Tata Motors Ltd (TML) announced its decision on March 4 to split its operations into two separate listed entities: one for commercial vehicles (CV) and the other for passenger vehicles (PV).
According to the carmaker, the demerger is a natural progression following the earlier subsidiarisation of PV and EV businesses in 2022. This move aims to empower each business to pursue its strategy more effectively and achieve higher growth with increased agility while maintaining accountability.
Tata Motors highlighted that over the past years, its CV, PV+EV, and Jaguar Land Rover (JLR) businesses have implemented distinct growth strategies. Since 2021, these businesses have been functioning independently under their respective CEOs.
On Monday, Tata Motors’ stock on the BSE remained unchanged at Rs 989.
The demerger will be executed through an NCLT scheme of arrangement, ensuring that all shareholders of TML retain identical shareholding in both listed entities. However, obtaining necessary shareholder, creditor, and regulatory approvals may take an additional 12-15 months.
The company stated in a stock exchange filing that its Board of Directors has approved the demerger proposal, which will create two separate listed companies: one for the Commercial Vehicles business and related investments, and the other for the Passenger Vehicles business, including PV, EV, JLR, and related investments.
N Chandrasekaran, Chairman of Tata Sons, expressed, “Tata Motors has undergone a remarkable turnaround in recent years. The three automotive business units are now operating independently and delivering consistent performance. This demerger will enable them to better capitalize on market opportunities by enhancing their focus and agility, ultimately benefiting customers, employees, and shareholders.”
While there are minimal synergies between the Commercial Vehicles and Passenger Vehicles businesses, significant synergies exist across PV, EV, and JLR, particularly in areas like EVs, autonomous vehicles, and vehicle software. The demerger aims to leverage these synergies effectively.
Tata Motors assured that the demerger will not adversely affect employees, customers, or business partners.
