The transaction, which values the IPO-bound Tata Technologies at around $2 billion, is in line with Tata Motors’ deleveraging strategy, according to a company release.

Tata Motors sold 9% to TPG Rise Climate for ₹1,467 crore and 0.9% to the Ratan Tata Endowment Foundation for ₹146.7 crore.

The transaction is expected to be completed by 27 October or on a mutually agreed date between the parties.

TPG Rise Climate, an investment arm of TPG’s $18 billion global impact investment platform, focuses on five climate sub-sectors: energy transition, green mobility, sustainable fuels, sustainable molecules, and carbon solutions.

The fund had previously invested $1 billion into Tata Passenger Electric Mobility Ltd and is a strategic partner in Tata Motors’ journey to create an electric passenger mobility business in India.

Tata Technologies, which provides engineering and digital services for the automotive and aerospace sectors, is preparing to go public, marking the first initial public offering for a Tata Group entity in nearly two decades since Tata Consultancy Services Ltd got listed in 2004.

Tata Technologies, which primarily acted as a captive outsourcing arm for Tata Motors in its initial years, has since been gradually diversifying away from it.

Over the last few years, the company has focused on electric vehicle makers globally, besides venturing into segments such as aerospace and other transportation sub-segments.

Tata Motors owns 74.69% stake in the company, while Alpha TC Holdings and Tata Capital Growth Fund I hold 7.26% and 3.63% respectively.

The pricing for the IPO is yet to be disclosed, but listed peers in the engineering research & design (ER&D) sectors, such as KPIT Technologies, Tata Elxsi and L&T Technology Services, could provide a potential benchmark.

Tata Motors, which announced its plan to take Tata Technologies public in December, will benefit from the cash flow the IPO will generate to achieve its debt reduction goals.

Shares of Tata Motors rose 4.73% to ₹ 667.10 on NSE.

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Updated: 14 Oct 2023, 05:06 AM IST