Tata Motors Finance, the vehicle financing subsidiary of Tata Motors, will be merged with Tata Capital through an NCLT scheme of arrangement, after the boards of all the companies gave their approval on Tuesday.
As consideration for the merger, Tata Capital, will issue its equity shares to the shareholders of Tata Motors Finance which will result in Tata Motors effectively holding a 4.7% stake in the merged entity.
Tata Capital is the financial services company of Tata Sons and is one of the largest diversified non banking finance companirs in India with an assets under management (AUM) of Rs 1.6 lakh crore
Tata Motors Finance which has an AUM of Rs 32,500 crore, predominantly provides financing solutions for new and old commercial vehicles, passenger vehicles, dealers and vendors.
“The transaction is also in-line with Tata Motors’ stated objective of exiting non-core businesses and focus its capital spends on emerging technologies and products,” said a statement from the company.
Tata Capital has limited presence in commercial and passenger vehicles financing segments.
The scheme of arrangement will be subject to approval of regulators SEBI and RBI and the NCLT amongst others and all shareholders and creditors of both the companies will take about 9-12 months to complete, added the statement.
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.