Tata Capital set to enter PV/CV finance segment with TMFL

Tata Motors Limited(TML) is a multinational automotive company under the Tata Group. For FY24, Tata Motors Limited issued a revenue of Rs. 437,928 Crores and a PAT of Rs. 31,807C Crores. This marked a YoY increase of 26.6% and Rs.29,117 Crore respectively. 

Tata Motors Finance Limited (TMFL):

TMFL is a Non-Banking Financial Company (NBFC) that operates under the aegis of Tata Motors Finance Holdings Limited (TMHFL). TMHFL is a core Investment Company fully owned by Tata Motors Limited (TML). TMFL’s mission to provide relevant customer-centric financial products and solutions in the Automotive system aligns with the guiding principles of Tata Motors Limited and Tata Capital as well. In FY24, TMFL reported a PAT of Rs. 52 Crore.

Tata Capital Limited(TCL):

TCL is the flagship financial services company of the Tata Group and is a Non-Banking Financial Company. It provides an array of financial services and products and operates under several financial business areas like Commercial Finance, Consumer Loans, Private Equity, Investment Banking, Wealth Services , and distribution and marketing of Tata Cards. It issued a revenue of PAT of Rs. 3150 Crore in FY24. It is one of the largest diversified NBFCs in India with Assets Under Management worth Rs. 1.6Lakh Crore.

Details of the Merger

On 4 June 2024, Tata Motors Limited issued a press release stating the approval of the merger of TMFL with TCL by the Board of Directors of Tata Motors Limited. Based on the merger, TCL will issue equity shares to the shareholders of TMFL over a period of 9-12 months. This scheme of arrangement is subject to the approval of SEBI, RBI, NCLT, and all creditors and shareholders of TCL and TMFL.

The Need

Post-announcement about the demerger of the PV and CV segment of Tata Motors Limited has committed itself to focus on better allocation capital on emerging technologies and products. Since TCL had a limited presence in CV and PV financing, the merger will help them expand their financing segments and will also provide differentiated growth to employees.

Conclusion: The issuance of TCL equity shares to TMFL will result in Tata Motors Limited effectively holding a 4.7% stake in the merged entity. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.