MUMBAI: Tata Motors in a filing to the exchanges said on Tuesday that the board of directors of Tata Motors, Tata Capital and Tata Motors Finance have approved a merger of Tata Motor Finance with Tata Capital through an NCLT scheme of arrangement. ET had reported on Tata Motors’ plans to hive off its vehicle financing subsidiary and merge it with the IPO-bound Tata Capital in the May 10th edition.
Subject to approval of Sebi (Security and Exchange Board of India) RBI and NCLT (National Company Law Tribunal) amongst others, and all shareholders and creditors of Tata Capital and Tata Motors Finance, the merger will take 9-12 months to complete. The move will not have any adverse impact on customers or creditors of Tata Motors Finance.
The transaction is in line with Tata Motors’ stated objective of exiting non-core businesses and focusing its capital spends on emerging technologies and products, the company said. As consideration for the merger, Tata Capital will issue its equity shares to the shareholders of Tata Motor Finance resulting in Tata Motors effectively holding a 4.7% stake in the merged entity.
Tata Capital is a 95% subsidiary of Tata Sons and the flagship financial services company of the conglomerate. Its products include commercial finance as well as consumer, home, education, personal and car loans. It also offers loans against property, wealth services, private equity and the distribution and marketing of Tata Cards.
It is one of the largest diversified NBFCs in India with an asset under management of ₹1.6 lakh crore with over 25 product offerings across retail, SME (small and medium enterprises) and corporate segments. Tata Motor Finance, with an asset under management of ₹32,500 crore, predominantly provides financing solutions for new and old commercial vehicles (CV), passenger vehicles (PV), dealers and vendors.
In FY 24, Tata Capital and Tata Motors Finance reported a profit after tax of ₹3,150 crore and ₹52 crore respectively. Tata Capital has limited presence in CV/ PV financing. With this merger it will gain new customers in the fast-growing CV/PV financing segments, which it aims to serve with innovative products and digital offerings, whilst providing differentiated growth opportunities to employees. From Tata Capital’s perspective, this recast is part of streamlining the financial services portfolio of the group under a single entity ahead of its planned IPO in 2024-25, ET had reported.
Additionally, it will help Tata Motors deleverage its balance sheet at a time it’s rationalizing its own operations by demerging the passenger and commercial vehicles businesses. Since it will own shares of Tata Capital after the merger, Tata Motors can unlock value by monetizing that stock during the listing for a significant upside, said the people cited above.
Source: The Economic Times