Tata Motors Board Approves Demerger: Here's What It Means For Shareholders

Tata Motors is making a significant shift by splitting its operations into two distinct entities, focusing on commercial vehicles and passenger vehicle businesses. The company’s board approved this strategic move on Monday to enhance growth and agility in both sectors.

What does the Tata Motors split mean for shareholders?

Shareholders of Tata Motors won’t see a change in their stake; they’ll hold identical shares in the newly formed entities. This decision follows the 2022 subsidiarisation of its Passenger Vehicle (PV) and Electric Vehicle (EV) units, aiming to boost growth and accountability within these segments.

The segregation will see one entity concentrating on commercial vehicles and related investments, while the other will focus on passenger vehicles, including the PV, and EV sectors, and the prestigious Jaguar and Land Rover brands, along with associated investments.

How long will the demerger take and what do we know so far?

To execute this demerger, Tata Motors plans to follow an NCLT scheme of arrangement, requiring approval from the company's board, shareholders, creditors, and regulatory bodies, a process expected to take between 12 to 15 months.

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Since 2021, Tata Motors’ Commercial Vehicles (CV), Passenger Vehicles (PV), and Jaguar Land Rover (JLR) operations have been managed independently by their respective CEOs. The company aims to capitalize on the unique strengths of each sector, especially in evolving fields like EVs, autonomous driving, and vehicle software, without affecting employees, customers, or business partners.

Chairman N Chandrasekaran highlighted the demerger as a step towards more focused market opportunities, promising enhanced customer experiences, growth prospects for employees, and increased shareholder value. This restructuring comes as Tata Motors reports a 133% profit increase in the third quarter, alongside a 25% revenue boost, marking a robust turnaround for the company.

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