Tata Motors to have 2 separate listed companies post demerger; shareholders to get shares in 1:1 ratio

Tata Motors (TML) will demerge its commercial vehicle business into a separate listed entity, with the shareholders of the company set to receive one share of the new Tata Motors CV business for every one share held in Tata Motors, under a composite scheme of arrangement approved by the board of directors on Thursday.

Tata Motors is the largest truck and bus maker in the country. Over the last few years, it has also emerged as the largest electric passenger vehicle company, while also strengthening its market share in the ICE (internal combustion engine) passenger vehicle space. To capitalise on their individual strengths and opportunities, the company's board had in March approved plans to demerge Tata Motors into two separate listed entities.

This would help them better capitalise on the opportunities in the market by enhancing their focus and agility, chairman N. Chandrasekaran had said. It would lead to a superior experience for customers, better growth prospects for its employees and enhanced value for shareholders, he had added.

As a part of the scheme, the truck and business business will now be demerged into a separate company, with TML shareholders getting an identical shareholding (1:1) in both the listed entities.

Once the scheme is effective, the two businesses will also be renamed, resulting in two separate listed entities. The passenger vehicle business, electric vehicle business, Jaguar Land Rover and their related investments will be under Tata Motors Passenger Vehicles Ltd (TMPV) and the resulting company carrying on the CV business will be Tata Motors Limited.

"These actions would further empower the respective business groups to pursue their differentiated strategies with greater agility while reinforcing accountability and will enhance shareholder value," it said.

The scheme will not have any adverse impact on employees, customers, creditors and other business partners, TML added.

The company on Thursday reported a consolidated net profit of Rs 5,566 crore, up 74 per cent from a year ago profit of Rs 3,203 crore. Revenue, on the other hand, was at Rs 1.08 lakh crore, compared with Rs 1.02 lakh crore in the year ago quarter.

Tata Motors has seen some slowdown in the domestic passenger vehicle business, with PV sales declining 1.1 per cent and EV volumes falling near 14 per cent.

According to Shailesh Chandra, MD of Tata Motors PV, retails had slowed in the first quarter due to intense heat waves across the country and the general elections and the company had proactively adjusted its wholesales in line with retails to keep channel inventories under control.

EV sales were impacted largely due to a "sharp" decline in fleet demand post the end of the Fame II subsidies, which had provided incentives for EV purchases. The fleet segment accounts for almost 20 per cent of EV volumes.

P. Balaji, the CFO of Tata Motors said some amount of moderation in PV sales was expected after two strong years. He is hopeful of PV sales rebounding through the rest of the year aided by new product launches and the festive season. Tata Motors will launch the much anticipated Curvv, its first coupe SUV next week. The EV version of the Curvv will be launched first, followed by the ICE (internal combustion engine) version.

Balaji also hoped the incentives for EVs would come back, which would help sales regrow.