January 10, 2005

Tata Finance Ltd. to be merged with Tata Motors Ltd.

The merger is expected to enable the vehicle financing business of Tata Finance to grow stronger by leveraging its synergies of the direct business model with the dealer driven business of the bureau of hire purchase and credits (BHPC), a division of Tata Motors.

The board of directors of Tata Motors (the company), and Tata Finance (TFL) today approved the merger of TFL with the company. The merger would be under a Scheme of Amalgamation under Sections 391 and 394 of the Companies Act 1956 and would be subject to the approval of the Hon’ble High Court of Judicature at Bombay and would be effective from April 1, 2005. In terms of the Scheme of Amalgamation that would be submitted to the court, all equity shareholders of TFL will be entitled to receive eight ordinary shares of the company of Rs10/- each for every 100 equity shares of Tata Finance of Rs10/- each.

The exchange ratio for the number of shares of the company to be issued to the shareholders of TFL is based upon a valuation conducted by M/s Bansi Mehta & Co., Chartered Accountants.

The merger is expected to enable the vehicle financing business of Tata Finance to grow stronger by leveraging its synergies of the direct business model with the dealer driven business of the bureau of hire purchase and credits (BHPC), a division of the company.

This merger will also allow the TFL shareholders to participate in the growth of the company, a leading automobile company in the country and thereby significantly gain with an upside of dividend and shareholder value creation.

The proposed merger will enable the company to grow its auto financing business and offer complete solutions in line with the global best practices in the auto industry. This will also enable the company to provide a hedge against the cyclicality of the automotive business and a significant value creation for its shareholders.

Currently, Tata Finance and BHPC finance around 17-18 per cent of the company’s vehicle sales while the global benchmark for captive finance units is to finance 35-40 per cent of the parent company’s vehicle sales. This merger is expected to create a platform that will enable the company to accelerate its move towards the global benchmark.

Tata Finance, a non-banking finance company, was formed by its promoters — Tata Industries and the company in 1984 with the primary objective of financing and promoting the company’s products and supporting financing needs of the company’s channel partners and retail finance business. Restructuring initiatives carried out by Tata Finance over the past 36 months have seen the company divest all its non-core activities and focus only on auto financing business. TFL had revenues of Rs305 crore and posted a profit before tax of Rs17.5 crore in FY 03-04.

In the first half of this fiscal, TFL had revenues of Rs118 crore and posted a profit before tax of Rs15.6 crore. The auto financing division of TFL (AFD) is expected to disburse funds of approximately Rs1,500 crore during the current year as compared to Rs551 crore disbursed in FY 01-02.

Tata Motors, a flagship company of the Tata Group is the largest automobile company in India, with revenues of over US$3.5 billion (FY 2003-04). It is the world’s fifth largest medium and heavy commercial vehicle manufacturer. The company is the second largest player in the domestic passenger car market in India.