Tata Motors has offered TPG flexible exit routes from its new electric vehicle (EV) company, which will see an investment of Rs 7,500 crore in a round led by the US investment company. The options before TPG include a stake buyout by Tata Motors and even an initial public offering (IPO).
The planned investment by TPG Rise Climate with investor ADQ in Tata Motors’ yet-to-be formed pure EV company is the single largest for a listed automotive company based in India. Their stake in the new Tata Motors company will be between 11 and 15 percent based on the turnover targets for the new company.
PB Balaji, Chief Financial Officer, Tata Motors, said: “All options are available to the investors. Right from Tata Motors buying them out to bringing in a third-party investor. Or we swap (the stake) into Tata Motors or merge it into Tata Motors or an IPO. It is a pretty flexible option structure. We can work together with them and make it happen.”
TPG’s planned investment with ADQ values the new Tata Motors EV company at $9.1 billion, making it the most valuable company in the EV category in India. Ola Electric is said to be raising fresh funds valuing the scooter making company at around $5 billion.
More to come
Balaji says the Tata EV arm will see more investments in the coming years. “...$2.2 billion investment will be done in the new EV company over a period of five years. And we will look at an appropriate time for a fundraise if we need to do so. Currently, there are no plans to raise further funds. We do not see a need for any further capital coming from Tata Motors for the EV company,” Balaji added.
While Balajji declined to provide the revenue targets for the new EV company, he said the new business would turn EBITDA positive in FY23. “We are pretty confident that the EV business will become EBITDA break-even next year. Its contribution margins are similar to what we have seen in the PV business,” Balaji added.
Tata Motors will launch at least seven new EVs by FY26 with a mix of body styles and drive ranges. With the help of these launches Tata Motors hopes to generate 20 percent of its total PV sales from EVs against 3 percent now.
‘Born electric’ platforms possible
Tata Motors is considering ‘born electric’ platforms for the next seven products it has planned. Born electric models are those that are built as EVs from scratch. The EVs that Tata Motors has on sale today were originally built to be powered by internal combustion engines.
With just two EV models, Nexon and Tigor (two variants), Tata Motors is the leader in the passenger EV segment with a market share of 71 percent. The company is clocking more than 1,000 units in EV sales every month. During FY21, the EV business clocked revenues of Rs 500-600 crore.
“We intend to move into an investment phase (for the EV company) in the next 3-4 years and the business should go cash-positive thereafter,” Balaji added.
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