To sell the equity stake in Tata Motors Finance through securitisation, the parent company Tata Motors is in the process of forming collaborations with banks.
Tata Motors has planned to reduce the asset under management (AUM) base of its finance arm by about Rs 9,000 crore to Rs 23,000 crore from Rs 32,000 crore over three years. For this, Tata Motors will now collaborate with banks and other market participants.
Two years back, Tata Motors said that it was open to forming the partnerships in TMF but while retaining the majority stakes in it. It was planning for an AUM target of Rs 50,000 crore by 2020 which it was not able to achieve.
TMF had an AUM of Rs 36,881 crore in FY20 which was nearly 4 per cent low from Rs 38,311 crore in FY19. The company has initially planned to infuse Rs 400 crore annually to enhance business growth but later changed the decision.
Chief Finance Officer of Tata Motors, P B Balaji said, “No plans to invest in Tata Motors Finance at this point in time. They will be self-sufficient in their funding requirements by sourcing and selling down assets. We will go asset-light there”.
Tata Motors said, “While a defined set of assets is assigned to a bank, TMF will continue to collect EMIs from original borrowers in the capacity of a collection agent for the assignee bank.
It added, “With securitisation, borrowing costs are being reduced and by co-originating new contracts, risks are being shared and reduced. Such an ‘Asset Lite’ model will enable sustainable ROE generation and limit any additional requirement for equity infusion”.