Tata Motors may rope in investors for CV arm | The Financial Express

Tata Motors may rope in investors for CV arm

“There will be interest from third-party investors, given the business case we have,” Girish Wagh, executive director, Tata Motors, told FE.

Tata Motors may rope in investors for CV arm
The company already has assured orders of 3,600 electric buses as part of the 5,450 e-bus tender floated by the Centre-backed Convergence Energy Services (CESL). With an average price of an electric bus being between Rs 1.5 crore and Rs 2 crore, the new Tata Motors subsidiary would need around Rs 5,400 crore to Rs 7,200 crore for buying the 3,600 e-buses.

By Swaraj Baggonkar

Tata Motors is likely to rope in investors for its newly formed wholly-owned mobility subsidiary, TML Smart City Mobility Solutions (TSCMSL), to secure funds to fulfil orders from various state governments under tenders for electric buses.

The company already has assured orders of 3,600 electric buses as part of the 5,450 e-bus tender floated by the Centre-backed Convergence Energy Services (CESL). With an average price of an electric bus being between Rs 1.5 crore and Rs 2 crore, the new Tata Motors subsidiary would need around Rs 5,400 crore to Rs 7,200 crore for buying the 3,600 e-buses.

TSCMSL will not just operate and maintain these buses but also needs to buy and own them, which has never been done by Tata Motors so far. As the contract to run these buses would be for a period of 12 years, in select cities where Tata Motors has bagged the contract, this new company will be asset-heavy whose balance sheet will reflect all the buses.

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The company is looking at the model which it has adopted for its passenger EV business. Here, after hiving off the EV unit, Tata Motors secured an investment of Rs 7,500 crore from TPG Rise Climate and co-investor ADQ in exchange for an 11-15% stake in the newly formed subsidiary. This transaction valued Tata Motors’ passenger electric vehicle business at $9.1 billion.

“There will be interest from third-party investors, given the business case we have,” Girish Wagh, executive director, Tata Motors, told FE.

TSCMSL was incorporated to manufacture, design and develop electric, diesel, CNG, hybrid, and new energy vehicles (including hydrogen fuel cell). It has received an initial capital of Rs 5 crore from parent company Tata Motors and the company is looking at additional investments from PE investors just as it did for its passenger EV business.

Tata Motors has been involved in maintaining and partly operating intra-city buses for Delhi Transport Corporation (DTC) for more than a decade.

“(Operate and maintain) is a new business model for us but not alien. We have been supporting Delhi Transport Corporation buses for 12 years now. The only difference was that we were not owning these buses but only maintaining them and partly operating them. We have developed a good experience in this. Owning the vehicle was the third dimension that was added and we have got good learning from the buses we have deployed,” Wagh said.

At the end of June quarter, Tata Motors’ net debt stood at Rs 60,700 crore, of which the external debt component is of Rs 34,800 crore. Tata Motors chairman N Chandrasekaran has promised to restore profitability of Tata Motors and get to near zero net debt by FY24.

“Own, operate and maintain — the mobility business will be asset heavy business. Standardisation of the specification, aggregation of the tenders and FAME-II subsidy was the first support that led to the big tender of 5,450 buses. The second level of de-bottlenecking is going to be how do we address the initial funding and how to address the security of monthly payments. We are talking to the government on both these aspects, they are also quite responsive and they want to provide the solutions for this,” Wagh added.

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