Tata Motors Finance merges with Tata Capital

The board of Tata Motors, Tata Capital and Tata Motors Finance (TMFL) today approved a merger of TMFL with Tata Capital through an NCLT scheme of arrangement.

As consideration for the merger, Tata Capital will issue its equity shares to the shareholders of Tata Motors Finance resulting in Tata Motors effectively holding a 4.7% stake in the merged entity.

Tata Capital is one of the largest diversified NBFCs in India with assets under management of ₹1.6 lakh crore servicing customers with over 25 product offerings across retail, SME and corporate segments.

Tata Motors Finance with an AUM of ₹32,500 crore predominantly provides financing solutions for new and old commercial vehicles (CV), passenger vehicles (PV), dealers and vendors.

In FY24, Tata Capital and Tata Motors Finance reported a profit after tax of ₹3,150 crore and ₹52 crore respectively.

The transaction is also in-line with Tata Motors’ stated objective of exiting non-core businesses and focus its capital spends on emerging technologies and products, the automaker says in a statement,

Tata Capital has limited presence in commercial vehicle and passenger vehicle financing. With this merger, Tata Capital will gain new customers in the fast-growing CV/PV financing segments, which it aims to serve with products and digital offerings, the statement says.

The scheme of arrangement will be subject to approval of market regulator SEBI (Securities and Exchange Board of India), RBI (Reserve Bank of India), NCLT (National Company Law Tribunal) amongst others and all shareholders and creditors of TCL and TMFL and will take around 9-12 months to complete.

Tata Motors increased its spending on research and development (R&D) by 45% year-on-year to ₹29,398 crore for the year ended March 31, 2024. India’s largest electric carmaker’s R&D spending stood at ₹20,265 crore in FY23 and ₹15,339 crore in FY22. This increased spending on R&D comes as Tata Motors focuses on extending its electric vehicle (EV) product range, developing flex-fuel powertrain, fuel cell EV and Hydrogen ICE with necessary strategic investments for supporting infrastructure. Tata Motors’ product strategy is based on a complete shift towards zero and low-carbon vehicles like EVs, hydrogen vehicles, and flex fuel vehicles.

Some other areas in which R&D is being carried out include wireless battery management system, wireless charging of high voltage battery, development of vehicle control strategies to improve the EV vehicle efficiency by including the multiple efficiency levers. Tata Motors is also focusing on development of light and heavy commercial trucks on the battery electric vehicle platform.

Tata Motors clocked the highest-ever consolidated net profit at ₹31,807 crore in the financial year ended March 31, 2024. The auto major reported record revenues of ₹4.38 lakh crore, a growth of 26.6% over ₹3.46 lakh crore reported in the previous fiscal. For Q4 FY24, Tata Motors’ profit grew 46% year-on-year to ₹17,529 crore.