Tata Motors has reached a deal to raise about $1 billion by selling a stake in its electric-vehicle business to a TPG fund and other investors, sending the automaker’s stock soaring more than 20% on Wednesday.
TPG Rise Climate and Abu Dhabi’s ADQ will invest 75 billion rupees for a 11-15% stake in Tata Motor’s electric-vehicle unit that values the business at $9.1 billion. Tata Motors is the leading EV manufacturer in India with a 70% market share in fiscal year 2021.
Tata Motors said it said it would invest over $2 billion in its EV business as part of its plan to expand its portfolio of 10 models over the next five years.
India’s government aims to have EVs make up 30% of private cars sales by 2030 to reduce it dependence on oil and to cut emissions. They currently account for less than 1%, so the government in introducing incentives to spur the process. Many of India’s top automakers still have yet to begin selling EVs.
Tata Motors’ shares have surged of 278% over the past year, lifting the stock to a four-year high of 506.90 rupees. Some of those recent gains were fueled by speculation that Tata group, the parent of Tata Motors, might be interested in acquiring Ford’s plants in India.
Last week, Natarajan Chandrasekaran, chairman of Tata Sons, the holding company of the diversified Tata group, met with M.K. Stalin, Chief Minister of the southern Indian State of Tamil Nadu, in Chennai. Although Tata group said Chandrasekaran’s meeting with Stalin was just a courtesy visit, the fact that one of Ford’s plants is located near Chennai may be more than just a coincidence.
The U.S. auto giant has two plants–the one at Maraimalai Nagar near Chennai and the other at Sanand, near Ahmedabad in the western State of Gujarat. And Ford had announced just last month that it decided to stop making cars for the Indian market.
Tata Motors has a plant at Sanand, with a capacity of 400 vehicles a day in two shifts where it makes cars such as the Tigor and Tiago. It has another plant in Pune in Maharashtra, where, apart from commercial vehicles, the company produces cars such as the Zest, Bolt and Nexon.
Adding further fuel to the speculation of a possible deal for Tata Motors was a prior meeting between the Tamil Nadu Chief Minister and Girish Wagh, an executive director from Tata Motors. That courtesy visit took place just over a week before Chandrasekaran’s meeting.