Tata Motors to be split into PV and CV cos

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Tata Motors is being split into two listed companies. The board Tata Motors Limited approved the demerger plan at its meeting on Monday. The company will be split into Commercial Vehicles business and its related investments in one company and the passenger vehicles businesses including passenger vehicles, electric vehicles, JLR and its related investments in another entity, the company informed the BSE in a regulatory filing.

The demerger will be implemented through an NCLT scheme of arrangement and all shareholders of Tata Motors shall continue to have the identical shareholding in both the listed entities, the company said in a press statement.

According to some market experts, the CV segment contributes about 38-40% of revenue, while PV contributes the rest.

Over the past few years, the CV, Passenger Vehicles, 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 demerger is a logical progression of the move to separate the PV and EV businesses in 2022 and shall further empower the respective businesses to pursue their respective strategies to deliver higher growths with greater agility while reinforcing accountability.

While there are limited synergies between Commercial Vehicles (CV) and Passenger Vehicles (PV) businesses, there are considerable synergies across the PV, EV and JLR particularly in EVs, autonomous vehicles, and vehicle software which the demerger will help secure.

Speaking after the meeting 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 NCLT scheme of arrangement for the demerger shall be placed before the TML Board of Directors for approval in the coming months and will be subject to all necessary shareholder, creditor and regulatory approvals which could take a further 12-15 months to complete. The demerger will have no adverse impact on employees, customers, and business, he said.