The Competition Commission of India has approved the merger of Tata Motors Finance Ltd. with Tata Capital Ltd., according to a release on Tuesday. The proposed combination involves the merger of TMFL into TCL, with the latter emerging as the surviving entity under a scheme of arrangement to be filed with the National Company Law Tribunal.
The merger, approved by the boards of Tata Motors Ltd. and its subsidiaries, will include a share swap arrangement where TCL will issue its equity shares to the shareholders of TMFL. Following this, Tata Motors will hold a 4.7% stake in the newly merged entity.
TCL, a subsidiary of Tata Sons, operates as a non-banking financial company engaged in lending, leasing, factoring, and financing, while TMFL focuses on providing loans for purchasing new and pre-owned vehicles, particularly those manufactured by Tata Motors and its group companies. TMFL also provides loans and advances to transporters, dealers, and vendors of Tata Motors, including working capital and invoice discounting facilities.
The companies have clarified that the merger will not negatively impact customers or creditors of TMFL.
The transaction is part of Tata Motors' ongoing strategy to prepare for an initial public offering, which is required by the Reserve Bank of India's scale-based regulations for upper-layer NBFCs. TCL, which was notified by the RBI in 2022, must list on the exchanges by 2025.
The merger, expected to take nine to 12 months for completion, is still subject to approval from regulatory bodies, including the RBI, SEBI and the NCLT.
In the financial year 2024, TMFL had assets under management worth Rs 32,500 crore, reporting a profit after tax of Rs 52 crore. TCL had a consolidated loan book of Rs 1.57 lakh crore, with disbursals rising 40% year-on-year to Rs 1.05 lakh crore and PAT at Rs 3,150 crore, up 37% year-on-year.
Shares of Tata Motors closed 0.30% higher at Rs 1,035.45 per share on the BSE, compared to a 0.44% advance in the benchmark Sensex.
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