Tata Motors Ltd (TML) on March 4 informed the stock exchanges of its decision to demerge its businesses into two separate listed entities, namely the commercial vehicles (CV) and passenger vehicles (PV) businesses.
"The demerger is a logical progression of the subsidiarisation of PV and EV businesses done earlier in 2022 and shall further empower the respective businesses to pursue their respective strategies to deliver higher growths with greater agility while reinforcing accountability," said the carmaker.
Over recent years, Tata Motors' CV, Passenger Vehicles (PV+EV), and Jaguar Land Rover (JLR) businesses have implemented distinct growth strategies and since 2021, these businesses have been functioning independently under their respective CEOs, added Tata Motors.
On Monday, Tata Motors' scrip on BSE closed flat at Rs 989.
The demerger will be implemented through an NCLT scheme of arrangement and all shareholders of TML shall continue to have identical shareholding in both the listed entities, said the carmaker in a stock exchange filing, adding that necessary shareholder, creditor, and regulatory approvals could take a further 12-15 months to complete the demerger.
"The Board of Directors of TML, at its meeting today, has approved the proposal of demerger of Tata Motors Ltd into two separate listed companies housing A) the Commercial Vehicles business and its related investments in one entity and B) the Passenger Vehicles businesses including PV, EV, JLR and its related investments in another entity," the company said.
Tata Sons Chairman N Chandrasekaran said: “Tata Motors has scripted a strong turnaround in the last few years. The three automotive business units are now operating independently and delivering consistent performance. This demerger will help them better capitalise on the opportunities provided by the market by enhancing their focus and agility. This will lead to a superior experience for our customers, better growth prospects for our employees, and, enhanced value for our shareholders.”
While there are limited synergies between Commercial Vehicles and Passenger Vehicles businesses, 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, said Tata Motors.
"The demerger will have no adverse impact on employees, customers, and our business partners," added Tata Motors.
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