TPG fund to invest $1 bn in Tata Motors EV arm at $9.1 bn valuation
Photo Credit: Reuters

Private equity firm TPG's Rise Climate Fund has decided to invest Rs 7,500 crore (around $1 billion) in the newly incorporated wholly-owned subsidiary of Tata Motors to expand its passenger electric mobility business, the Tata Group firm said on Tuesday. 

Abu Dhabi's ADQ will be a co-investor, Tata Motor’s investor presentation said. 

Tata will form a separate electric mobility subsidiary Tata EVCo in which TPG and ADQ will make the investment at an implied equity valuation of up to $9.1 billion for a 11-15% stake in next 18 months.

The EV arm will be issuing 50 million A1 compulsorily convertible preference shares (CCPS) and 25 million A2 compulsorily convertible preference shares to TPG Rise for an aggregate of Rs 7,500 crore. 

The funds will be used to invest in electric vehicles, dedicated BEV platforms, charging infrastructure and battery technologies, Tata Motors said. 

The Indian automaker has plans to launch 10 new EVs by 2025 as well as invest in setting up charging infrastructure across the country. 

In September, Ola Electric, the electric vehicle arm of ride-sharing startup Ola Cabs, raised over $200 million in a round led by Falcon Edge, SoftBank and others, pushing its valuation to $3 billion.  

Last week, VCCircle and Mint reported that the Ola EV arm is is in the final stages of raising yet another $200 million as part of a fresh raise which could value the startup at over $5 billion. 

Tata Motors expects the first round of capital infusion from TPG to be completed by March 2022 and the entire funds will be infused by end of 2022. 

Morgan Stanley and JP Morgan were joint financial advisors to Tata Motors on the deal. Meanwhile, BofA Securities India was representing TPG Rise Climate for this transaction. 

Set up in early 2021, TPG Rise Climate is a $7 billion fund with a focus on investing in companies that enable carbon reduction in a quantifiable way. 

In July, TPG Rise Climate, the climate investing strategy of global impact investing platform TPG Rise, marked the first close of its inaugural fund at $5.4 billion (Rs 40,199 crore) and expects to hold a final close in the fourth quarter of 2021. 

The Rise Climate Coalition comprises of more than 20 founding companies and members including 3M, ADM, Allianz, Allstate, Alphabet, Apple, AXA, Bank of America, Boeing, Dow, Exor, FedEx, GE, General Motors, Honeywell, John Deere, Michael R. Bloomberg, NIKE, Sumitomo Mitsui Banking Corporation, Smithfield Foods, and TD Bank Group.  

Multiple firms have set up climate platforms in recent years. In 2020, BlackRock-backed group said it aims to raise an initial $500 million for a private equity fund that will invest in climate change-linked infrastructure upgrades in emerging markets. Earlier in July, IKEA and Rockefeller set up a $1 billion global climate change platform. 

The Green Growth Equity Fund is a climate fund anchored by the governments of India and the UK and managed by EverSource Capital, a 50:50 joint venture between Everstone Capital and European solar energy developer Lightsource BP.  

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