Tata Motors to fund EV co via PEs; gets $1 billion from TPG, ADQ

The new passenger electric vehicle (PEV) company of Tata Motors Ltd (TML) will begin its ambitious journey to capture the emerging Indian electric mobility market with a $1 billion (₹7,500 crore) investment from TPG Rise Climate and Abu Dhabi-based ADQ. The private equity giants will receive an 11%-15% stake in the new entity while they complete the investments in two tranches in 2022. The investment will value the company at $9.1 billion.

The PEV company requires $2 billion of investments in the next five years in products, platforms, drive trains, dedicated EV manufacturing, charging infrastructure, and advanced technologies. TML has decided to raise the equity capital from investors as the passenger vehicle business will be fund constrained to support the aggressive EV aspirations of the company.

The new firm will be created as an asset lite new subsidiary of TML. It will house all the existing dedicated EV talent and design capabilities and aims to attract global talent. The PEV will leverage all existing investments in technologies, brands, manufacturing capacities, and sales network of TML’s passenger vehicle business, which will play the role of toll manufacturer and provider of services.

N Chandrasekaran, chairman of Tata group and Tata Motors said the company will continue to proactively invest in exciting products that delight customers while meticulously creating a synergistic ecosystem. “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,” TML said.

Jim Coulter, managing partner, TPG Rise Climate said there is 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 government envisages a 30% electric vehicles penetration rate by 2030.

It is expected that the first round of capital infusion will be completed by March 22 and the entire funds will be infused by the end of 2022. Morgan Stanley and JP Morgan are the joint financial advisors to TML, while BofA Securities India Ltd represented TPG Rise Climate for this transaction.

Khaitan & Co are legal advisors to TML, Shardul Amarchand Mangaldas & Co, Cleary Gottlieb are legal advisors to TPG Rise for the transaction.

TML has a 70% market share among EV makers in India. Its EV sales went up three-fold to 1,078 units in September compared to a mere 308 units in the same month last year. The company has sold 10,000 EVs in India so far, thanks to the success of the Nexon EV SUV. It offers SUV Nexon and subcompact sedan Tigor in electrified form.