Tata Motors’ board has approved the proposal for the demerger of Tata Motors into two separate listed companies housing its commercial vehicle (CV) and passenger vehicle (PV) businesses, respectively. 

Post demerger, one entity would house the CV business and its related investments, while the other entity would house its passenger vehicles business including electric vehicles and Jaguar Land Rover (JLR) and related investments. Let’s delve into the details.

Why the demerger?

Tata Motors’ Chairman N Chandrasekaran said that the company has scripted a strong turnaround in the last few years. Its automotive business units are now operating independently and delivering consistent performance. He added that the demerger will help them better capitalise on the opportunities provided by the market by enhancing their focus and agility. Moreover, it will lead to a superior experience for its customers, better growth prospects for its employees and enhanced value for its shareholders.

Over the past few years, the global automobile manufacturer’s businesses have delivered strong performance by successfully implementing distinct strategies. These businesses have been operating independently under their respective CEOs since 2021.

The company said that this demerger is a logical progression of the subsidiarisation of PV and EV businesses done earlier in 2022. It will help secure synergies across its PV, EV and JLR, particularly in the areas of EVs, autonomous vehicles, and vehicle software. Moreover, it shall further empower the respective businesses to pursue their respective strategies to deliver higher growth with greater agility while reinforcing accountability.

What about stakeholders?

All shareholders of Tata Motors will continue to hold identical shareholding in both the listed entities. This demerger will be subject to necessary approvals from shareholders, creditors, and regulatory bodies, which would take a further 12-15 months to complete. Tata Motors said that the demerger will have no adverse impact on employees, customers and business partners.

Recent developments

  • Tata Motors moved up to the second position on the brand-wise monthly sales leaderboard (for PVs) for February 2024, surpassing its Korean competitor, Hyundai Motor India, by around 1,000 vehicles. Meanwhile, Maruti Suzuki is at the top spot
  • The company’s sales in the month of February 2024 stood at 86,406 vehicles, compared to 79,705 units during February 2023   
  • Tata’s EV line accounted for a sizable portion of its total automobile sales, with 6,923 vehicles sold. Its EV sales grew by 30 percent year over year
  • Tata Motors’ share price vroomed to cross the ₹1,000 mark for the first time. It gained more than 100% in the past year and more than 10% in the past month, buoyed by notable improvements in JLR as well as its commercial vehicle businesses 

Best Sellers

Tata’s recent introductions such as the Punch EV and the redesigned Nexon EV are in high demand. They often make it to the list of the top 10 best-selling vehicles each month. In addition, Tata Motors is working on the launch of its electric SUV, sometime during the remainder of this financial year.

What about DVR shares?

In December 2023, the auto major received approval rom the exchanges to convert its differential voting rights (DVR) shares to ordinary shares. Accordingly, shareholders will receive 7 fully paid-up shares of Tata Motors for every 10 Tata Motors DVRs they held. Therefore, two major corporate actions will be taking place — the conversion of DVR shares to ordinary shares and the demerger of the company’s CV and PV businesses.