Tata Motors to raise $1bn in electric vehicle entity at valuation of $9 bn from TPG Rise

Homegrown automobile brand, Tata Motors on October 12 announced that TPG Rise Climate, along with its co-investor ADQ, is set to invest Rs 7,500 crore in an electric vehicle subsidiary owned by Tata Motors. The company's board approved the constitution of a wholly-owned new subsidiary to take up the electric business in the country, ushering the company to take on the encounter with Tesla in the market and on-road.

TML EVCo is the entity set up by Tata Motors for the electric vehicle segment and the investment in the company would be made in tranches, over a period of 18 months from the date of completion of the first tranche.

Putting an end to speculations over this deal and Tata Motors' reaching out to sovereign wealth funds (SWFs) in West Asia, the company's Chairperson 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 delight customers while meticulously creating a synergistic penetration rate by 2030."

TPG Group to invest Rs 7,500 crores in Tata Motors' electric vehicle arm

The Compulsorily Convertible Preference Shares (CCPS) will aid TPG Rise secure between an 11% and 15% stake in Tata Motors' subsidiary company at an equity valuation of up to USD 9 billion. 

"Tata Motors Ltd (TML) and TPG Rise Climate have today entered into a binding agreement whereby TPG Rise Climate along with its co-investor ADQ, shall invest in a subsidiary of Tata Motors that will be newly incorporated. TPG Rise Climate along with co-investors shall invest Rs 7,500 Cr in compulsory convertible instruments to secure between 11% to 15% stake in this company translating to an equity valuation of up to $9.1 bn," Tata Motors' press release read. 

"The transaction is subject to conditions precedent and customary approvals," Tata Motors' press release stated.

While it is expected that the entire funds will be infused by the year 2022, the first round of capital infusion will be completed by March 2022. Tata Motors' filing stated that after the incorporation of TML EVCo, it will enter into an enforceable shareholders' agreement as a condition precedent to the proposed transaction. 

Image: Twitter/@TataMotors_Cars, PTI