Tata Motors (TML) has received the green light from its Board of Directors to split the company into two separate entities. One will focus on Commercial Vehicles and related investments, while the other will handle Passenger Vehicles, including EVs, as well as Jaguar Land Rover (JLR) and associated investments.
Tata Motors, a subsidiary of the Tata Group, is a leading global automobile manufacturer with a rich history spanning over 75 years. Headquartered in India, Tata Motors has a diverse portfolio of products ranging from small cars to heavy trucks, buses, and defense vehicles.
The company has a strong presence in over 175 countries, with manufacturing facilities in India, the UK, South Korea, Thailand, South Africa, and Indonesia. Tata Motors is known for its commitment to innovation, quality, and sustainability, with a focus on developing cutting-edge technologies and products that meet the evolving needs of its customers worldwide.
This demerger, to be executed through an NCLT scheme of arrangement, will maintain the current shareholding structure for all TML shareholders in both listed companies. Tata Motors has seen notable success in recent years, with its CV, PV+EV, and JLR divisions implementing effective strategies, leading to strong performance.
In a strategic move, these companies have been operating independently since 2021, each under its own CEO. The decision to demerge is seen as a natural progression following the earlier subsidiarisation of their PV and EV businesses in 2022. This move is expected to give each business greater freedom to pursue its growth strategies more effectively and with increased agility, while also enhancing accountability.
While there are few synergies between their CV and PV businesses, there are significant opportunities for collaboration across their PV, EV, and JLR divisions, particularly in the areas of electric vehicles, autonomous driving technology, and vehicle software. The demerger is aimed at enabling the companies to harness these synergies more effectively.
In a recent statement, N Chandrasekaran, the Chairman of Tata Group, highlighted the remarkable turnaround achieved by Tata Motors in recent years. He emphasized the successful independence and consistent performance of the automotive business units.
Chandrasekaran expressed optimism about the demerger, stating that it would enhance focus and agility, enabling the business units to capitalize more effectively on market opportunities. He added that this strategic move would lead to a superior customer experience, improved growth prospects for employees, and enhanced shareholder value.
The NCLT scheme of arrangement for the demerger is expected to be presented to the Tata Motors Board of Directors for approval in the coming months. However, the process is subject to various approvals, including those from shareholders, creditors, and regulatory bodies, which could take an additional 12-15 months to complete. Chandrasekaran assured that the demerger would not have any adverse impact on employees, customers, or business partners.
