Tata Motors open to stake sale in finance arm, expects Rs 50k crore AUM by 2020


Tata Motors is open to divesting stake in its financing arm, Tata Motors Finance, which is expected to have Rs 50,000 crore of assets under management by 2020, according to company officials.

The auto major, however, intends to keep control in Tata Motors Finance Ltd (TMFL), an entity which it expects to play a key role in its future growth even as it sells a stake in other businesses or winds up some operations abroad as part of a restructuring exercise.

“Of course, we are very clear that we will now continue to invest as far as Tata Motors Finance is concerned. We will maintain control as far as Tata Motors Finance is concerned. But clearly, there is no intention to say that it should always hold at 100 percent. That is also clear,” Tata Motors Group CFO PB Balaji told analysts.

He said the company expects “a very strong broad-based rebound” in TMFL, which saw 24 percent increase in assets under management (AUM) in 2017-18 at Rs 27,932 crore as against Rs 22,517 crore in 2016-17.

“Probably the most heartening to see is gross NPA has gone from 18 percent last year (FY17) down to 4 percent (in FY18) and the business actually generates an ROE (return on equity) of 17 percent,” Balaji added.

Elaborating on strategic goals, Tata Motors Finance Ltd(TMFL) CEO Samrat Gupta said in an investor presentation that the company is aiming to be a “Rs 50,000 crore asset under management group” by 2020.

As part of the plan, TMFL also plans to expand its reach by increasing total branches across India to 500 by 2020 from 270 at present, he added.

Moreover, Gupta said TMFL is also targeting to “attain 20 percent sustainable ROE” by 2020.

Apart from driving up financing of its new vehicles by TMFL, Tata Motors also looking at the financing arm to help its partner suppliers with poor financial health.

Conducting the financial risk assessment of stressed vendors, providing assistance in correcting capital structure and financial working capital requirements are some of the areas that Tata Motors is looking to leverage on TMFL.

The significance of TMFL to Tata Motors is in contrast to other businesses such as defence the sale of which is in progress.

Balaji said Tata Motors is “now holding for sale of a stake in Tata Technologies as well as Tata Hitachi” and some small shareholding in other companies like Tata Steel.

“We are winding up our Spain business (Tata Hispano), which is already in final stages as well as Tata Precision in Singapore has been wound up,” he added.



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