Tata Motors finance arms to sell loan assets of Rs 14,500 crore

Move to free up capital for both Tata Motors vehicle finance companies

The boards of Tata Motors Finance and Tata Motors Finance Solutions (TMFSL), the in-house financiers of Tata Motors vehicles, have approved plans to sell part of their loan assets and receivables of up to Rs 12,000 crore and Rs 2,500 crore, respectively, through securitisation or direct assignment of cash flows.

The move will free up capital for both companies and the proceeds will be used to push sales of parent Tata Motors — which is showing a steady growth in sales in the recent months with a 27 per cent rise for the month of February alone. The sale of loan books will be in either one or more tranches.

Bankers said there will be good demand for the loan books as both companies are rated high (Double A minus by Care Ratings) because of their strong operational linkages with parent and shared brand name.

The company is seeking shareholders’ approval to sell the books because according to the Companies Act, a company can sell, lease or dispose of any undertaking of a company only with the approval of the members of the company by way of a special resolution — if the investment of the company in the undertaking exceeds 20 per cent of its net worth, or the undertaking generates 20 per cent of the total income in the previous year.

According to the latest available data, Tata Motors Finance loans and advances was Rs 27,939.85 crore as on December 2021 and Tata Motors Finance Solutions loans and advances was Rs 6,956.70 crore as on September last year.

In a notice to its shareholders, Tata Motors Finance said in light of the current situation in the financial markets, it may enter one or more transactions for sale and transfer of loan assets and receivables of the company, through securitisation or direct assignment of cash flows, which may constitute “substantially the whole of the undertaking of the company” and hence it is seeking their approval.

Both companies, therefore, called an urgent extraordinary general meeting on Friday to approve the plans to sell part of their books. Both companies also sought shareholders’ approval to raise Rs 500 crore each as non-convertible debentures.

TMFL is a majority-owned subsidiary of TMF Holdings (TMFHL) which, in turn, is a wholly owned subsidiary of auto major, Tata Motors.  In 2015, TMFSL — another subsidiary of TMFHL — had purchased Tata Motors’ guaranteed business and used vehicle finance business from TMF Holdings on a slump sale basis. The objective of creating Tata Motors Finance Solutions was to have a dedicated focus on the manufacturer-guaranteed business, used vehicle financing business and de-risk the balance sheet of TMFL.