Tata Motors: TPG Goes Into Tata Motors EV Business With $ 1 Billion Investment

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Abu Dhabi’s private equity group TPG and ADQ announced on Tuesday agreed to invest in the EV division Rs 7,500 crore ($ 1 billion), valuing the company, $ 9.1 billion after the silver, confirming ET’s October 8 announcement.

Tata Motors, which already gained shareholder approval to separate its passenger vehicle business in March, will now create a separate electric-only branch in which the proposed investment will be made over the next 18 months, said the company said in a press release. The new EV co, will be lightweight and house only technology and future IPs, while manufacturing will be housed under the paid passenger vehicle division.

New investors will be issued Mandatory Convertible Preferred Shares (CCPS) which, after conversion over an 18-month period, will give them an 11-15% stake in the EV branch, while parent company Tata Motors will own the remainder. The conversion will also be linked to certain previously agreed income thresholds. The first round of 50% capital injection is expected to be completed by March 22 and full funds to be injected by the end of 2022.

Tata Motors’ board of directors met earlier today to approve the transaction.

Tata Motors is already the domestic market leader in the electric vehicle segment with 70% market share and 3 models.

Shares of Tata Motors have jumped XXX over the past month and ended Tuesday at Rs 420.80 with a market cap of Rs 1,718.55 crore.

GREEN MISSION

Tata Group President N Chandrasekaran spoke on orienting Tata Motors’ business towards sustainability and green mobility options. The company has already announced plans to roll out 10 new battery-electric vehicles in its domestic product portfolio by 2025. The company is also evaluating the creation of an automotive software and engineering vertical within the Tata group that will l ‘will help to be a leader in the field of connected technologies and autonomous vehicles. Tata Motors’ CFO, P Balaji, said the company is considering an investment of Rs 15,000 crore over the next XXX years just to fuel its aspirations for electric vehicles.

“We will continue to proactively invest in exciting products that delight customers while meticulously creating a synergistic ecosystem. We are excited and determined to play a leading role in the government’s vision of having an electric vehicle penetration rate of 30% by 2030, ”said Chandrasekaran.

RISE & SHINE

TPG’s investment is being made through the recently raised $ 7 billion climate fund – Rise Impact. Former US Treasury Secretary Hank Paulson is the executive chairman along with the fund’s co-founder, James Coulter. Like many fund managers, TPG has also actively focused on environmental, social and corporate governance (ESG) investment themes.

The climate fund Rise had previously backed a Hyderabad-based Fourth Partner Energy (4PEL), which focuses on the commercial and industrial (C&I) segment and has an operational portfolio of 550 megawatts (MW). At the end of last year, TPG Pace Beneficial Finance Corp., a Special Purpose Acquisition Company (SPAC), agreed to acquire EV Charged BV, a unit of the French public utility Engie SA specializing in the technology of recharging electric vehicles to create a combined entity, the EVBox group. , with a valuation of around $ 1.4 billion.

TPG is already an investor in Reliance Jio Infocom and Reliance Retail.

“There is significant momentum around India’s electric vehicle movement, supported by government vision and policies, as well as growing consumer demand for greener solutions. The investment aligns with TPG Rise Climate’s focus on carbon-free transportation and builds on TPG’s long history in India, ”said Coulter, Managing Partner of TPG Rise Climate and Founding Partner of TPG. Previously, TPG had partnered with former Tata group manager Mukund Rajan to purchase the struggling Tata teleservices, but it never paid off.

Morgan Stanley, JP Morgan advised Tata Motors and Bank of America were the advisers to TPG. Khaitan & Co and Shardul Amarchand Mangaldas were the legal advisers.

“The company believes fiscal 2024E could be the tipping point for the electric vehicle industry. As a result, it improved its market share to 10.1% in the first quarter of fiscal 22, compared to 6-7% in fiscal 2019. In addition, in terms of profitability, the company has improved the PV segment EBITDA margin to 4 to 5% in the first quarter of fiscal 22 compared to stable levels in fiscal 2019. During the last two quarters, the EBITDA per vehicle of the photovoltaic segment was at same level as that of Maruti Suzuki, which is commendable, ”said Rishi Vora, analyst at Kotak Institutional Equities.

ECOSYSTEM

As a group, Tatas relies on various companies in the group to create an ecosystem. While Tata Power is engaged in charging infrastructure; Tata Chemicals Evaluates Lithium-Ion Cell Manufacturing; Tata Autocomp maps battery manufacturing; and the eponymous financial arm of Tata Motors provides financing solutions for the adoption of electric vehicles. An internal working group comprising officials from all of these companies would also work together. The mandate is to move quickly and develop and offer the entire ecosystem to consumers.

Energy Efficiency Services, the EV branch has already completed the production of more than 200 cars and the plan is to be a forerunner and seize the opportunities arising from new mobility trends, as stated by Chandrasekaran. Tata Capital will be the support arm for financing and Tata Power for the charging infrastructure network. Investors were previously hesitant given the huge valuation sought by Tata Motors, but realize the immense growth opportunities here, a senior group official said.

The new company will leverage all existing investments and capabilities of Tata Motors Ltd and channel future investments in electric vehicles, dedicated BEV platforms, advanced automotive technologies and catalyze investments in charging infrastructure and charging technologies. battery, the company said in a statement.

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