Tata Motors to get $1 billion in investment from TPG

On Tuesday, it was confirmed that TPG Rise Climate and Abu Dhabi's ADQ will invest Rs 7,500 in Tata Motors' electric vehicle sector. 

This is said to be the first major fundraising by an Indian carmaker to promote clean mobility. 

"The investment will be in a newly formed subsidiary Tata Motors has formed for the EV business. The Rs 7,500 crore (close to $1 billion) will give a stake of 11-15 percent stake to the TPG-ADQ combine in this subsidiary," reports Business Standard. 

TPG Rise Climate took in Bank of America as their advisor and Morgan Stanley and JP Morgan advised Tata Motors EV unit. 

The group is said to be a leading player in the EV business with almost 70 per cent market share. 

Chief Financial Officer, P B Balaji had expressed that the company with invest approximately Rs 16,000 crore in the next 5 years. 

The investors will also be provided with compulsory convertible instruments over an 18-month-period and the investments will be made in tranches. 

"We are committed to playing a leading role in the government's vision to have 30 per cent electric vehicles penetration rate by 2030."

"The new EV company will leverage the existing investments and capabilities of Tata Motors and will channelise future investments in electric vehicles," he said.

The electric vehicle subsidiary, also known as Evco, will undertake the passenger electric mobility business. Meanwhile, the passenger business unit will own the existing assets such as manufacturing plants, brands, and dealerships. 

"This new subsidiary will be asset-light, and all the investment will go towards creating intellectual properties like new vehicle designs and EV platforms. The Tata Motors passenger vehicle business doesn't have the wherewithal in the EV space. Creating that needs investment of $2 billion," Balaji said in a conference call organised after the announcement of the deal.

The commercial vehicles segment will remain with the parent company and will be left out of the purview of this deal. 

Experts concluded that this investment signifies global investors' interest in India's efforts to electrify transport, says Business Standard. 

"This is a welcome step. It would be interesting to see how the proposed networks of charging Infra are set up and their interplay with the cost of electricity with various state distribution companies. This could be the first step for many on this road at a large scale," said Santosh Janakiram, partner and head (projects), Cyril Amarchand Mangaldas.

TPG Rrise Climate was founded in 2016 and has $5 billion under its current management. Its primary focus is to invest in companies with an environmental and social focus. 

"The investment aligns with TPG Rise Climate's focus on decarbonised transport and builds on TPG's long history in India," said TPG founding partner Jim Coulter.