The Reserve Bank of India has granted approval for the merger of Tata Capital with Tata Motors Finance, setting the stage for the creation of India’s 12th largest non-banking finance company. This approval follows the earlier green light from the Competition Commission of India.
The merger is strategic, aiming to tap into the burgeoning markets for commercial vehicle and passenger car financing. With digital enhancements planned, Tata Capital seeks to improve customer service and offer new growth avenues for its employees.
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As part of the merger terms, Tata Capital will issue shares to TMFL shareholders, resulting in Tata Motors acquiring a 4.7% stake in the combined entity. This move is part of broader efforts to consolidate Tata’s financial services under a single umbrella.
Tata Sons has demonstrated its commitment to this venture by investing Rs 6,097 crore in Tata Capital over the past five years, steering the company towards becoming a retail-focused financial powerhouse.
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Additionally, Tata Sons is planning to bolster its position in the automotive sector by purchasing a 12.65% additional stake in Tata AutoComp Systems from Tata Capital, valuing the company at Rs 16,800 crore.
As the final piece in the structural puzzle, Tata Sons currently holds 92.83% of Tata Capital’s equity, with the rest owned by various Tata Group entities and trusts. This restructuring underscores Tata’s intent to streamline its operations and enhance shareholder value across its portfolio.
