In a strategic move aimed at streamlining its operations and focusing on core businesses, the Board of Directors of Tata Motors Limited (TML), Tata Capital Limited (TCL), and Tata Motors Finance Ltd (TMFL) have approved a merger between TMFL and TCL. The merger, subject to regulatory approvals, is expected to be completed within 9-12 months.
Merger Details
As part of the merger, TCL will issue equity shares to TMFL shareholders, resulting in TML holding a 4.7% stake in the merged entity. TCL, one of India's largest diversified non-banking financial companies (NBFCs), has an asset under management (AUM) of approximately Rs 1.6 lakh crore and offers 25 plus product offerings across retail, SME, and corporate segments. TMFL, with an AUM of around Rs 32,500 crore, primarily provides financing solutions for commercial and passenger vehicles, dealers, and vendors.
Financial Performance
In FY24, TCL reported a profit after tax of Rs 3,150 crore, while TMFL reported a profit after tax of Rs 52 crore, as per the press release.
Strategic Benefits
The merger aligns with TML's objective of exiting non-core businesses and focusing on emerging technologies and products. TCL will gain access to new customers in the fast-growing commercial and passenger vehicle financing segments, which it plans to serve with innovative products and digital offerings. The merger will also provide differentiated growth opportunities for employees.
Transaction Advisors
EY, 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.
Regulatory Approvals
The scheme of arrangement is subject to approval from SEBI, RBI, NCLT, and all shareholders and creditors of TCL and TMFL. The merger is expected to be completed within 9-12 months and will not have any adverse impact on customers or creditors of TMFL.