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Tata Motors to raise $1 bn in passenger EV business

TPG Rise Climate along with co-investors shall invest  ₹7,500 crore in compulsory convertible instruments to secure between 11 % to 15 % stake in this company translating to an equity valuation of up to $9.1 billion, the statement said.Premium
TPG Rise Climate along with co-investors shall invest 7,500 crore in compulsory convertible instruments to secure between 11 % to 15 % stake in this company translating to an equity valuation of up to $9.1 billion, the statement said.

TPG Rise and co-investor ADQ will subscribe to compulsory convertible instruments for between 11% and 15% stake in the new company, translating into an equity valuation of up to $9.1 bn for the new company, Tata Motors said

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MUMBAI : The TPG Rise Climate fund will lead a 7,500 crore investment in a new company of Tata Motors Ltd that will house the automaker’s passenger electric vehicle business.

TPG Rise, the dedicated climate investing strategy of US private equity firm TPG, and co-investor ADQ will subscribe to compulsory convertible instruments for between 11% and 15% stake in the new company, translating into an equity valuation of up to $9.1 billion for the new company, Tata Motors said in a statement.

The company will be a unit of Tata Motors, and will leverage the automaker’s existing investments and capabilities and channel future investments into electric vehicles, dedicated battery electric vehicle platforms, advanced automotive technologies, and catalyse investments in charging infrastructure and battery technologies, according to the statement.

Over the next five years, this company will create a portfolio of 10 electric vehicles and establish a charging infrastructure across India, in partnership with Tata Power Ltd, to spur the rapid adoption of such eco-friendly vehicles.

“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 delight customers while meticulously creating a synergistic ecosystem. We are excited and committed to play a leading role in the government’s vision to have a 30% electric vehicles penetration rate by 2030," said N. Chandrasekaran, chairman, Tata Motors.

The first tranche of the funding will be made by March, and the remainder by the third quarter of 2022.

Mint first reported on 13 August that Tata Motors was in talks with private equity investors to raise as much as $1 billion for its EV business and that the company was in talks with buyout firms, including TPG, Blackstone and KKR.

EVs are gaining popularity with the government offering incentives to consumers to switch over from petrol and diesel vehicles while imposing stricter emission curbs on automakers to tackle air pollution in India, home to some of the world’s most polluted cities. Improving charging infrastructure is also encouraging more consumers to opt for such vehicles. In addition, a steep increase in prices of internal combustion engine vehicles post-implementation of Bharat Stage-VI emission norms and rising fuel prices is also causing a shift towards EVs.

Tata Motors’ focus on EVs comes amid growing pressure from investors to back environmentally sustainable businesses.

Morgan Stanley and JP Morgan were the joint financial advisers to Tata Motors on the transaction. BofA Securities India Ltd represented TPG Rise.

“We are excited to partner with Tata Motors on their mission to lead the electrification of passenger mobility in India. There is significant momentum around India’s EV movement, supported by the government’s vision and policies, as well as growing consumer demand for greener solutions. The investment aligns with TPG Rise Climate’s focus on decarbonized transport and builds on TPG’s long history in India," said Jim Coulter, managing partner of TPG Rise Climate and founding partner of TPG.

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