- Tata Motors was in talks with Warburg Pincus almost 3 years ago for a potential equity stake sale in Tata Technologies, which was founded as a business unit of TML in 1989. However, the deal was called off later.
Tata Technologies Ltd and Tata Hitachi Construction Machinery Company Pvt Ltd are first group businesses being put on the block for stake sale under Tata Motors’ deleverage plan, which aims to make the company debt free in 3 years, three people aware of the plans told Mint.
“Tata Motors has resumed talks with multiple stakeholders for potential equity stake sale in its software arm and in the Hitachi joint venture. The intent is to monetize non-core assets and the exercise has begun with these two companies,” said the first person, requesting anonymity.
Tata Motors (TML) was in talks with Warburg Pincus almost 3 years ago for a potential equity stake sale in Tata Technologies, which was founded as a business unit of TML in 1989. However, the deal was called off later.
“While TML has now called out these two companies first off the block, more non-core businesses would be opened up for stake sale soon. The company is also open to equity infusion by promoters towards reducing its debt,” said the second person.
The company’s deleverage plan is critical for reducing its soaring net consolidated debt, which rose from ₹48,000 crore as of 31 March to ₹68,000 crore as of 31 July on account of extensive cash burn due to covid-19 led disruptions.
“There is nothing fresh to share beyond what was said in the AGM,” a Tata Motors spokesperson said, declining to comment on the matter.
Tata Motors Group’s global vehicle wholesales for the June quarter, including volumes from its British subsidiary Jaguar Land Rover Plc (JLR), declined 64% year-on-year to 91,594 units. Low vehicle sales resulted in a sharp decline of 48% in consolidated revenue, which was at ₹31,983 crore, and a PBT loss of ₹6,184 crore for the June quarter.
Addressing the shareholders in the annual general meeting last month, N Chandrasekaran, chairman, Tata Motors said that while the management plans to make the company debt free in 3 years, it is already taking action to generate free cash flows (FCF) across its India and JLR businesses.
“The TML Group will also look to unlock non-core investments,” Chandra had said, adding that the overall investments of the group are reduced by 50% for the ongoing fiscal.
Tata Motors has been implementing aggressive measures to control costs and save cash to generate FCF while shoring up liquidity to sail through the crisis.
The company’s cost and cash saving plans look to achieve cumulative savings of GBP 6 billion at JLR and ₹6,000 crore of cash savings in its India business by end FY2021. These include roll back of capex investments to GBP 2.5 billion (from GBP 4 billion earlier) at JLR and to ₹1500 crore (from ₹4500 crore) at its domestic business this fiscal.
The management looks to make TML India business FCF positive by FY21, JLR by FY22 and passenger car business by FY23. While the latter is hived off to create a separate legal entity, Tata Motors has been in talks for strategic partnership as part of its deleverage plan.