Tata Capital Strengthens Vehicle Financing Arm with Tata Motors Finance Merger

Tata Motors Finance Limited (TMFL) has ceased to be a step-down wholly owned subsidiary of Tata Motors Ltd (TML) as of May 8. The development, sanctioned by the Mumbai bench of the National Company Law Tribunal on May 6, sees TMFL becoming part of Tata Capital Ltd (TCL). The transition, approved during board meetings on June 4, 2024, across TML, TMFL, and TCL, marks a major realignment within the Tata Group's financial services arm.

The merger aligns with TML’s strategic objective of focusing on core businesses, particularly those tied to emerging technologies and products, while exiting non-core operations. As part of the arrangement, TCL will issue equity shares to TMFL shareholders, resulting in TML holding an effective 4.7% stake in the merged entity.

Tata Capital Ltd, one of India’s largest diversified non-banking financial companies (NBFCs), with assets under management of Rs 1.6 lakh crore, will significantly enhance its customer base in commercial vehicle (CV) and passenger vehicle (PV) financing through this merger. TMFL, which primarily offers financing solutions for new and used CVs, PVs, dealers, and vendors, boasts an AUM of Rs 32.5K crore.

The merger will not have any adverse impact on customers or creditors of TMFL. E&Y, ICICI Securities, and Wadia Ghandy & Co are the transaction advisors to TCL, while PwC, Axis Capital, and AZB & Partners are the transaction advisors to TMFL.

Way Forward

As Tata Motors Finance integrates into Tata Capital, the latter is set to gain a foothold in the rapidly growing CV and PV financing segments, broadening its diversified portfolio. Tata Motors' decision to realign its finance operations underscores its focus on capitalizing on emerging automotive technologies while ensuring a seamless transition for existing TMFL customers and stakeholders. The merger marks a calculated step in fortifying Tata Capital’s position as a leader in India's NBFC landscape.