The demerger via the NCLT route will take around 12-18 months time to be implemented. Furthermore, post the de-merger, each shareholder of Tata Motors will get 1 share of both the new listed entities.
Tata Motors was the stock of the moment in the opening deals on Tuesday, March 5, as, in a big announcement on Monday after market hours, it announced the demerger of its company into two separate entities.
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One entity will house commercial vehicle (CV) business and its related investments, while the other will house passenger vehicle businesses, including passenger vehicles, electric vehicles and JRL and their related investments.
At around 9:39 am, shares of the company traded with gains of 4.72 per cent or Rs 46.6 at Rs 1033.8, while at the day’s high it scaled levels of Rs 1034.15 per share on the BSE.
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In a regulatory filing, Tata Motors said that all shareholders of Tata Motors shall continue to have identical shareholdings in both the listed entities. “Over the past few years, the commercial vehicles (CV), passenger vehicles (PV+EV), and Jaguar Land Rover (JLR) businesses of Tata Motors have delivered a strong performance by successfully implementing distinct strategies. Since 2021, these businesses have been operating independently under their respective CEOs,” Tata Motors said adding the demerger could take a further 12-15 months to complete and it will have no adverse impact on employees, customers and business partners.
Of late, Tata Motors announced that sales in the domestic and international market for February 2024 stood at 86,406 vehicles, compared to 79,705 units during February 2023, recording a growth of 8%. Total domestic sales stood at 84,834 units, up 9% YoY. On the other hand, domestic commercial vehicle sales declined 4% to 33,576 units while domestic passenger vehicle sales grew 20% YoY to 51,267 units in February 2024.
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Prashanth Tapse, Senior VP (Research), Mehta Equities said, “We believe this demerger news is a much-awaited strategic move and logical progression to further empower each segment and deliver higher growths with greater visibility. We continue to see high growth opportunities in segment PV, EV and JLR, particularly in the areas of EVs, autonomous vehicles and vehicle software which this move will help secure high focus. We think this demerger will help Tata Motors to better capitalise on the growth opportunities and enhanced value for long-term shareholders.”
Tapse continues to remain positive on Tata Motors as a long-term story. “The commercial vehicles business and its related investments will also be spun into one entity like the vehicle financing business, Tata Technologies etc. but it would be too early to comment on how this will look like. We need to wait and watch for more clarity on how they would go ahead,” Tapse said.
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