Tata Motors ready to sell defence biz for Rs 2,475cr

MUMBAI: Tata Motors will sell its defence business to sister company Tata Advanced Systems (TAS) for up to Rs 2,475 crore. The sale forms part of Tata Motors’ strategy of monetising its non-core assets and use the proceeds to bring down its debt, while for TAS, the transaction aids in consolidating its presence in the defence sector.

As on December 31, 2017, Tata Motors had a debt of Rs 47,777 crore. While some part of Tata Motors’ defence business is housed within the company, the rest is under its wholly owned subsidiary TAL Manufacturing Solutions (TAL). TAL is being sold for an enterprise value of Rs 625 crore, whereas the defence unit of Tata Motors is being transferred for Rs 1,850 crore. Of the Rs 1,850 crore, Tata Motors will get Rs 100 crore upfront on completion of the transaction and the balance will be received on a deferred basis spread across 15 years starting from fiscal 2020.

Before selling TAL, Tata Motors will acquire the non-aerospace business (robotics) from it for Rs 10 lakh. A couple of months ago, Tata Power announced the sale of its defence portfolio to TAS for Rs 2,230 crore. Tata Motors, said its CEO Guenter Butschek, decided to sell the defence business to TAS, among other factors, as the latter is better equipped to handle big and complex defence contracts. Besides, the transaction allows Tata Motors to participate in the future growth of the defence business through a revenue-share agreement, Butschek said.

Apart from Tata Motors, Tata Power and TAS, the Tata Group’s defence business is dispersed across Titan, Tata Technologies, TCS, Tata Steel and Voltas.

Tata Motors