Tata Motors To Demerge Businesses Into Two Listed Companies

Indian automaker’s shareholders will continue to have identical shareholding in both the listed commercial vehicles and passenger vehicles businesses
Tata Motors To Demerge Businesses Into Two Listed Companies
Image Source: Tata Motors

Indian automaker Tata Motors Ltd. plans to demerge its businesses into two separate listed companies consisting of commercial vehicles (CV) and passenger vehicles (PV) businesses.

The CV business and its related investments will be grouped under one entity, while the PV businesses -- PV, electric vehicles (EV) as well as UK-based luxury car unit Jaguar Land Rover (JLR) and its related investments -- will be housed in another entity, Tata Motors said in a stock exchange announcement.

The company’s board approved the demerger proposal today.

The demerger will be implemented through a scheme of arrangement and all shareholders of Tata Motors will continue to have an identical shareholding in both the listed entities.

DEMERGER RATIONALE

Tata Motors said over the past few years, all these businesses have delivered a strong performance by successfully implementing distinct strategies and since 2021, these businesses have been operating independently under their respective chief executive officers.

The Mumbai-based company said the demerger is a logical progression of the subsidiarization of PV and EV businesses done earlier in 2022 and will further empower the respective businesses to pursue their respective strategies to deliver higher growth, while reinforcing accountability.

“The three automotive business units are now operating independently and delivering consistent performance,” said Tata Motors’ Chairman N. Chandrasekaran. “This demerger will help them better capitalize on the opportunities provided by the market by enhancing their focus and agility.”

Tata Motors also said there are considerable synergies to be harnessed across PV, EV and JLR, particularly in the areas of EVs, autonomous vehicles, and vehicle software, which the demerger will help secure.

DEMERGER TIMELINE

Tata Motors said the National Company Law Tribunal (NCLT) scheme of arrangement for the demerger will be placed before the company’s board for approval in the coming months.

The demerger, which will be subject to regulatory and other necessary approvals, could take a further 12 to 15 months for completion, it added.

Tata Motors, part of Indian conglomerate Tata Sons, said the demerger will have no adverse impact on employees, customers, and the company’s business partners.

Shares of Tata Motors ended at 988.90 rupees apiece on the NSE in Mumbai trading today.

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