JLR already operates as an independent unit with its own CEO

Tata Motors‘ board has approved the demerger of Tata Motors into two separate listed companies housing the commercial vehicles business and its related investments in one entity and passenger vehicles including Tata PVs, EVs, JLR and its related investments in another entity.

The demerger will be implemented through an NCLT scheme of arrangement and all shareholders will continue to have the identical shareholding in both the listed entities.

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“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,” Tata said in a statement.

The demerger was a logical progression of the “subsidiarisation” [sic] of PV and EV businesses done earlier in 2022 and “shall further empower the respective businesses to pursue their respective strategies to deliver higher growths with greater agility while reinforcing accountability”.

Tata said there was limited synergy between CV and PV businesses but “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”.

Shareholder, creditor and regulatory approvals could take 12-15 months to complete.

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“The demerger will have no adverse impact on employees, customers, and our business partners,” Tata said.

Tata Motors shares rose to record highs after the announcement, Reuters reported.

The demerger would allow Tata Motors’ passenger vehicle business to directly compete with industry leader Maruti Suzuki, an analyst told the news agency.

With Hyundai potentially listing in India and Mahindra & Mahindra as the fourth top carmaker, investors would have a wider range of options to choose from as competition intensified, he said.