Tata Motors board okays demerger of commercial vehicle business

2 Aug 2024 , 11:27 AM

Tata Motors Ltd announced on Thursday (August 1) that its board has approved a composite plan of arrangement that would result in the demerger of its Commercial Vehicle (CV) business into a separate publicly listed company.

Concurrently, Tata Motors Passenger Vehicles (TMPV) will merge with the existing listed company, resulting in two separate publicly traded organisations for the CV and Passenger Vehicle (PV) sectors.

Under the authorised arrangement, Tata Motors stockholders will receive one share of the newly established TMLCV for each share they own in Tata Motors, resulting in a 1:1 share entitlement ratio.

This move intends to allow the respective businesses to follow their unique objectives with greater agility, hence increasing shareholder value. The demerger transfers all assets, liabilities, and personnel associated with the CV business to TMLCV.

The present Passenger Vehicle business, the Electric Vehicle (TPEM) business, and JLR will be combined into TML, the current publicly traded organisation. As a result, TML will only focus on the CV company, whilst TMPV will include the PV, EV, and JLR companies.

This strategic realignment aims to improve operational efficiency and accountability, preparing both companies for future growth. The scheme is subject to shareholder, creditor, and regulatory approval.

The Board’s decision follows an earlier notification made on March 4, 2024, and is consistent with Sections 230-232 of the Companies Act, 2013. The Scheme is subject to all necessary shareholder, creditor, and regulatory approvals, which may take 12-15 months to execute.

PwC Business Consulting Services LLP provided the share entitlement report for the transaction, while SBI Capital Markets gave a fair judgement on the demerger’s share entitlement ratio.

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