March 5, 2023
New Delhi, India
Tata Motors
Tata Motors Ltd., one of India’s leading automobile manufacturers, announced on Monday that its board has approved the demerger proposal of the company into two separate listed entities. The two entities will focus on different aspects of the business, with one handling commercial vehicles and related investments and the other handling passenger vehicles, electric vehicles, Jaguar Land Rover, and their related investments.
Impact on Market and Shareholders
The demerger of Tata Motors into two separate listed entities is expected to have significant implications for the market and shareholders.
The demerger will be executed through a National Company Law Tribunal scheme of arrangement, and all shareholders of TML will continue to have identical shareholding in both entities. The necessary approvals for the demerger are expected to take 12-15 months to complete.
The company stated that the demerger would have no adverse impact on employees, customers, and business partners. The commercial vehicles, passenger vehicles (PV+EV), and Jaguar Land Rover (JLR) businesses of Tata Motors have delivered a strong performance in recent years, and the demerger will help secure considerable synergies across PV, EV, and JLR, particularly in EVs, autonomous vehicles, and vehicle software.
Strategic Implications for Tata Motors
The division of Tata Motors into distinct entities marks a strategic shift for the company.
Tata Sons Chairman N Chandrasekaran expressed his support for the demerger, stating that it will help the three automotive business units better capitalize on market opportunities by enhancing their focus and agility. He added that this would lead to a superior experience for customers, better growth prospects for employees, and enhanced value for shareholders.
Tata Motors’ stock has surged by about 27 per cent in 2024, following a strong performance in the previous year. After the demerger, shareholders will continue to have identical shareholding in both the listed companies.
JLR is also gearing towards a major shift towards electric vehicles, with the first electric Range Rover due to launch this year and over 16,000 sign-ups for the model after opening the waiting list in December.
The split is a logical progression after Tata Motors separated its passenger vehicle and electric mobility businesses in 2022. Since 2021, these businesses have been operating independently under their respective CEOs.
Tata Motors is optimistic about the demerger and looks forward to the opportunities it will bring to the company, its employees, and its shareholders.
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