Tata Motors Board approves demerger of commercial vehicle business

Tata Motors Ltd announced on Thursday (August 1) that its board has approved a complex demerger plan that will result in the spin-off of its commercial vehicle (CV) business into a separate public company.

At the same time, Tata Motors Passenger Vehicles (TMPV) will merge with an existing listed company, creating two separate public companies for the commercial and passenger vehicle sectors.

Under the approved agreement, Tata Motors shareholders will receive one share in the newly created TMLCV for each Tata Motors share they hold, giving a 1:1 equity ratio.

The move is intended to enable the individual businesses to pursue their unique goals with greater agility, thereby increasing shareholder value. The spin-off transfers all assets, liabilities and personnel related to CV’s business to TMLCV.

The current passenger vehicle business, the electric vehicle business (TPEM) and JLR will be merged into TML, the current public organisation. As a result, TML will focus only on the CV business, while TMPV will include the PV, EV and JLR businesses.

This strategic realignment is designed to improve operational efficiency and accountability, positioning both companies for future growth. The program is subject to approval by shareholders, creditors and regulators.

The Board’s decision follows a prior notification dated 4 March 2024 and is in accordance 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 to 15 months to complete.

PwC Business Consulting Services LLP prepared the rights issue report for the transaction while SBI Capital Markets provided a fair value assessment of the rights issue for the demerger.

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