BENGALURU : Shares of India's Tata Motors rose nearly 20per cent on Wednesday, a day after the Jaguar and Land Rover owner raised funds from private equity firm TPG and said it would invest over US$2 billion in its electric vehicle (EV) business over the next five years.
Tata Motors said on Tuesday TPG's Rise Climate Fund and Abu Dhabi state holding company ADQ had agreed to invest about US$1 billion to expand the company's EV business for which it would form a separate unit.
The fundraising is the first major one by an Indian carmaker in the EV space when global automakers such as General Motors, Volkswagen and Toyota Motor are spending heavily to speed up EV adoption.
The move to set up a separate EV subsidiary and get funding from leading private equity players like TPG would give Tata Motors access to TPG's network of world-class EV capabilities to further fine-tune its strategy, Ambit Capital analysts said in a note.
India intends for EVs to make up 30per cent of total car sales by 2030 from less than 1per cent at present to reduce its oil dependence and cut pollution. To achieve the target, the government has launched several incentive schemes including one for setting up local battery manufacturing.
Large investments, more product options and favourable government policies will accelerate the pace of EV adoption in India, Emkay Global analysts said in a note.
Tata Motors is India's top electric car seller with sports utility vehicle Nexon and Tigor compact EV, and plans to launch 10 new electric models by 2025. But several companies, including India's top carmaker Maruti Suzuki, have yet to enter the space.
Tata's move also comes at a time when Tesla Inc, the world's biggest electric carmaker, is preparing to launch its cars in India.
Shares of Tata Motors have gained about 48per cent so far this month, hitting an over 4-1/2-year high on Wednesday. With a 168per cent year-to-date surge, the stock has outperformed the broader Nifty auto index, which has gained about 28per cent.
(Reporting by Nallur Sethuraman in Bengaluru; Editing by Subhranshu Sahu)