In March 2020, the Tata Motors board had approved a plan to hive off the passenger vehicle (PV) business, which includes EVs, into a separate subsidiary and seek investors to help the unit secure its long-term viability.
The officials cited above said the Tata Group has high expectations with regard to the EV business valuation, but it will need to show more volumes if the expectations are to be met.
There have been reports that Tata Motors has talked to Chinese auto major Geely with the intention of roping in the company as a strategic partner for the PV business.
Its subsidiary Jaguar Land Rover (JLR) has a tie-up with Chery Automobile of China.
“Discussions are open for a strategic partner or financial investors for the passenger vehicle business and the electric vehicle space is seen as a strong growth engine. Plans are open-ended currently in terms of likely partnerships,” a company insider said.
Morgan Stanley and JP Morgan are understood to be investment bankers for the proposed plan.
Tata Motors has received shareholder approval and now needs to receive a nod from National Company Law Tribunal before the PV business spinoff gets completed. The company is hoping to complete the process by the end of the September quarter this year.
“The subsidiarisation of the PV business is currently ongoing and is expected to complete this fiscal, post requisite approvals,” said the company spokesperson in response to ET’s email query.
“Tata Motors is looking to tie up with strategic investors as it plans to reduce its debts and bring it close to zero levels in the next 2-3 years,” said Mitul Shah, head of research, Reliance Securities.
The PV division had losses of Rs 11,173 crore as of June end 2020, while its valuation has been fixed at Rs 9,417 crore, a company notice to the shareholders in February 2021 said.
The automaker has priced its electric cars at 15-20% premium to conventional petrol/diesel-powered vehicles. “That the price premium is competitive between conventional engines and electric variants gives an added advantage to Tata Motors,” Shah added.
Tata Motors has stated that it will leverage group companies such as Tata Power for setting up charging infrastructure, Tata Auto Comp for battery packs,
for lithium ion cells and Tata Finance for financing options.