Tata Motors Decision
Tata Motors has decided to postpone its plans to raise additional capital for its electric vehicle (EV) subsidiary, Tata Passenger Electric Mobility (TPEM).
Financial Break-even and EBITDA Positivity
The senior official from Tata Motors mentioned that the electric passenger car business has recently broken even financially.
The business is expected to become EBITDA positive (Earnings Before Interest, Taxes, Depreciation, and Amortization) once it receives Production Linked Incentive (PLI) proceeds from the government.
No Current Plans for Capital Raise
According to PB Balaji, the CFO of Tata Motors, there is currently no plan for raising capital in the EV arm.
Market Conditions Assessment
The decision is based on the assessment of the current market conditions, which are considered unfavorable for any kind of fundraising.
Importance of Market Conditions and Valuation
Balaji highlighted the importance of assessing the market conditions and the valuation at which funds could be obtained before considering any future capital raise for the EV business.
Previous Capital Raising Plans
In 2021, Tata Motors had initially announced a plan to raise $2 billion for its EV business.
Funds Raised So Far
$1 billion has already been raised from TPG Rise Climate, securing an 11 to 15 percent stake in the EV wing at a valuation of approximately $9.1 billion.
The first tranche of the investment was received in March 2022, and the second round of funding closed in January 2023.
Utilization of Raised Funds
The CFO mentioned that the first round of fundraising generated $1 billion, which is considered adequate for sustaining ongoing investments in the electric vehicle segment.
Future Capital Raising Evaluation
While there are no immediate plans for capital raising, Balaji indicated that the company would evaluate the need and potential market conditions when considering any future capital raise for the EV business.