Tata Motors looks to raise 1 bn euros via equity for Iveco acquisition

New Delhi, Jul 31 (PTI) Tata Motors is looking to raise about 1 billion euros through equity as part of its plans to term out the 3.8 billion euros bridge financing facility for acquiring Italian commercial vehicle maker Iveco Group, which will catapult it to the fourth largest big truckmaker globally, its top officials said on Thursday.

The company had on Wednesday announced that it would acquire Iveco Group, excluding its defence business, for euro 3.8 billion (nearly Rs 38,240 crore) in a deal which is set to be the Indian automaker's biggest buyout.

Addressing a conference call, Tata Motors Group CFO PB Balaji said, "The funding of 3.8 billion euros has already been secured through bridge financing facility committed by Morgan Stanley & MUFG and this is expected to be syndicated, subsequently termed out by a combination of equity and long-term debt over next 12 to 18 months after the closure of the transaction." He further said, "We expect this transaction to close sometime by April next year, assuming all the regulatory approvals come through." When asked how much fund Tata Motors is looking to raise through equity, Balaji said, "We have not yet made up our mind in terms of the magnitude of the equity raise. It obviously has to be discussed with the rating agencies as well, but we believe close to about 'a billion euros kind of a raise' is what the ballpark range will come on, to how much exactly it will be." Asserting that the company is "comfortable with respect to the metrics that we will land with that kind of a fundraise", he said, adding, "Also, other thing is that of the monetisation of Tata Capital stake that also needs to be factored in and together that more or less takes care of it (terming out of the bridge financing)." On the significance of the acquisition, Balaji said, "Strategically, this ranks right up there in terms of the top acquisition that the (Tata) group has done." From a commercial vehicle business perspective, it is very strategic and something that is "a very, very large move" from an industry perspective, as it is a very consolidated industry, he noted.

"With this…we move into the number four in terms of 'greater than six tonne' trucks portfolio, and within touching distance of the two and the three and the fourth that are already there," Balaji said.

As per an investor presentation by the company, after combining Iveco's volumes, Tata Motors Group will have a total sales of 2.3 lakh units annually in the over 6 tonne trucks category same with the Volvo Group in the fourth position behind leaders Daimler Group (3.5 lakh units), CNHTC Group (2.5 lakh units), and Traton Group (2.4 lakh units).

Before the proposed acquisition, Tata Motors Group was the sixth largest with 1.8 lakh units, and Iveco was 17th with 50,000 units annually.

Overall, the acquisition creates a stronger, more diversified entity with a significant global presence and overall sales of over 5,40,000 units per year.

Tata Motors Executive Director Girish Wagh said the product portfolio is also very complementary to each other. The pricing range and capabilities are also very complementary.

"They (Iveco) have strong technology investments in powertrain electrification, in hydrogen, in ADAS...and complemented with the Indian frugal engineering capability, design to value capability, I think these capabilities put together will bring strong competitiveness for both the businesses together," Wagh noted.

In terms of synergies, he said, "There are some revenue synergies wherein we can launch Iveco products in India or the markets where Tata Motors is strong. We can launch Tata Motors products in the markets where Iveco is strong, especially Latin America." The acquisition, once completed, will not only provide access to products, platforms and manufacturing facilities, but it will also give Tata Motors access to a very strong network for sales and after-sales, not just in Europe, but also in Latin America, which otherwise takes a lot of time, Wagh noted.

"We will also get access to retail financing capabilities in many of these markets," he noted.

When asked if there will be job redundancies at Iveco after the acquisition, Balaji said, "No cost heads are going to get rationalised with respect to the factory footprint or employees in the factories, as far as the Italian setup is concerned." Iveco has over 32,000 employees globally as of December 2024, excluding defence and discontinued operations.

Tata Motors has been "at it for the last six months," Balaji said, when asked for how long the company has been in talks with Iveco.

Wagh said Iveco currently has around 70-80 per cent capacity utilisation at its factories in Italy, Spain, Czechoslovakia and France.

It has 16 manufacturing sites and 23 R&D centres in Europe. In South America, it has two manufacturing sites and one R&D centre. PTI RKL IAS SHW