The Board of Directors of Tata Motors Limited (TML), along with Tata Capital Limited (TCL) and Tata Motors Finance Ltd (TMFL), has approved a merger plan, subject to NCLT approval, where TMFL will merge with TCL. Under this arrangement, TCL will issue its equity shares to TMFL shareholders, resulting in TML holding a 4.7% stake in the combined entity.
TCL, a highly rated NBFC in India, boasts an extensive portfolio of over INR 1.6 trillion in assets under management (AUM), catering to a wide range of customers across Retail, SME, and Corporate Segments with more than 25 product offerings. Meanwhile, TMFL primarily focuses on providing financing solutions for both new and used commercial vehicles (CV), passenger vehicles (PV), dealers, and vendors, with an AUM of approximately INR 32.5 billion.
In the fiscal year 2024, TCL reported a profit after tax of INR 3,150 crore, while TMFL's profit after tax stood at INR 52 crore. This merger aligns with TML's strategic goal of divesting from non-core businesses and redirecting capital expenditure towards emerging technologies and products.
While TCL currently has limited involvement in CV/PV financing, the merger aims to broaden its customer base in these segments, leveraging innovative products and digital offerings to capture growth opportunities. The scheme is anticipated to undergo scrutiny and approval from regulatory bodies such as SEBI, RBI, and NCLT, as well as from TCL's and TMFL's shareholders and creditors. The entire process is estimated to take approximately 9-12 months to complete.
Importantly, the merger is not expected to adversely affect TMFL's customers or creditors. Transaction advisory services are being provided by E&Y, ICICI Securities, and Wadia Ghandy & Co for TCL, and by PwC, Axis Capital, and AZB & Partners for TMFL. Furthermore, Tata Motors' indirect stake in the merged entity will be held through its wholly-owned subsidiary, TMF Holdings Limited, which is an RBI-registered NBFC-CIC.