Tata Motors (TML) does a start-up kind of fund raising and announces $1 bn of investments from TPG and ADQ (of Abu Dhabi) in it’s EV business.
Key points to note –
- The investment values the EV business at $9.1 bn post money.
- Funds will come in two tranches – 50% by March 2022 and balance 50% by December 2022.
- Funding is part of the total $2 bn of investments that TML expect to make in the EV business over the next 5 years.
- EV business will be housed in a separate subsidiary (EVCo) – 85-89% to be held by Tata Motors and balance 11-15% to be held jointly by TPG and ADQ. Actual dilution being a convertible structure would depend upon milestone achievement.
- EVCo will have an asset light model and primarily focus upon R&D, IPs and creation of charging infrastructure. Manufacturing will be outsourced to the fully owned Passenger Vehicles Company (PVCo) of TML.
- EVCo will also benefit from the cross synergies of other group entities including Tata Power (EV charging installations), Tata Chemicals (lithium-ion cells, batteries), Tata Autocomp (battery assembly), TCS (connected car tech, designing and R&D), Tata Motorsfinance (finance) etc.
For TMSL – it’s a brilliant deal reminding of a typical start-up funding culture.
For TPG and ADQ – it allows them to participate in a speculated high growth area of electric vehicles and that too through Tata’s ecosystem.
Valuations – not the right time to try analysing that. Who would want to miss out on a probable next Tesla for few billion dollars – so why to haggle !
The 1st tranche has come in.
TML informed on March 30, 2022 that TPG RISE Climate TopGun (TPG), a private equity fund, has subscribed to 3,75,00,000 compulsorily convertible preference shares of the face value of Rs 1,000 each in its subsidiary, Tata Passenger Electric Mobility.
This is for an aggregate consideration of Rs 3,750 crore as the first tranche of the potential investment aggregating Rs 7,500 crore, announced by the company in October 2021.