Indian carmaker Tata Motors (TAMO.NS) has begun talks with sovereign wealth funds and private equity investors to raise up to $1 billion via a stake sale in its electric vehicle (EV) business.

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The company plans to sell a significant minority stake, eyeing a valuation of about $10.5 billion.

The funds and investors include the UAE-based Abu Dhabi Investment Authority (ADIA) and Mubadala Investment Company, the Saudi Arabia-headquartered Public Investment Fund, Singapore's Temasek Holdings, and KKR and General Atlantic.

Tata Motors and some of the companies did not immediately respond to Reuters' request for comment. KKR declined to comment while Temasek said it does not comment on "market speculation and rumours".

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Tata Motors plans to use the bulk of the proceeds to retire a part of its outstanding debt and infuse a small portion as primary equity in the EV business.

Earlier this week, Uber Technologies (UBER.N) said it plans to introduce 25,000 EVs over three years in India and will buy vehicles from Tata Motors, India's biggest electric carmaker.

Tata Motors has outlined plans to expand its electric car portfolio with new models and higher price points.

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India's car market is tiny compared to its population, with electric models making up just 1% of total car sales of about 3 million a year. The Indian government wants to grow this to 30% by 2030.

In 2021, Tata Motors raised $1 billion from TPG (TPG.O) and Abu Dhabi state holding company ADQ for its EV unit at a $9 billion valuation, pledging to invest more than $2 billion in its EV business over five years.

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