Tata Motors plans NBFC spin-off, merger with Tata Capital ahead of IPO: Report

An official announcement regarding the merger is anticipated in the near future. Bank of America is said to be advising Tata Motors on the transaction.

Tata Motors is planning to separate its vehicle financing subsidiaries housed under Tata Motors Finance Ltd and merge them with Tata Capital to streamline operations and reduce its debt burden, according to sources familiar with the matter as reported by The Economic Times on May 10.

The proposed move will entail a share-swap arrangement, with Tata Sons, the group holding company, offering shares of Tata Capital to Tata Motors. This transaction would grant India's third-largest carmaker by volume a minority stake in Tata Capital, the report further elaborated.

The valuation of Tata Motors Finance is estimated to range between Rs 15,000 crore to Rs 20,000 crore, translating to 2.6 to 3.5 times its FY23 book value of Rs 5,625 crore, sources cited in the report disclosed. This valuation represents a substantial premium compared to the value attributed to it by equity analysts covering Tata Motors.

An official announcement regarding the merger is anticipated soon. Bank of America is said to be advising Tata Motors on the transaction.

Both Tata Sons and Tata Motors declined to comment on the Economic Times report. Despite attempts to reach out, Tata Capital did not respond to queries, the report stated.

Moneycontrol could not independently verify the information provided in the report.