Tata Motors is set to raise approximately €1 billion through equity to fund its €3.8 billion (Rs 38,240 crore) acquisition of Italy’s Iveco Group, a move that will position the Indian automaker as the world’s fourth-largest heavy truck manufacturer. The landmark deal, announced on Wednesday, excludes Iveco’s defence business and is poised to be Tata Motors’ largest-ever acquisition, surpassing its 2008 purchase of Jaguar Land Rover for $2.3 billion.

In a conference call, Tata Motors Group CFO PB Balaji outlined the financing strategy, revealing that the €3.8 billion deal is backed by a bridge financing facility from Morgan Stanley and MUFG Bank. “We’ve secured the funding, which will be syndicated and termed out over 12-18 months post-transaction closure, expected by April 2026, pending regulatory approvals,” Balaji said. The equity raise, estimated at €1 billion (Rs 10,000 crore), will be finalized after discussions with rating agencies, with additional funds from monetizing Tata Motors’ stake in Tata Capital’s upcoming IPO.

Balaji emphasized the deal’s strategic importance, calling it one of the Tata Group’s top acquisitions. “This catapults us to number four in the global over-6-tonne truck market, within striking distance of leaders like Daimler, CNHTC, and Traton,” he said. The combined entity will boast annual sales of 540,000 units and revenues of €22 billion (Rs 2.2 lakh crore), with Europe contributing 50%, India 35%, and the Americas 15%.

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Tata Motors Executive Director Girish Wagh highlighted the complementary nature of the two companies. “Iveco’s advanced technologies in powertrain electrification, hydrogen, and ADAS, combined with our frugal engineering, will enhance competitiveness,” Wagh said. The acquisition grants Tata Motors access to Iveco’s 16 European manufacturing sites, 23 R&D centers, and robust sales networks in Europe and Latin America, where Iveco derives 75% and 12% of its revenues, respectively. Tata’s dominance in India, where its commercial vehicle (CV) business generates 90% of its Rs 75,000 crore revenue, complements Iveco’s minimal presence in Asia.

The deal, structured through a Dutch subsidiary, TML CV Holdings PTE LTD, involves acquiring Exor’s 27.1% stake (43.1% voting rights) and a tender offer for remaining shares at €14.1 per share—a 22-25% premium over Iveco’s three-month average price. An extraordinary dividend of €5.5-6.0 per share from Iveco’s defence unit sale to Leonardo (€1.7 billion) will further sweeten the deal for shareholders.

Despite market skepticism, with Tata Motors’ shares falling 3.5% to Rs 668.40, analysts see long-term potential. Nuvama Institutional Equities projects a 4% earnings per share boost by the second year post-acquisition, though risks include a potential sales downturn in Europe and the US. The deal’s synergies, targeting €0.5 billion in free cash flow by FY28, will stem from shared R&D, procurement, and cross-market product launches, such as Iveco’s electric buses in India and Tata’s trucks in Latin America.

Balaji assured no job cuts or plant closures, citing non-financial covenants with the Italian government to preserve Iveco’s 32,000-strong workforce and Turin headquarters. “This is a growth-led transaction, not cost-cutting,” he said, drawing on lessons from the JLR integration. The Italian government, wary of strategic assets, will scrutinize the deal under its “golden power” legislation, but the exclusion of Iveco’s defence unit, sold to Leonardo, has eased concerns.

The acquisition aligns with Tata Motors’ post-demerger strategy to globalize its CV business, soon to be listed independently. With Iveco’s expertise in low-emission technologies and Tata’s cost-efficient engineering, the combined entity aims to lead in sustainable mobility, challenging European giants like Volvo and Daimler. As Tata Motors navigates regulatory hurdles and investor caution, this bold move signals its ambition to dominate the global CV market.

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