Tata Motors is looking at a premium of 15-20% from the last round when Tata Passenger Electric Mobility Ltd was valued at $9.1 billion, the people said. That would translate into a valuation of as much as $10.9 billion for the business, which it had carved out as a subsidiary in late 2021.
The move is part of an ambitious strategy by the leader in the electric passenger vehicle market to raise significant funds, both via external and internal sources, to support its growth plans through product innovations, especially of EV platform, top executives close to the development said.
The company is working with adviser Morgan Stanley and has sounded out marquee investors, impact funds, sovereign wealth funds from the Middle East, Korea and Singapore, as well as Canadian pension funds for the funding.
‘Fundraising Target can be Raised’
Some of the legacy buyout funds have dedicated pools of capital for energy transition.
“Several new pedigree investors are keen to be part of the new narrative at Tata Motors. The company is actively working on the combination of external and internal funds,” an executive said. “Interest for funding in the EV space has picked up significantly and the company is evaluating the options.”The discussions with potential investors are preliminary in nature and non-disclosure agreements are getting signed, said a person in the know. The company may increase the fundraising target depending on investor appetite, another person said. However, the premium sought may prove to be expensive, warned some analysts.
As a policy and practice, Tata Motors does not comment on speculation, a company spokesperson told ET.
Tata Motors is the first automaker in the country to sell 50,000 electric passenger vehicles a year, which it achieved in 2022 selling the Nexon and Tigor EVs and commanding a more than 80% market share. Growth and innovations at Tata Motors are tech-led, with a focus on sustainability, said an executive close to the company. “So, funds to support this growth will be made available to the management and the clear directive is this time Tata Motors should not miss the bus and instead be ahead of the curve. Availability of funds will not be an issue, the balance-sheet is today strong enough to attract good investors.”
Tata Motors is expected to sell part of the shares held by it in the unit as well as issue new shares to the investors, which will help it deleverage the balance sheet and also get growth equity for expansion. In the first half of fiscal 2023, Tata Motors’ net automotive debt totalled Rs 59,900 crore, as per a company presentation. This comprised Rs 32,200 crore of external debt, Rs 19,900 crore of working capital debt and Rs 7,800 crore in leases.
FOCUSSED STRATEGY
Tata Motors incorporated the subsidiary, Tata Passenger Electric Mobility, in December of 2021 to focus on design and develop all kinds of services related to passenger electric vehicles/electric mobility and hybrid electric vehicles. Tata Motors became the promoter of the company with an initial capital of Rs 700 crore.
In October of the same year, while announcing the spinning out of the EV vertical into a separate arm, Tata Motors said it planned to invest more than $2 billion in the EV business over five years. It raised funds from the two external investors, TPG Rise and ADQ, by issuing compulsorily convertible preference shares, which upon conversion over an 18-month period would give them an 11-15% stake in the EV arm.
