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Tata Group | TPG: PE group TPG may recharge Tata EV unit with a $1-billion cheque

Private equity group TPG is in advanced discussions with the Tata Group to invest $1 billion or more in the electric vehicles (EV) division of , said people aware of the matter. The country’s largest vehicle maker is in the process of transferring its passenger vehicles division, including its EV portfolio, to a step-down subsidiary. The company got shareholder approval for the move in March.

TPG’s $1 billion investment, which could even go up to $1.5 billion, values the EV division at $8-9 billion. The final quantum of investment and the valuation is yet to be sealed, the people added. A formal announcement is expected this month. The final due diligence is ongoing but both sides, said company officials, have “had a handshake two-three weeks back.”

The group is also talking to some of the sovereign wealth funds (SWFs) in the Middle East such as Abu Dhabi Investment Authority and Saudi Arabia’s PIF to come on board either separately or as a consortium but they are likely to get smaller allocations than TPG, which is expected to be the “anchor investor.” Similar approaches have also been made to the California Public Retirement System (Calpers), said one of the persons cited above. Many of them are limited partners (LPs) of TPG Capital as well.

ET had in its June 23 edition reported that Tata Motors had initiated fund raising for the EV platform and had mandated Morgan Stanley and JP Morgan. Bank of America is believed to be working with TPG. Tata Sons, Tata Motors and TPG declined to comment. Mails to ADIA, PIF and Calpers did not generate a response.

Focus on Green Mobility

TPG recently raised $5.4 billion in a climate fund -Rise Impact – and is expected to lead the Tata Motors investment. Former US treasury secretary Hank Paulson serves as its executive chair along with the fund’s cofounder James Coulter.

Like several money managers, TPG too has been actively focussing on environmental, social and corporate governance (ESG) investment themes.

The Rise climate fund had earlier backed a startup, Form Energy, which is developing cheap batteries that enable electricity grids to better integrate renewable energy. In India, it has also backed Hyderabad-based Fourth Partner Energy (4PEL), which focuses on the commercial and industrial (C&I) segment and has an operational portfolio of 550 megawatts (MW). Late last year, TPG Pace Beneficial Finance Corp., a special purpose acquisition company (SPAC), agreed to acquire EV Charged BV, a unit of French utility Engie SA that specialises in electric-vehicle charging technology to create a combined entity, EVBox Group, with a valuation of about $1.4 billion. TPG is already an investor in Reliance Jio Infocomm and Reliance Retail.

The new investor will come in only for the domestic EV play. The National Company Law Tribunal (NCLT) has already approved Tata’s plan to hive off its passenger vehicle (PV) business, a year after the company’s board approved forming a new entity to house that division, including the EV unit, at a Rs 9,417 crore valuation. Accordingly, the passenger vehicle business will be transferred to TML Business Analytics Services, which will be later renamed Tata Motors Passenger Vehicles Limited (TMPVL). The 100% owned subsidiary will have only working capital debt and some long-term debt from the Sanand operations, while the rest, including nonconvertible debentures (NCDs), will remain with the standalone business.

Pivot to Green

Tata Sons chairman N Chandrasekaran has been vocal about pivoting Tata Motors toward sustainability and green mobility options. Tata Motors has announced plans for 10 new electric vehicles in its domestic product portfolio by 2025.

“In India, EV penetration in our portfolio has doubled to 2% this year and we expect penetration to increase exponentially in the coming years,” Chandrasekaran said in the company’s annual report for FY21.


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