Tata Motors To Sell Its Defence, Aerospace Business

Tata Motors has announced that it will be selling off the defence and aerospace parts of its business to another Tata Group entity, Tata Advanced Systems. This will entail its large trucks and weapons system carriers along with large specialised vehicles that Tata Motors makes for both Indian military forces and international ones. Tata Motors however will continue to retain and supply lighter civilian use vehicles like the recently spied Safari Storme that has been prepared for the Indian army. Included in this deal will also be the TAL Manufacturing Solutions, a subsidy of Tata Motors that specialises in Heavy Engineering and more recently, to Aerospace and Defence sectors.

TAL Manufacturing Solutions Ltd (TAL) will be sold to Tata Advanced Systems Limited for a value of Rs 625 Crore. That said, Tata Motors will acquire a non-aerospace part of TAL's business at a value of Rs 10 lakh. Tata Motors will also get an additional Rs 100 Crore for capital expenditure. The move to consolidate all of Tata's defence and aerospace businesses under the TASL banner has been on-going with the likes of Tata Power also selling similar businesses to TASL last month.

Speaking on the deals, Guenter Butschek, CEO & Managing Director of Tata Motors said, "Tata Motors has been a strategic partner to the Indian Ministry of Defence in defence mobility solutions for several decades. We will continue providing civilian logistics vehicles to the Defence customers. On our transition to a full range combat vehicle player, we realized that our current portfolio is small and we need scale to unlock its true potential. We believe Tata Advanced Systems Limited will be better equipped to execute larger and more complex projects and be more globally competitive as part of the larger Tata Group. Therefore we have decided that it is in our best interests to sell this part of the business to Tata Advanced Systems Limited and participate in the future growth of this business through a revenue share agreement. Also, TAL Aerospace Solutions is a non-core business to Tata Motors. We have been working on charting our next phase of growth and would like to use the opportunity of consolidation at Group level to monetize our investment in this area."

(Tata Motors EVision Electric Sedan Concept)

The boost in capital for Tata Motors will also play a big role in boosting the passenger and commercial vehicle businesses. With a range of new cars and SUVs in the pipeline, Tata Motors will need all the money it can get to ensure big improvements in platforms, drivetrains - both internal combustion and electric and of course, overall design and quality.