Tata Motors to demerge CV and PV businesses into separate listed companies

Tata Motors business demerger: Tata Motors said on Monday, March 4, that its board has approved the proposal for the demerger of the company into two separate listed companies: A) the commercial vehicle business and its related investments in one entity; and B) the passenger vehicle businesses, including PV, EV, and JLR, and their related investments in another entity.

The demerger will be implemented through an NCLT scheme of arrangement, and all shareholders of TML shall continue to have identical shareholdings in both of the listed entities. 

"Over the past few years, the Commercial Vehicles (CV), Passenger Vehicles (PV+EV), and Jaguar Land Rover (JLR) businesses of Tata Motors have delivered a strong performance by successfully implementing distinct strategies. Since 2021, these businesses have been operating independently under their respective CEOs," the company said in its press release. 

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 growth with greater agility while reinforcing accountability.

Furthermore, while there are limited synergies between commercial vehicles (CV) and passenger vehicles (PV) 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, it added.

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Shares of the company ended 0.12 per cent lower at Rs 987.20 on the BSE. The stock of the company has given multi-bagger returns (over 120 per cent) in the past 12 months. 

The press release added that the NCLT scheme of arrangement for the demerger shall be placed before the TML Board of Directors for approval in the coming months, which could take a further 12–15 months to complete. "The demerger will have no adverse impact on employees, customers, or our business partners," it said.

Commenting on the demerger, Tata Group 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.”