Tata Motors's demerger to split commercial and passenger vehicle businesses
What's the story
Tata Motors has announced its plan to split its commercial vehicle (CV) and passenger vehicle (PV) businesses into two separate listed entities.
This decision follows the subsidiarisation of PV and EV (electric vehicle) businesses earlier in 2022, allowing each division to pursue individual strategies for higher growth and increased agility.
The demerger process, which requires consent of shareholders and creditors, as well as regulatory approvals, is expected to take 12-15 months.
Demerger process
Demerger implementation and shareholder impact
The demerger will be carried out through an NCLT (National Company Law Tribunal) scheme of arrangement, ensuring that Tata Motors's shareholders maintain the same shareholding in both listed entities.
Tata Sons chairman N Chandrasekaran said, "This demerger will help them better capitalize on the opportunities provided by the market by enhancing their focus and agility."
He added that the demerger will lead to superior customer experience, better growth prospects for employees, and enhanced value for shareholders.
Why demerger
Limited synergies between CV and PV businesses: Tata Motors
Tata Motors highlighted that there are limited synergies between the CV and PV businesses to function as a singular entity.
However, the company underlined that significant synergies exist across PV, CV, and JLR (Jaguar Land Rover) in areas such as electric vehicles, autonomous vehicles, and vehicle software.
The demerger aims to harness these synergies without negatively impacting employees, customers, or business partners.