of achieving certain revenue thresholds.

Morgan Stanley and JP Morgan are the joint financial advisors to Tata Motors, while BofA Securities India Ltd. will represent TPG Rise Climate.

Ahead of the announcement, shares of Tata Motors closed 1.24% higher on the BSE, while the benchmark Sensex closed 0.25% up.