Tata Motors Board Approves Splitting Commercial and Passenger Vehicle Businesses into Separate Companies

Tata Motors’ board has given the green light for the demerger of its operations into two distinct entities – one for commercial vehicles and the other for passenger vehicles. The move aims to leverage synergies and foster higher growth opportunities.

Under this demerger, all existing Tata Motors shareholders will maintain identical shareholding in both listed entities. The decision is seen as a strategic progression following the earlier subsidiarisation of the passenger vehicle and electric vehicle businesses in 2022. The demerger is expected to empower each business to pursue individual strategies for enhanced growth and agility while reinforcing accountability.

After the demerger, one entity will focus on the commercial vehicles business and related investments, while the other will house the passenger vehicles business, including electric vehicles, Jaguar, Land Rover, and associated investments.

The implementation of the demerger will involve an NCLT scheme of arrangement, requiring approval from the Tata Motors board, shareholders, creditors, and regulators. The entire process is anticipated to be completed within 12-15 months.

Tata Motors’ commercial vehicles, passenger vehicles, and JLR businesses have been operating independently since 2021 under their respective CEOs. The company believes that while there are limited synergies between commercial and passenger vehicle businesses, there are substantial synergies across all three businesses, especially in areas like electric vehicles, autonomous vehicles, and vehicle software.

Tata Motors assures that the demerger will not adversely impact employees, customers, or business partners. The company has undergone a significant turnaround in recent years, and the demerger is expected to enhance focus and agility, leading to a superior experience for customers, better growth prospects for employees, and increased value for shareholders, according to N Chandrasekaran, Chairman of Tata Motors. In the third quarter, Tata Motors reported a profit of Rs 7,100 crore, marking a 133% YoY increase, with revenue rising by 25% to Rs 1.11 lakh crore.

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