Tata Sons, the holding company of the Tata Group, is preparing to acquire an additional 12.65% stake in Tata AutoComp Systems (TACO) from Tata Capital. The proposed acquisition, worth ₹2,122 crore, will raise Tata Sons' stake in TACO to 53%. This investment positions Tata Sons as a stronger player within its auto components business.
Investors keen to invest in stocks may find this deal interesting, as it highlights Tata's strategic moves to consolidate its holdings across different sectors.
Tata Capital’s stake and financial impact
Tata Capital currently holds a 12.65% stake in Tata AutoComp and plans to sell the remaining portion to Tata Sons in two stages. In June 2024, Tata Capital sold a 5.08% stake to Tata Sons for ₹850 crore and now proposes to sell the remaining 7.57% stake for ₹1,272 crore. Once the transaction is complete, Tata Capital will fully exit its stake in Tata AutoComp.
Tata Motors, another key Tata Group company, holds a 26% stake in Tata AutoComp. Other Tata entities hold the remaining equity in the company. With the acquisition, Tata Sons aims to strengthen its position in the fast-growing auto components sector. The total valuation of Tata AutoComp now stands at approximately ₹16,800 crore.
Related party transactions and regulatory approval
Tata Capital has sought shareholder approval for the related party transaction with Tata Sons. According to Tata Capital’s filings, the total value of the transaction, along with other transactions involving Tata Sons, is expected to be around ₹2,500 crore for FY25. This figure represents 13.76% of Tata Capital’s consolidated turnover for FY24.
To ensure transparency and compliance with regulations, Tata AutoComp was independently valued. The transaction was then reviewed by Tata Capital’s audit committee. Following a detailed evaluation, the committee approved the related party transaction with Tata Sons, confirming that it would be carried out on an arm's length basis and in the ordinary course of business.
Tata Capital's future plans
Tata Capital is gearing up for a potential listing following its classification by the Reserve Bank of India (RBI) as an NBFC-Upper Layer. This classification requires the company to list its shares by September 2025. Tata Capital is also in the process of merging Tata Motors' auto finance arms into its own operations, further consolidating its financial services.
The sale of its stake in Tata AutoComp forms part of Tata Capital's broader strategy to maintain a strong capital adequacy ratio and ensure continued business growth. The company plans to engage in multiple transactions with Tata Sons, including the sale of investments and other business collaborations.
Conclusion
Tata Sons' acquisition of a 12.65% stake in Tata AutoComp for ₹2,122 crore reinforces its commitment to the auto components industry. As the deal nears closure, expected by the end of the financial year, it signals Tata’s broader ambitions to strengthen its presence in this sector. For those looking to invest in stocks, these strategic moves may present a promising opportunity, given Tata's focus on consolidation and growth across its various businesses.
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