NEW DELHI: US-based private equity investor TPG Capital is investing Rs 7,500 crore in Tata Motors’ (TML) new electric vehicle (EV) subsidiary. TPG Capital’s climate-focused financial fund, TPG Rise Climate, along with co-investors will invest Rs 7,500 crore in compulsory convertible instruments to secure between 11 to 15% stake in TML EVCo, the new subsidiary, translating to an equity valuation of up to $9.1 billion, a statement from Tata Motors said.
It is expected that the first round of capital infusion will be completed by March 2022 and the entire funds will be infused by the end of 2022. The investment comes at a time when India is pushing automakers to achieve 30% market penetration of EVs in the passenger vehicle segment by 2030.
Over the next five years, TML EVCo will create a portfolio of 10 EVs, and in association with Tata Power Ltd, will go for widespread charging infrastructure to facilitate EV adoption. At present, Tata Motors leads India’s small electric PV market with over 70% market share. Its Nexon EV is India’s best selling electric car and the company had recently launched the electric version of its Tigor model.
“We will continue to proactively invest in exciting products that delights customers while meticulously creating a synergistic ecosystem. We are excited and committed to play a leading role in the government’s vision to have a 30% electric vehicle penetration rate by 2030,” said N Chandrasekaran, Chairman of Tata Motors. According to the home-grown auto major, TML EVCo will invest in excess of $2 billion over the next 5 years in products, platforms, drive trains, dedicated EV manufacturing, charging infrastructure and advanced technologies.
Jim Coulter, Managing Partner TPG Rise Climate and Founding partner of TPG, 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 investment aligns with TPG RiseClimate’s focus on decarbonised transport and builds on TPG’s long history in India.”
Meanwhile, Tata Motors continues to stage a strong recovery across its three different verticals- PV, commercial vehicle and Jaguar Land Rover. Tata Motors Group global wholesales in Q2 FY22, including JLR, were at 2,51,689 units, higher by 24%, as compared to Q2 FY21.
Analysts at Morgan Stanley in a report said that as India’s auto cycle emerges from multi-year lows, they believe Tata Motors will enjoy the highest gains from operating and financial leverage. “Further, with aggressive cost cuts, sharply lowered breakeven point, three months of order book on hand, and key models such a RR and RR Sport coming for upgrades, we believe JLR will generate strong FCF(free cash flow) gains in FY23,” the report said.