Tata Motors, an Indian automaker, announced on Monday that it will split into two publicly traded companies, separating its commercial vehicle business from its passenger vehicle arm, which will include the profitable Jaguar Land Rover business.
After experiencing a business reversal in recent years, Tata Motors, the largest carmaker in India based on revenue, has been running its commercial, passenger, and Jaguar Land Rover sectors independently under different CEOs since 2021.
Tata’s JLR Luxury cars
The company's high demand for its JLR luxury cars contributed to its first annual profit in five years, which it declared for the fiscal year 2023. About two-thirds of Tata Motors' revenue comes from JLR, and the remaining fifth comes from commercial vehicles like trucks and buses.
Following the demerger, one entity will hold the passenger and electric car divisions, as well as the Jaguar Land Rover businesses and associated investments. The other company will acquire the commercial vehicle division and any associated investments. In India, Tata Motors dominates the market for commercial cars.
Tata Motors' stock has increased by almost 27% in 2024 after more than doubling the previous year. According to the corporation, after the split, stockholders will still own the same number of shares in each of the listed companies.
Segmentation of Companies
Although there are few synergies between the passenger and commercial vehicle industries, there are many between the passenger, electric, and Jaguar Land Rover segments, especially in the areas of electric, autonomous mobility, and vehicle software, according to Tata Motors. According to Chairman N Chandrasekaran, the demerger will benefit staff by improving their growth opportunities and increasing shareholder value.
The business stated that the demerger's scheme of arrangement will be presented to the board in the next months and that it is subject to the requisite approvals from shareholders, creditors, and regulators, which may require an additional 12 to 15 months to finalize. It further stated that there will be no negative effects of the demerger on partners in business, customers, or staff.
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