In a bid to enhance their strategic focus and agility, the Board of Directors of Tata Motors Limited (TML) has given the go-ahead to a proposal for the demerger of Tata Motors Ltd into two separate listed companies. This landmark decision was reached during a meeting held on Monday.
Creating Two Distinct Entities
The demerger plan calls for the establishment of one entity housing the Commercial Vehicles (CV) business and its related investments, and another entity encompassing the Passenger Vehicles (PV) businesses, including EV, along with Jaguar Land Rover (JLR) and their related investments.
Maintaining Identical Shareholding for Shareholders
Under this NCLT scheme of arrangement, all shareholders of TML will maintain identical shareholding in both listed entities. This ensures that investors will continue to have equal stakes in the newly formed companies.
Capitalizing on Independent Performance
The past few years have witnessed robust individual performances from Tata Motors’ CV, PV+EV, and JLR businesses, with each operating independently under their respective CEOs since 2021. This demerger aligns with the earlier subsidiarisation efforts in 2022, empowering the PV+EV businesses for better outcomes.
Enhanced Focus and Agility
The rationale behind the demerger, according to Tata Motors Chairman N Chandrasekaran, is to enhance focus and agility. The separation will enable each entity to pursue its distinct strategies for achieving higher growth while reinforcing accountability. Chandrasekaran stated, “Tata Motors has scripted a strong turnaround in the last few years. This demerger will help them better capitalize 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.”
Unlocking Synergies and Future Readiness
Though limited synergies exist between CV and PV businesses, significant synergies are anticipated across PV, EV, and JLR. These synergies, particularly in the domains of electric vehicles (EVs), autonomous vehicles, and vehicle software, are expected to be harnessed more effectively after the demerger is implemented.
NCLT Approval Process and Timeline
The NCLT scheme of arrangement for the demerger will undergo approval by the TML Board of Directors in the coming months. Following this, it will be subject to necessary shareholder, creditor, and regulatory approvals. A timeframe of 12-15 months is estimated for the completion of this entire process.
No Adverse Impact on Stakeholders
While this demerger will see Tata Motors transforming into two distinct entities, the company assures all stakeholders that it will have no adverse impact on employees, customers, or business partners. The emphasis remains on sustaining growth and driving innovation, enabling each entity to seize emerging opportunities in the automotive sector while delivering enhanced value to its stakeholders. As Tata Motors seeks to position its businesses with greater focus and agility, the demerger represents a substantial milestone in their strategic journey. By creating two separate entities, they strive to unlock synergies, drive growth, and transform the future of the automotive industry.
