Tata Motors Finance To Merge With Tata Capital

Tata Motors Finance Ltd. will merge with Tata Capital Ltd., according to a statement on Tuesday. The board of both the companies and Tata Motors Ltd., approved the merger through a National Company Law Tribunal scheme of arrangement.

The process of the merger involves a share swap agreement—Tata Capital will issue its equity shares to the shareholders of Tata Motors Finance. As a result, Tata Motors will end up holding 4.7% stake in the newly formed merged entity.

It will also take about nine to 12 months for the merger to be completed, the statement said.

"The merger will not have any adverse impact on customers or creditors of TMFL (Tata Motors Finance Ltd.)," it said.

Through this, Tata Motors would exit the non-core businesses and focus on capital spends related to emerging technologies and products, as stated before on multiple occasions.

Tata Motors Finance is primarily engaged in the business of giving loans for commercial vehicles, passenger vehicles, dealers and vendors. Since Tata Capital had limited presence in the mentioned areas, the merger would help the company gain more customers in the commercial vehicle and passenger vehicle financing segments.

While the proposed merger has been approved by the respective companies' boards, its completion is subject to the approval of Reserve Bank of India, National Company Law Tribunal, Securities and Exchange Board of India, and other authorities.

The plan for merging Tata Motors Finance with Tata Capital is also part of the operational restructuring, ahead of the latter going public. For Tata Capital's IPO, the company must be compliant with RBI's scale-based regulations, according to which upper-layer, non-banking financial companies have to list on the exchanges within three years of being notified.

Of the 16 upper-layer NBFCs notified in September 2022 by RBI, Tata Capital is one. Accordingly, it needs to be listed by 2025.

According to the statement, Tata Motors Finance has assets under management worth Rs 32,500 crore. It reported a PAT of Rs 52 crore in FY24.

Tata Capital, on a consolidated basis, had a loan book of Rs 1.57 lakh crore, up 35% YoY in FY24, according to the investor presentation for the quarter and year-ended March 31. Its PAT was at Rs 3,150 crore, up 37% YoY.

The company's disbursals increased 40% YoY to Rs 1.05 lakh crore.