Tata Motors is strategizing a significant restructuring move, aiming to separate its vehicle financing subsidiaries under Tata Motors Finance Ltd and merge them with Tata Capital. This initiative, as insiders revealed, seeks to streamline operations and alleviate the balance sheet leverage of the automotive giant. The proposed process involves a share-swap agreement wherein Tata Sons, the conglomerate's holding company, will offer Tata Capital shares to Tata Motors, resulting in the latter acquiring a minority stake in Tata Capital.

Tata Capital, a flagship financial services entity of the Tata conglomerate, is primarily engaged in offering a diverse range of financial products, including commercial and consumer loans, wealth management, private equity, and credit card services. The valuation of Tata Motors Finance is estimated to be between Rs 15,000-20,000 crore, representing a significant premium compared to the assessments by equity analysts. An official announcement of this restructuring is anticipated shortly, with Bank of America advising Tata Motors on this strategic move.

From Tata Capital's perspective, this realignment aligns with its objective of consolidating the group's financial services portfolio ahead of its anticipated IPO in 2024-25. As per Reserve Bank of India (RBI) regulations, Tata Capital Financial Services, along with Tata Sons, are classified as upper layer NBFC.