Tata Motors demerger: Commercial, passenger vehicles businesses to be split into two separate listed companies

Tata Motors demerger: Auto maker said commercial vehicles business will be housed in one entity while passenger vehicles business would be part of other entity.

Mumbai: Tata Motors' board has approved the proposal to demerge the company into two separate listed entities. The company said in a statement that the demerger will birth two companies -- a commercial vehicles business and a passenger vehicles business.

A Tata Motors logo is pictured outside the company showroom in Mumbai, India.(Reuters file photo)

"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," the company said in the statement.

"The demerger is a logical progression of the subsidiarisation of PV and EV businesses done earlier in 2022 and shall further empower the respective businesses to pursue their respective strategies to deliver higher growths with greater agility while reinforcing accountability. Furthermore, while there are limited synergies between Commercial Vehicles (CV) and Passenger Vehicles (PV) businesses, there are considerable synergies to be harnessed across PV, EV and JLR particularly in the areas of EVs, autonomous vehicles, and vehicle software which the demerger will help secure," it added.

Why is Tata Motors demerging?

Tata Group chairman N Chandrasekaran said the company's three automotive business units are now operating independently and delivering consistent performance. He said the demerger will help the three companies to make use of the opportunities with enhanced 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," he said.

The demerger process could take 12-15 months to complete.

Tata Motors said the demerger would have no adverse impact on employees, customers and business partners.