Demerger of CV and PV business to bring in greater agility and accountability – N Chandrasekaran

The move is crucial in executing the well-differentiated strategies of both companies, says the chairman. 

By Ketan Thakkar and Shahkar Abidi calendar 31 May 2024 Views icon9385 Views Share - Share to Facebook Share to Twitter Share to LinkedIn Share to Whatsapp
Demerger of CV and PV business to bring in greater agility and accountability – N Chandrasekaran

Natarajan Chandrasekaran, the Chairman of Tata Motors, says the demerger of Tata Motors’ commercial vehicle and passenger vehicle businesses will empower each business and bring greater agility and accountability to them.

In his address to the shareholders in the company's 79th annual report, Chandrasekaran highlighted that the demerger is crucial to executing well-differentiated strategies for both companies.

This strategic move will enable each business to focus on its unique strengths and market opportunities.

Specifically for the passenger vehicle business, he said, “This will also help secure considerable synergies across PV, EV, and JLR, particularly in EVs, autonomous vehicles, and vehicle software. This will lead each Company to deliver a superior customer experience, better employee growth prospects, and enhanced shareholder value.”

The Tata Motors Board has put forth a proposal to divide the company into two separate listed entities. The first entity will house the Commercial Vehicles business and its related investments. In contrast, the second entity will encompass the Passenger Vehicles businesses, including PV, EV, JLR, and its related investments.

Recapping the last financial year, Chandrasekaran says that in the first phase of this multi-year journey, Tata Motors delivered an excellent performance with all automotive verticals delivering on their strategies, leading to multiple achievements.

“All three businesses—commercial vehicles (CV), passenger vehicles (PV), and JLR—delivered remarkable improvement in performance across metrics—brand health, customer experience, financials, product innovation, and employee engagement,” he added.

On a consolidated basis, Tata Motors business delivered several highs - Net revenue of Rs 4,37,928 crore, EBITDA of Rs 62,798 crore, PBT [before exceptional items (bei)] of Rs 28,932 crore and auto free cash flow (after investment and interest) of Rs 26,925 crore.

“Our India automotive business is now debt-free, and the Company is on track to make JLR debt-free in FY25,” he asserted.

Tata Motors delivered this strong outperformance and successfully navigated many challenges this year, including migrating to India's BS-VI Phase II emission norms, geopolitical turbulence leading to supply chain disruptions, and a global slowdown in auto sales.

He reminded shareholders that the structural shifts Tata Motors called out for last year continue to evolve, i.e. – Irreversible energy transition to green mobility, rebalancing supply chains to achieve resilience, and digital acceleration with AI and ML becoming mainstream.

“With Tata Motors' turnaround, the company is embracing these shifts from a position of strength and confidence,” said Chandrasekaran.  

Geo-political situation tense but global economy to grow 

The Chairman says the global geo-political scenario continues to be “tense with continuing military conflicts.”

The same has created immense hardships for the affected people and resulted in supply chain disruptions.

However, the economic scenario is stabilizing, and he estimates global economic growth to be around 3% in the next couple of years.

The coordinated actions by the central banks have helped in bringing down inflation.

Due to this strong performance, the Board has recommended a final dividend of I:3 per share to ordinary shareholders and I:3.1 per share to DVR holders and a special dividend of I:3 per share to ordinary shareholders and I:3.1 per share to DVR holders, both subject to your approval. 


 

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