Tata Motors is raising up to $1 billion (Rs 7,500 crore) in its passenger electric vehicle (EV) business from TPG Rise Climate and its co-investor ADQ at a valuation of up to $9.1 billion.

The investors will take a stake of 11-15 per cent in the arm that will be newly incorporated. While 50 per cent of the committed amount will come in by March 2022 after setting up of the EV company, the balance will flow in by the third quarter 2022 on achieving certain actions, Tata Motors said on Tuesday.

They will be subscribing to compulsory convertible preference shares which will convert to ordinary shares in the EV unit after achieving certain revenue thresholds.

Tata Motors said that the new company will leverage all its existing investments and capabilities and will channelise the future investments into electric vehicles, dedicated BEV (battery electric vehicle) platforms, advanced automotive technologies and catalyse investments in charging infrastructure and battery technologies.

The company added that over the next five years, this arm will create a portfolio of 10 EVs and in association with Tata Power Ltd, catalyse the creation of a widespread charging infrastructure to facilitate rapid EV adoption in India.

“I am delighted to have TPG Rise Climate join us in our journey to create a market-shaping electric passenger mobility business in India. We will continue to proactively invest in exciting products that delights customers while meticulously creating a synergistic ecosystem.

“We are excited and committed to play a leading role in the government’s vision to have 30 per cent electric vehicles penetration rate by 2030,’’ N. Chandrasekaran, chairman of Tata Motors, said.

Speaking to reporters, Shailesh Chandra, president-passenger vehicle business unit, Tata Motors, said EV adoption has risen in India over the last five years. He pointed out that the growth drivers have been favourable government policies, launch of aspirational mainstream EVs, positive word of mouth by existing customers, increase in prices of internal combustion engine vehicles and huge rise in fuel prices.

He added that Tata Motors has been leading the EV revolution in India and it now has a market share of 70 per cent in India’s electric vehicle segment. It has also increased its reach to touch more than 2,500 customer touch points, set up more than 700 charging stations, expanded to 60 cities from 22 earlier. Last month, the company had said that its electric vehicles achieved a cumulative sales milestone of 10,000 units.

P Balaji, chief financial officer, Tata Motors here added that while Tata Motors wants to lead the EV charge in the Indian market, it is also looking to catalyse charging infrastructure and invest proactively in drive trains, products and platforms.

Explaining the rationale for roping in investor like TPG Rise Climate, he said that the growth plans in EV will require $ 2 billion of investment over the next five years. While its passenger vehicle subsidiary will be constrained to support the aggressive EV aspirations, given the latter’s core net zero emission credentials, a different segment of investors who focus on the long term, carbon free world are accessible. Moreover, there is also a potential for significant value unlock and ability to fund the requirements of the business.