Tata Motors to demerge into two listed firms, shares jump

The Tata Motors Ltd board has approved a plan to demerge its commercial vehicles and passenger vehicle businesses into two separate listed entities, the company informed the stock exchanges this week.

The company’s commercial vehicles business and its related investments will be housed in one entity, while its passenger vehicles businesses, including passenger vehicles, electric vehicles, Jaguar Land Rover (JLR) and its related investments in the other.

The business units will be demerged via a national company law tribunal (NCLT) scheme of arrangement, and all shareholders of Tata Motors shall continue to hold identical shareholding in both listed entities, the company said.

Share of Tata Motors were up 3% from Monday’s close on BSE at 1.40pm, while the benchmark Sensex index was little changed at 73,814.06.

Over the past few years, the commercial vehicles, passenger vehicles, and JLR businesses of Tata Motors have delivered a strong performance, the company said, adding that since 2021, these businesses have been operating independently under their respective chief executives.

“The three automotive business units are now operating independently and delivering consistent performance. This demerger will help them better capitalize on the opportunities provided by the market by enhancing their focus and agility,” Tata Motors chairman N. Chandrasekaran.

The scheme of arrangement will be put before the board for approval in the coming months and will be subject to all necessary shareholder, creditor and regulatory approvals which could take about 15 months to complete. The demerger will have no adverse impact on employees, customers, and business partners, the company added.

The company said it sees limited synergies between CV and PV businesses, but significant potential in PV, EV, and JLR, especially in autonomous vehicles and software, which the demerger aims to unlock.