Tata Technologies, the engineering design services unit partially owned by Tata Motors, may soon sell a minority stake to American equity investment firm Warburg Pincus for Rs.2,300 crore. This announcement comes after months of talks between the two giants. While the official announcement is set to be made in about a month, sources close to the deal have revealed that Tata has been on the lookout to divest 26-40% for an $800 million (Rs.5,400 crore) for over a year now.
Tata Technologies started out in 1994 as a design subsidiary company for Tata Motors, which currently holds a 70% stake in the company. Other Tata group companies and senior executives own another 17%, and the remaining is owned by outside investors.
Primary revenue for Tata Technologies comes from Tata Motors and other Tata group companies, and the remainder comes from revenue in Europe, Asia Pacific, and North America. Almost 65% of the total business is from the automotive sector, 12% from the aerospace industry, and the remainder from other businesses like industrial machinery.
Since 1997, Warburg Pincus has invested around $3.8 billion in over 50 Indian companies like Alliance Tire, Ambuja Cement, Larkus Labs and Kotak Mahindra Bank. Last year, the equity investor spent Rs.840 crore for a 14% stake in PVR and has announced that it plans to invest $8 billion in India over the next decade.
Tata Motors had previously considered selling a controlling stake in the company for a valuation of $1 billion while also exploring the possibility of an IPO, which resulted in many PE funds like Apax, Advent, CPPIB, Carlyle, etc. exploring the investment opportunity.