Tata Motors, a well-known Indian automaker, has officially announced that it is going to go through a demerger. This was accepted by the company's board of directors today in a meeting. The demerger will split the company into two separate publicly traded entities. One will focus on the commercial vehicles business and the investments that go with it, while the other will focus on passenger vehicles, including PV, EV, JLR, and the investments that go with them. The company said in a statement that this strategic move, which will be carried out through an NCLT plan of arrangement, will make sure that all current Tata Motors shareholders will keep the same number of shares in both new companies.
Chairman N Chandrasekaran said, “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. This will lead to a superior experience for our customers, better growth prospects for our employees and, enhanced value for our shareholders.”
What Does This Mean?
As the next step after subsidising the Tata PV and Tata EV businesses in 2022, the demerger occurred. There isn't much cooperation between the CV and PV businesses, but there is a lot of it between PV, EV, and JLR, especially when it comes to electric vehicles, autonomous cars, and vehicle software. Tata Motors says that the demerger is a strategic move to capture and make the most of these benefits.
"Over the past few years, the Commercial Vehicles (CV), Passenger Vehicles (PV+EV), and Jaguar Land Rover (JLR) businesses of Tata Motors have delivered a strong performance by successfully implementing distinct strategies. Since 2021, these businesses have been operating independently under their respective CEOs," the Indian Company said.
In the coming months, the NCLT plan of arrangement for the demerger will be sent to the TML Board of Directors to be approved. After this, the process will need to be approved by shareholders, creditors, and regulatory officials. The whole thing should take about 12 to 15 months to finish. It is made clear that the demerger is not meant to hurt workers, customers, or any crucial company partners.
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