Tata Motors, one of the largest automobile manufacturers in the country and across the globe is about to demerge into two different entities, both will be listed. In a stock exchange filing on 1 August 2024, Tata Motors informed that the board of directors of the auto giant has given a nod for the Tata Motors demerger.Â
Demerging into two entities
Tata Motors is planning to separate its commercial vehicle business from its passenger vehicles business segment. The commercial vehicle segment of the automaker will be a separate listed entity as TML Commercial Vehicles Limited while the passenger vehicles, along with the EV segment, JLR, and other similar businesses will form the second listed entity.
As the demerger of Tata Motors will end up forming two separate listed companies, the shareholders of Tata Motors will be shareholders of both the companies that will form. This is known as identical or mirror shareholding where shareholders of a company become shareholders of all the entities formed in the demerger. The demerger will be done using an NCLT scheme; however, Tata Motors is still awaiting approval from shareholders, the National Company Law Tribunal (NCLT), and other similar authorities. Since the approvals are pending, the Tata Motors share demerger date is yet to be announced.
Why this demerger of Tata Motors?
As per Tata Motors, this demerger will help the company implement better business strategies for the two different business segments separately. As both segments have different customers and dynamics, this demerger can help the company better its place in the market and increase shareholder return and investments’ overall value.
Apart from better business management, this demerger is also targeted to develop the PV, EV, and JLR segments of the company by implementing better software and tech support and services. The plan is to incorporate automation and vehicle software full-fledged into this segment. For the CV segment, this demerger can open new opportunities across the world.
Share price movement of Tata Motors
The share price of Tata Motors today tanked 3.40% until 12.30 pm after the Tata Motors demerger news came in. However, the overall market is sluggish today which is also putting pressure on the auto stock. In the past 12 months, Tata Motors’ share price jumped around 78% and currently, it is trading at Rs. 1107.40 apiece.
Source: https://www.moneycontrol.com/
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