Tata Motors Ltd (TML) and TPG Rise Climate, along with its co-investor ADQ have entered into a binding agreement, for TPG Rise Climate to invest in a newly incorporated subsidiary of Tata Motors.
Tata Motors’ recent press release states that 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’s board has approved TML EVCo – the new EV subsidiary, to engage in the electric vehicle business in India. First round of capital infusion is planned to be completed by the 22nd of March, 2022 and the rest be done by the end of that year.
The new EV subsidiary will not own any manufacturing units of its own and instead rely on PV factories for output. It will own all future IP rights for EVs from the company without setting up factories.
Tata’s current products in market such as the Nexon EV and Tigor EV will be continued from the current locations. Only future products will be given off to the PV factories.
In the press release, N Chandrasekaran, Chairman Tata Motors Ltd has 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 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 30% electric vehicles penetration rate by 2030.”
Tata also has plans to expand its EV portfolio with 10 new models in the next 5 years through EVCo in association with TPL. This is to be done with an investment of Rs 15,000 crore in this new wholly owned electric vehicle subsidiary.
TPG Rise Climate is the dedicated climate investing strategy of TPG’s global impact investing platform TPG Rise. The fund takes a broad-based sector approach to investment types, from growth equity to value added infrastructure, and focuses on five climate sub-sectors: clean energy, enabling solutions, decarbonized transport, greening industrials, and agriculture & natural solutions. Former U.S. Treasury Secretary Hank Paulson serves as TPG Rise Climate’s Executive Chairman.
Jim Coulter, Managing Partner TPG Rise Climate and Founding partner of TPG commented, “We are excited to partner with Tata Motors on their mission to lead the electrification of passenger mobility in India. 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 Rise Climate’s focus on decarbonized transport and builds on TPG’s long history in India.”
Meanwhile, TPG’s co-investor ADQ is one of Abu Dhabi’s largest holding companies, with investments in more than 90 companies globally.
Morgan Stanley and JP Morgan are the joint financial advisors to TML, while BofA Securities India Ltd is representing 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.
Tata also mentioned in a statement that the new company shall leverage all existing investments and capabilities of Tata Motors Ltd and will channelize the future investments into electric vehicles, dedicated BEV platforms, advanced automotive technologies and catalyse investments in charging infrastructure and battery technologies. This shows Tata’s intent in becoming the forerunner in the EV segment of the country, at the same time competing with the EV giant, Tesla, globally.