Tata Capital and Tata Motors Finance merger: The Board of Directors of Tata Motors Limited (TML), Tata Capital Limited (TCL), and Tata Motors Finance Ltd. (TMFL) have today approved a merger of TMFL with TCL through an NCLT scheme of arrangement. As consideration for the merger, TCL will issue its equity shares to the shareholders of TMFL, resulting in TML effectively holding a 4.7% stake in the merged entity.
On December 3, the Mumbai NCLT bench, composed of technical member Charanjeet Singh Gulati and judicial member Lakshmi Gurung, ordered Tata Capital Ltd. and Tata Motors Finance Ltd. to meet with creditors and shareholders to get their merger approved.
Tata Capital has an AUM of nearly Rs 1.6 lakh crore and services customers with over 25 product offerings across retail, SME, and corporate segments. Tata Motors Finance funds the purchase of new vehicles manufactured by its parent, Tata Motors Ltd., and its group companies.
In FY 24, TCL and TMFL reported a profit after tax of INR 3,150 crore and INR 52 crore respectively.
Why is Tata Group seeking a merger between Tata Capital and Tata Motors Finance?
The Tata Group is merging Tata Motors Finance with Tata Capital to form a larger, unified financial services entity with a broader geographical presence, stronger capital, and a more robust asset base.
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The transaction is also in line with Tata Motors’ stated objective of exiting non-core businesses and focusing its capital spending on emerging technologies and products.
The companies, represented by counsel Hemant Sethi, argued that the merger would create growth opportunities for employees and pool expertise in the credit business.
Tata Capital has a limited presence in commercial vehicle (CV) and passenger vehicle (PV) financing. Through this merger, the NBFC aims to expand its customer base in the rapidly growing CV and PV financing sectors, offering innovative products and digital solutions, while also creating unique growth opportunities for its employees.
Tata Motors Finance and Tata Capital merger date
“Any scheme of arrangement between two major companies such as these typically takes three to four quarters to get complete,” Ruchi Khatlawala, a partner at law firm Little & Co. told ET.
“The merger is subject to the approval of Sebi, RBI, NCLT, shareholders, creditors and even certain sector regulators or government departments as the case may be, which is a time-consuming process.”
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As per Tata Motors’ website, the arrangement scheme will take nearly 9-12 months to complete.
TMFL and TCL merger details
The boards of Tata Motors, Tata Capital, and Tata Motors Finance approved the merger plan of the two NBFCs on June 4 this year. The deal also received approval from the Reserve Bank of India and the Competition Commission of India.
As consideration for the merger, Tata Capital will issue its equity shares to the shareholders of Tata Motors Finance. As a result, Tata Motors will effectively hold a 4.7% stake in the merged entity.
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The scheme of arrangement will be subject to approval of SEBI, RBI, NCLT amongst others and all shareholders and creditors of TCL and TMFL and will take ~9-12 months to complete. The merger will not have any adverse impact on customers or creditors of TMFL. E&Y, ICICI Securities, Wadia Ghandy & Co are the transaction advisors to TCL, while PwC, Axis Capital and AZB & Partners are the transaction advisors to TMFL.
Press Release here: https://www.tatamotors.com/press-releases/merger-of-tata-motors-finance-limited-with-tata-capital-limited/
