On March 4, Tata Motors Ltd (TML) disclosed to the stock exchanges its strategic move to split its operations into two distinct listed entities, specifically focusing on the commercial vehicles (CV) and passenger vehicles (PV) businesses.
Tata Motors emphasized that the demerger marks a logical progression from the earlier subsidiarization of PV and EV businesses in 2022, aiming to empower each business to pursue distinct strategies for achieving enhanced growth and agility while reinforcing accountability.
In recent years, Tata Motors has witnessed the implementation of separate growth strategies across its CV, Passenger Vehicles (PV+EV), and Jaguar Land Rover (JLR) businesses. Since 2021, these businesses have been operating autonomously under their respective CEOs, highlighting a shift towards independent functioning.
On Monday, Tata Motors’ scrip on the BSE closed flat at Rs 989.
The demerger process will be executed through an NCLT scheme of arrangement, ensuring that all shareholders of TML maintain identical shareholding in both listed entities. Tata Motors stated in a stock exchange filing that securing necessary approvals from shareholders, creditors, and regulators could prolong the demerger process by an additional 12-15 months.
Tata Motors announced that its Board of Directors, during a meeting on the same day, has greenlit the proposal to demerge Tata Motors Ltd into two separate listed companies. These entities will encompass A) the Commercial Vehicles business and its related investments, and B) the Passenger Vehicles businesses, inclusive of PV, EV, and JLR, along with their associated investments.
N Chandrasekaran, Chairman of Tata Sons, expressed, “Tata Motors has undergone a robust turnaround in recent years. The three automotive business units are now functioning independently and showcasing consistent performance. This demerger will enable them to effectively leverage market opportunities by enhancing their focus and agility, thereby leading to an enhanced experience for our customers, improved growth prospects for our employees, and increased value for our shareholders.”
While acknowledging limited synergies between the Commercial Vehicles and Passenger Vehicles businesses, Tata Motors highlighted substantial synergies to be leveraged across PV, EV, and JLR, particularly in areas such as EVs, autonomous vehicles, and vehicle software, which the demerger aims to capitalize on.
Tata Motors assured that the demerger will not adversely affect its employees, customers, or business partners.