Tata Motors Announces Demerger Of Commercial And Passenger Vehicle Businesses

Under the approved plan, Tata Motors Ltd will be divided into two separate listed companies, one of which will house the CV division and the other will incorporate the PV, EV and JLR divisions.

By Carandbike Team

2 mins read

Published on March 4, 2024

Highlights

Tata Motors board greenlights proposal for demerger of CV and PV businesses.
Demerger to be carried out through an NCLT scheme of arrangement.
Process estimated to take 12 to 15 months.

In a strategic move, the Board of Directors of Tata Motors Limited (TML) has given the green light to the proposal to demerge its vehicle businesses, splitting the company into two distinct entities. This decision, approved at today's board meeting, marks a significant restructuring effort within the company. Under the approved plan, Tata Motors Ltd will be divided into two separate listed companies. The first entity will house the commercial vehicles (CV) business and its related investments, while the second will incorporate the passenger vehicles (PV) businesses, including PV, EV, and JLR (formerly Jaguar Land Rover), along with their associated investments.

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The demerger process will be carried out through an NCLT (National Company Law Tribunal) scheme of arrangement. All shareholders of TML will retain identical shareholding in both listed entities, ensuring continuity and fairness in ownership structure, the company said in a media statement.

Tata had announced the subsidiarisation of its PV and EV businesses back in 2022.

The demerger scheme will now undergo scrutiny by the TML Board of Directors for approval in the coming months. Following this, it will be subject to necessary shareholder, creditor, and regulatory approvals, a process estimated to take an additional 12-15 months. Importantly, Tata Motors assured stakeholders that the demerger will have no adverse impact on employees, customers, or business partners.

Since 2021, Tata Motors' CV, PV + EV and JLR businesses have been operating independently under their respective CEOs, showcasing their capability for autonomy and efficiency, read a statement from the company.

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Commenting on the approval for the demerger, 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.”

The demerger, as per Tata, represents a logical progression from the previous subsidiarisation of PV and EV businesses in 2022. While synergies between its CV and PV businesses are limited, significant synergies exist across PV, EV, and JLR, particularly in areas such as electric vehicles, autonomous technology, and vehicle software, the company added in its statement.