Tata Motors plans to raise close to €1 billion through equity via either a rights issue or qualified institutional placement (QIP) and monetise its stake in Tata Capital to help repay a €3.8 billion bridge loan it will use to acquire Italy’s Iveco Group, Group CFO PB Balaji said.
The funding strategy is expected to be executed over the next 12 to 18 months. “We will pay down our acquisition debt over a four-year period,” Balaji said. “To do so, there will be a capital raise, and it could be a rights issue or QIP, we’ll see how it works out. We’ll also be monetising our stake in Tata Capital to ensure we minimise the debt raise.”
The bridge loan for the €3.8 billion all-cash acquisition will be syndicated, with Morgan Stanley and MUFG having committed to provide the initial funding. The drawdown is expected in April 2026, and the company will have around a year thereafter to term out the bridge loan and complete the equity raise. “The equity raise is likely to be close to about a billion euros. What form it takes we’ll worry about at that point in time,” Balaji said.
Importantly, both Tata Motors and Iveco’s CV businesses are cash-flow positive, ensuring that no fresh funds are required for ongoing operational or investment needs. “This allows us to use free cash flows toward debt repayment,” Balaji said.
The offer price of €14.1 per share (excluding proceeds from the divestment of Iveco’s defence business) reflects a premium of 34-41%, adjusted for an estimated €5.5-6.0 per share extraordinary dividend from the sale of the defence division. Iveco’s defence separation is expected to be completed by March 31, 2026.
The acquisition structured as an all-cash voluntary tender offer for Iveco’s common shares marks a landmark strategic expansion for Tata Motors in the global commercial vehicle (CV) landscape. The offer will be made by TML CV Holdings PTE Ltd or a Dutch-incorporated entity wholly owned by Tata Motors.
Strategic Rationale
The Iveco acquisition is being positioned as a key move in Tata Motors’ long-term strategy of unlocking the full potential of its commercial vehicle business, following the planned demerger of its passenger and commercial vehicle operations.
“We are staying true to what we said during the demerger that we’ll unleash the CV business. Taking it global was the logical next step. This is a very strategic and credible acquisition,” Balaji said.
He emphasised that the deal was not only strategic but financially compelling. “We are buying a profitable business at two times EBITDA. This is a substantially large acquisition at a very attractive valuation. From an EPS standpoint, this becomes accretive from year two after the capital raise is completed.”
Tata Motors expects the return on capital employed (ROCE) for the combined entity to stabilise at 20%, with room to grow earnings significantly. “Tata Motors’ CV business operates at ~40% ROCE, and Iveco is at 14%. Together we believe we can actually generate substantial value, we can triple our revenue and quadruple almost some of our profitability numbers amongst the two of us to ensure that it still generates a 20% kind of a ROCE,” Balaji said.
“This deal has board approval, and the Italian government is fully supportive. It makes strong strategic sense for all stakeholders,” Balaji said.
Synergy Potential
With combined annual revenues of €22 billion (approx. ₹2.2 lakh crore) and sales of over 540,000 units, the merged Tata-Iveco entity will derive approximately 50% of revenue from Europe, 35% from India, and 15% from the Americas, alongside a growing presence in Asia and Africa.
Balaji said Iveco’s EBITDA margins are comparable with Tata’s (12–13%), but EBIT margins are currently lower due to high depreciation and investment outlays. “They make about 6% EBIT margin; we make about 9%. There’s room to close the gap by improving volumes, eliminating redundant investments, and leveraging scale,” he said.
“We expect to see the revenue synergies fly first. As we coordinate R&D and reduce duplications, we should see even greater efficiencies.”
Brand, Product and Market Gains
Executive Director Girish Wagh elaborated on how the acquisition brings strategic depth beyond financial metrics. “This gives us access not just to Iveco’s strong product portfolio, but also to their iconic Italian brands, manufacturing facilities, and after-sales networks across Europe and Latin America,” he said.
Access to financing arms and market-ready sales channels is expected to significantly accelerate Tata Motors’ international expansion. “Some capabilities like retail financing and strong service channels can take years to build organically. This acquisition shortens that timeline considerably,” Wagh said.
He said the synergies could be grouped into three buckets: revenue, capital expenditure (capex), and operating expenditure (opex). On the revenue front, Tata Motors will look to plug gaps in its domestic portfolio using Iveco’s vans, tippers, and buses, while exporting Tata’s light trucks and small CVs to Latin America where price points are complementary.
“Capex synergies will come from shared R&D particularly in areas like powertrains, ADAS, heavy-duty vehicles, and electrification. By leveraging India’s frugal engineering skills, we can reduce development costs and achieve material cost synergies for Iveco,” he added.
While Tata has committed to non-financial covenants for two years post-deal such as no plant closures or layoffs in Italy, Wagh believes there are still operational savings possible through portfolio simplification and design-to-value approaches.
“Complexity reduction will help us generate opex synergies. And the combined scale will enhance both organisations’ ability to deliver more value to customers,” he said.