Tata Motors hopes to complete PV unit hive off by October 1

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Tata Motors is hoping to complete the subsidiarisation programme of its passenger vehicle (PV) business by the end of the September quarter, paving the way for onboarding a partner.

The Mumbai-based manufacturer of Nexon and Safari is awaiting the final nod from the National Company Law Tribunal (NCLT) on this matter, whose hearing is scheduled for June 14.

“We had an extraordinary general meeting on it and subsequently we filed all the papers with the NCLT who has now admitted the case for a view on June 14. At that hearing, we are expecting to get an approval of subsidiarisation of the PV business”, Chief Financial Officer PB Balaji said.

The PV division which looks into development, manufacture, distribution and sale of cars, SUVs and vans is being hived off into a separate entity allowing the company to sell its stake in it to a strategic partner.

The PV division also controls the electric vehicle business unit of Tata Motors.

Added Balaji: “There is some lead time involved like getting the ARAI (Automotive Research Association of India) certifications changed; those are the operational stuff. But internally all the systems are ready and I would expect that we would be doing somewhere between Q2 and Q3. By October 1, we should have the new subsidiary up and running. We are just waiting for the final approval from the NCLT.”

In the first week of March, Tata Motors shareholders voted to consider and approve the transfer of the passenger vehicles business unit to TML Business Analytics Services (the PV division of Tata Motors) as a going concern on a slump sale basis for a lump sum consideration. About 99.95 percent votes were in favour of the hive off process.

The passenger vehicle division of Tata Motors has piled up losses of Rs 11,173 crore, as of June end 2020, while the division's valuation has been fixed at Rs 9,417 crore, a company notice to the shareholders had stated.

The transfer of the PV unit does not mean that the company would be giving up control of the business entirely. In August 2020, Tata Motors had announced its intention to retain control over the hived-off unit even after accommodating the strategic and equity partner.

A move towards subsidiarisation of the PV business is the first step in securing strategic alliances that provides access to products, architectures, power trains, new age technologies and capital.

In simple terms, this will unlock value for the company for the PV business unit, which has struggled in the recent past in the face of strong competition.

However, 2020-21 has seen Tata Motors excel in pushing sales to new recent highs. As per data supplied by the Society of Indian Automobile Manufacturers (SIAM), PV sales of Tata Motors grew by 69 percent to nearly 222,025 units even as the rest of India’s PV segment recorded a fall of 2 percent.

“The PV business will turn cash positive by FY23 and that will happen even without a partner. That is the internal target we are working towards and we are confident of achieving that. Partnerships get us the momentum, but that is not the base case,” Balaji had said, speaking to Moneycontrol earlier.