The board of Tata Motors Ltd (TML) on Monday approved a proposal to demerge the automobile maker into two separate listed companies. One entity will house the commercial vehicles (CV) business and its related investments, while the other will encompass the passenger vehicles (PV) businesses, including domestic PV, electric vehicle (EV), Jaguar Land Rover (JLR), and their related investments.
According to industry watchers and analysts, this is the “right time” for the company to segregate its passenger and commercial vehicle businesses, thereby unlocking value for the EV business. However, they do not anticipate this move as a precursor to listing of the JLR and EV businesses separately at a later date.
The announcement came after market hours. The TML stock concluded the day’s trade marginally down at Rs 987.2 per share on the BSE.
The demerger will be executed through a National Company Law Tribunal (NCLT) scheme of arrangement. All TML shareholders will maintain identical shareholding in both the listed entities. The NCLT scheme of arrangement for the demerger will be presented to the TML board of directors for approval in the coming months, and it will be subject to necessary shareholder, creditor, and regulatory approvals, which could take an additional 12-15 months. The company assured that the demerger will not adversely affect employees, customers, or business partners.
(Business Standard)
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