Tata Capital, Tata Motors Finance merger receives RBI's approval

The Reserve Bank of India (RBI) has approved the merger of Tata Capital, an unlisted entity, with Tata Motors Finance Ltd. (TMFL), facilitating the creation of India’s 12th largest non-banking financial company. According to regulatory filings, both companies received a “no-objection” from the RBI earlier this month.

Under the merger terms, Tata Capital will issue equity shares to TMFL shareholders, resulting in Tata Motors holding a 4.7% stake in the merged entity. The Competition Commission of India had previously approved the merger in September. This regulatory clearance from the RBI marks a crucial step in advancing the merger, which will allow the company to list shares by September 2025, in compliance with the regulator's mandate for large NBFCs to go public.

As of March 31, 2024, Tata Sons holds 92.83% of Tata Capital, with the remaining shares mainly held by other Tata Group entities and trusts. The merger will allow Tata Capital to grow in the commercial vehicle and passenger car financing sectors, enhance customer service through digital platforms, and provide unique growth opportunities for employees. In the past five years, Tata Sons has invested ₹6,097 crore in Tata Capital, highlighting its commitment to expanding the lending business with a focus on retail financial services. Tata Capital also serves the financing needs of Tata Group affiliates, including vendors and dealers.

In addition, Tata Sons plans to acquire a 12.65% stake in Tata AutoComp Systems from Tata Capital for ₹2,122 crore, valuing the company at ₹16,800 crore. This acquisition will raise Tata Sons' stake in the automotive components company to 52.65%, while Tata Motors retains a 26% stake.