Tata Motors seeks to raise $1 billion for new EV biz, values it at $7 billion
Tata Motors Ltd, India’s largest vehicle maker, is in talks with bulge bracket buyout funds to raise as much as $1 billion for its new electric vehicles (EV) division, valuing the business at nearly $7 billion, two people directly aware of the discussions said.
Tata Motors, which got shareholders’ approval to separate its passenger vehicle business in March, is in the process of transferring the EV portfolio into a step-down arm in which the proposed investment will be raised.
“The talks are at an early stage, and several global PE firms, including Blackstone Group, TPG Capital and KKR & Co., have been approached,” one of the two people said seeking anonymity. “The company is also in the process of hiring an adviser and is in talks with several global investment banks,” the first person added.
Tata Motors’ focus on EVs also comes amid pressure from investors to back environmentally sustainable businesses.
Tata Motors chairman N. Chandrasekaran announced the funding plan for the EV unit in June at the company’s 76th annual general meeting, where he also announced plans to launch 10 EV models by 2025.
Tata Motors is in the process of hiving off the passenger vehicle business, including the EV division, to a new entity, valuing the business at ₹9,417 crore. According to ratings firm Crisil, the domestic passenger vehicle business, with its marginal presence and high capex needs, has been a drag on the firm. However, the business has been turning around with models such as Tiago, Nexon and Harrier gaining traction. PV sales rose 33% in the nine months through December 2020 from a year ago, helping the company lift its market share to 7.8%. Tata Motors is also exploring the possibility of inducting a strategic partner for new product development.
“The valuation being sought for the EV unit is relatively high, but the firm plans to add a new line of business and products in the division, which it feels, justifies the valuation,” said the second person.
A spokesperson for Tata Motors declined to comment, and so did spokespeople for Blackstone, TPG and KKR.