Tata Motors gets board approval for demerger of CV, PV business into two different listed companies

5 Mar 2024 , 09:58 AM

Tata Motors’ board of directors agreed on Monday the separation of the company’s activities into two independent organisations, namely commercial vehicles and passenger cars, in order to capitalise on synergies and provide better growth.

All Tata Motors stakeholders will retain the same exact stake in both listed companies.

The demerger represents a natural evolution of the subsidiary formation for both the PV and EV businesses, which was previously undertaken in 2022. This move will enhance the ability of each business to pursue their individual strategies, aiming for increased growth and agility. Simultaneously, it reinforces accountability, stated the company in an exchange filing.

Following the demerger, one company would house the commercial vehicle business and its connected assets, while the other would house the passenger car business, which includes PV, electric vehicles, Jaguar and Land Rover, and related investments.

The firm has said that the demerger would be carried out through an NCLT plan of arrangement. The NCLT strategy would require approval from the Tata Motors board, shareholders, creditors, and regulators, all of which might be achieved within 12-15 months.

Since 2021, Tata Motors’ CV, PV, and JLR companies have operated separately, led by their own CEOs. Explaining the rationale for this decision, the firm stated that while there are modest synergies between the CV and PV companies, there are ‘substantial’ synergies that it hopes to leverage across the three sectors.

The business believes it can leverage synergies, notably in the fields of EVs, driverless cars, and vehicle software.

Tata Motors does not expect the demerger to have a negative impact on its workers, customers, or business partners.

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