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Automobile manufacturer Tata Motors on Tuesday entered into a binding agreement with TPG Rise Climate to raise $1 billion for its newly-incorporated subsidiary dealing with the passenger electric vehicle (EV) business.

TPG Rise Climate along with its co-investor ADQ shall invest in a subsidiary of Tata Motors that will be newly incorporated.

Moreover, TPG Rise Climate along with the co-investors shall invest Rs 7,500 crore in compulsory convertible instruments to secure between 11 and 15 per cent stake in this company, translating to an equity valuation of up to $9.1 billion.

According to Tata Motors, the new company shall leverage all the existing investments and capabilities of Tata Motors and will channelise the future investments into electric vehicles, dedicated 'BEV' platforms, advanced automotive technologies and catalyse investments in charging infrastructure and battery technologies.

According to N. Chandrasekaran, Chairman, Tata Motors: "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 delight the 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."

It is expected that the first round of capital infusion will be completed by March 2022, and the entire funds will be infused by the end of 2022.

The automobile major said the transaction is subject to the conditions precedent and customary approvals.