TPG drives into Tata Motors EV business with $1 billion investment

announced Tuesday private equity group TPG along with ADQ of Abu Dhabi has agreed to invest in the EV division Rs 7500 crore ($1 billion), valuing the business at $9.1 billion, confirming ET’s newsbreak on October 8.

Tata Motors, which got shareholders’ approval to separate its passenger vehicle business in March, is in the process of transferring its India EV portfolio along with it’s passenger vehicles into a step-down subsidiary in which the proposed investment will be raised. A new subsidiary will now be formed to house only the EV business where the new investors together own 11-15%. The board of Tata Motors met earlier in the day to approve the transaction. The investors will be issued compulsorily convertible instruments over an 18 month period through which the investments will be made in tranches. It is expected that the first round of capital infusion will be completed by March 22 and the entire funds will be infused by end of 2022.

TPG’s investment is through the recently released $5.4 billion climate fund – Rise Impact. 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.

“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 Coulter, Managing Partner TPG Rise Climate and Founding partner of TPG.

ET in its June 23 edition had reported that Tata Motors have initiated its fund raising for the EV platform and had mandated Morgan Stanley and JP Morgan. Bank of America has been working with TPG.

Group chairman, N Chandrasekaran has been vocal about pivoting Tata Motors business towards sustainability and green mobility options. The company has already announced plans to roll out 10 new battery electric vehicles in its domestic product portfolio by 2025. The company is also evaluating the creation of an automotive software and engineering vertical within Tata group that will help it lead in the sphere of connected and autonomous vehicles.

The new company shall leverage all existing investments and capabilities of Tata Motors Ltd and will channelise the future investments into electric vehicles, dedicated BEV platforms, advanced automotive technologies and catalyse investments in charging infrastructure and battery technologies, and in association with Tata Power, catalyse the creation of a widespread charging infrastructure to facilitate rapid EV adoption in India,.the company said in a statement.

“We will continue to proactively invest in exciting products that delights customers while meticulously creating a synergistic ecosystem. We are excited and committed to play a leading role in the Government’s vision to have 30% electric vehicles penetration rate by 2030,” said Chandrasekaran.

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