NEW DELHI: Tata Motors Ltd (TML) is demerging itself into two separate listed companies. The commercial vehicles (CV) business and its related investments will be spun into one entity and the passenger vehicles (PV) businesses, including electric vehicles, Jaguar Land Rover (JLR) and related investments, in another entity.
“The demerger will be implemented through an NCLT scheme of arrangement and all shareholders of TML shall continue to have the identical shareholding in both the listed entities,” Tata Motors said in a regulatory filing on Monday. This means shares of the company will be split in a 1:1 ratio.
This fresh call of demerger comes as the Mumbai-based salt-to-aeroplane conglomerate is realigning its vast business empire and simplifying its capital structure. Last year, Tata Motors decided to cancel ‘A’ ordinary shares, known as different voting rights (DVR) shares and got Tata Technologies listed on the bourses, a first for a Tata company in two decades.
Analysts have given a thumbs up to demerger schmene as they believe it will lead to a higher valuation for the PV division and strengthen synergy within different units. Tata Motors’ PV unit (excluding JLR) competes with Hyundai Motor for the second spot in India’s fast-growing car market and has taken a big lead in the electric vehicle division. In the CV market, Tata Motors controls over half of the industry volume.
Tata Motors said since 2021, these businesses, CV, PV and JLR have been operating independently under their respective CEOs. It added that the demerger is a logical progression of the subsidiarisation of PV and EV businesses done earlier in 2022 and shall empower the respective businesses to pursue their respective strategies to deliver higher growths with greater agility while reinforcing accountability.
While there are limited synergies between CV and PV businesses, there are considerable synergies to be harnessed across PV, EV and JLR, mainly in the areas of EVs, autonomous vehicles, and vehicle software, which the demerger will help secure, added the automaker.
Chairman N Chandrasekaran said, “This demerger will help them better capitalise on the opportunities provided by the market 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.”
The share-split
The demerger will be implemented through an NCLT scheme of arrangement
All shareholders of TML will have identical shareholding in both listed entities
This means shares of the company will be split in a 1:1 ratio
Fresh call of demerger comes as the conglomerate is realigning its
business empire
Analysts have given a thumbs up to demerger scheme