Eye on higher growth: Tata Motors to demerge its businesses into two listed companies - passenger, commercial

Tata Motors on Monday informed that it will demerge its businesses into two separate listed companies. One entity will house commercial vehicle (CV) business and its related investments, while the other will have the passenger vehicle businesses including PV (passenger vehicles), EV (electric vehicles), JLR, and their related investments. 

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

Over the past few years, the company said, commercial vehicles, 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 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 automaker said.

While there are limited synergies between commercial vehicles and passenger vehicles businesses, there are considerable synergies to be harnessed across PV, EV, and JLR - particularly in EVs, autonomous vehicles, and vehicle software - which the demerger will help secure, the company said.

Speaking on the demerger, Tata Sons 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, he said, 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."