Tata Motors to demerge its businesses into two separate listed companies

In a bid to unlock more value for its businesses, Tata Motors Ltd today announced a major restructuring plan that would demerge the company into two separate publicly traded companies - one for the commercial vehicle business and the other for the passenger vehicle business, which will include electric vehicles and Jaguar Land Rover.

Tata Motors is currently the largest commercial vehicle maker and third largest passenger vehicle manufacturer, as well as the market leader in the electric passenger vehicle segment in the country. The announcement of restructuring comes almost a month after Tata Motors surpassed Maruti Suzuki India on the stock market to become the most-valued automaker in India in terms of market capitalisation.

“While there are limited synergies between the commercial vehicles 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,” the company said in a release.

In 2020, Tata Motors hived off its passenger vehicle business into a separate entity and set up a subsidiary Tata Motors Passenger Vehicles Ltd for electric vehicles in 2021. The subsidiary was valued at around $9 billion after investment from TPG Rise Climate. The company is planning a portfolio comprising ten electric vehicles in the coming years.

The automaker noted that the demerger is a “logical progression of the subsidiarisation” of passenger and electric vehicle businesses done in 2022. Currently, three businesses – commercial vehicles, passenger vehicles and Jaguar Land Rover – operate independently under their respective CEOs.

“Tata Motors has scripted a strong turnaround in the last few years. The three automotive business units are now operating independently and delivering consistent performance. This demerger will help them better capitalise on the opportunities provided by the market by enhancing their focus and agility,” Tata Motors' Chairman N Chandrasekaran said.

The automaker’s board has approved the proposal to demerge the company. The demerger will be implemented through an NCLT scheme of arrangement, which will be placed before the board for approval in the coming months. The necessary shareholder, creditor and regulatory approvals could take 12-15 months to complete.

The company noted that all shareholders of Tata Motors will have an identical shareholding in both the newly listed entities and the demerger will not have adverse impact on employees, customers, and business partners.

In 2023, Tata Group’s product engineering and digital services company Tata Technologies raised around Rs 3,000 crore in an initial public offering. It was the first IPO from Tata Group company in nearly two decades after listing Tata Consultancy Services.