Tata motors demerger: Tata Motors’ board approves demerging CV, PV businesses into two separate listed companies

The board of Tata Motors on Monday approved demerging the operations of the company’s business into two separate entities, i.e., commercial vehicles and passenger vehicle business, a move aimed at tapping synergies and delivering higher growth.

All shareholders of Tata Motors would continue to hold the same identical shareholding in both the listed entities.

“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,” the company said in a stock exchange intimation.

Post demerger, one entity would house the commercial vehicles business and its related investments while the other would house the passenger vehicles business including PV, electric vehicles, Jaguar and Land Rover and related investments.

The company has said the demerger would be implemented through an NCLT scheme of arrangement. The NCLT scheme would need a nod from the Tata Motors board, shareholders, creditors and regulators, all of which could be completed in 12-15 months.

Tata Motors’ CV, PV and JLR businesses have been operating independently under their respective CEOs since 2021. Explaining the rationale behind this move, the company said that while there are limited synergies between CV and PV businesses, there are ‘considerable’ synergies that it seeks to harness across the three businesses. The company feels it can harness synergies, particularly in the areas of EVs, autonomous vehicles, and vehicle software.Tata Motors does not expect the demerger to have any adverse impact on employees, customers, and our business partners.

“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,” said N Chandrasekaran, Chairman.

“This will lead to a superior experience for our customers, better growth prospects for our employees and, enhanced value for our shareholders,” he added.

Tata Motors in the third quarter registered a profit of Rs 7,100 crore, up 133 per cent year-on-year. Meanwhile, revenue rose 25 per cent to Rs 1.11 lakh crore.