On Monday, Tata Motors' board gave the green light to a significant restructuring, opting to demerge its operations into two distinct entities: one focusing on commercial vehicles and the other on passenger vehicles. This strategic move aims to capitalize on synergies within each segment and drive accelerated growth.
Under the proposed demerger, all shareholders of Tata Motors will maintain their current shareholding in both entities. This decision follows the earlier subsidization of PV and EV businesses in 2022, aligning with the company's strategy to enhance growth prospects and agility while reinforcing accountability.
After the demerger, one entity will oversee the commercial vehicles business and associated investments, while the other will manage passenger vehicles, including PVs, electric vehicles, Jaguars, Land Rovers, and related investments. The demerger process will be executed through an NCLT scheme of arrangement, subject to approvals from the Tata Motors board, shareholders, creditors, and regulators, expected to be completed within 12-15 months.
Since 2021, Tata Motors' CV, PV, and JLR businesses have operated independently under their respective CEOs. The rationale behind this move lies in the limited synergies between CV and PV businesses, although the company identifies significant synergies across all three, particularly in EVs, autonomous vehicles, and vehicle software.
Tata Motors assures stakeholders that the demerger will not adversely affect employees, customers, or business partners. Instead, it aims to streamline operations, foster innovation, and position both entities for sustained growth in their respective markets.
