TPG Group to invest Rs 7,500 crore in Tata Motors’ new electric vehicle subsidiary

Tata Motors on October 12 announced that private equity firm TPG Group would be investing Rs 7,500 crore in its new wholly-owned electric vehicle subsidiary.

The investment would be made in tranches, over a period of 18 months from the date of completion of the first tranche.

TML EVCo, the entity set up by Tata Motors for electric vehicles segment, will undertake passenger electric mobility business, the company said.

The first round of capital infusion will be completed by March 2022 and the entire funds will be infused by end of 2022, it added.

TPG Group will secure 11-15 percent stake in the EV subsidiary at an equity valuation of $9.1 billion.

“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 Motors Chairman N Chandrasekaran said.

Earlier this month, there were speculations over this deal and also that the Tata Motors would reach out to sovereign wealth funds (SWFs) in West Asia, such as Abu Dhabi Investment Authority and Saudi Arabia's PIF, and California Public Retirement System for additional funds.

In July, at the annual general meeting (AGM), chairman of Tata Motors, N Chandrasekaran had said that 25 per cent of its passenger-vehicles (PV) portfolio would be electric vehicles (EV) in the medium to long term, from the 2 per cent it currently is, and that the company is raising funds to support this growing vertical. The company had started the process of hiving off its passenger vehicle (PV) business as a subsidiary, and to onboard a partner, last year.

Electric race

The EV business is heating up with the government pushing for cleaner fuels. This April, Mahindra & Mahindra had announced that it would invest Rs 3,000 crores over the next three years to build its EV vertical. The company, which has invested Rs 1,700 crore, is targeting 5 lakh EVs by 2025. Hyundai, which was the first auto major to launch an electric car in India with Kona EV, and Kia has said that it will bring out six new EVs by 2024. The two will also come out with a low-cost EV car, priced below Rs 15 lakh, to be pitted against Tata's Nexon EV.

Maruti Suzuki has chosen to stay out of the EV race until there is better clarity on its feasibility. At its AGM this August, its chairman RC Bhargava said that they would focus on electric two wheelers for now and wait for the sales volumes to pick up before entering into the four-wheeler segment.