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The Reserve Bank of India (RBI) has approved the merger of Tata Capital, an unlisted entity, with Tata Motors Finance (TMFL), paving the way for the formation of India’s 12th largest non-banking finance company.
The RBI sent its “no-objection” to both companies earlier this month, according to the companies’ regulatory filings.
As consideration for the merger, Tata Capital will issue equity shares to the shareholders of TMFL, resulting in Tata Motors holding a 4.7 per cent stake in the merged entity.
In September, the Competition Commission of India cleared the merger. The banking regulator’s permission is key to moving the merger process forward, said a legal source.
The RBI’s approval is crucial for the company, which is expected to list its shares by September next year, following an earlier mandate from the regulator that requires all non-banking financial companies classified as upper layer to list their shares by September 2025.
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As of March 31, 2024, Tata Sons, the holding company of Tata Group, directly owns 92.83 per cent of Tata Capital’s equity shares, with the majority of the remaining stake held by other Tata Group companies and trusts.
Through this merger, Tata Capital aims to attract new customers in the rapidly growing commercial vehicle and passenger car financing segments. The company plans to enhance customer service with digital offerings while providing unique growth opportunities for its employees.
In the past five years, Tata Sons has invested a total of Rs 6,097 crore in Tata Capital, demonstrating the group’s commitment to enhancing its lending business and transforming it into a retail-focused financial services firm. Tata Capital is also funding the needs of various Tata Group affiliates, including suppliers, vendors, and dealers.
Tata Sons is also planning to acquire an additional 12.65 per cent stake in Tata AutoComp Systems for Rs 2,122 crore from Tata Capital at a total equity valuation of Rs 16,800 crore. Currently, Tata Sons holds a 40 per cent stake in the company, while Tata Motors holds a 26 per cent stake in Tata AutoComp, an automotive components firm.
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