Homegrown auto major Tata Motors today announced that its board of directors has approved the proposal to demerge the company into two separate listed firms, consisting of the commercial vehicles business and its related investments in one entity, and the passenger vehicles businesses, including PV, EV, JLR and its related investments in another entity.
The demerger will be implemented through an NCLT scheme of arrangement and all shareholders of Tata Motors shall continue to have identical shareholding in both the listed entities, the Nexon-maker said in an official statement.
“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,” the company said, adding that since 2021, these businesses have been operating independently under their respective CEOs.
The demerger is a progression of the subsidiarisation of PV and EV businesses done in 2022.
While there are limited synergies between CV and 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, Tata Motors 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,” said N Chandrasekaran, Chairman, Tata Sons.
“This will lead to a superior experience for our customers, better growth prospects for our employees and, enhanced value for our shareholders,” he added.
The NCLT scheme of arrangement for the demerger will be placed before the Tata Motors’ 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 our business partners,” Tata Motors said.
The article originally appeared on India Today.