Tata Motors shares trade higher after shareholders approve proposal to demerge its commercial business into a separate listed entity

Tata Motors shares were trading 5.1% in late trading after the homegrown carmaker said late on Tuesday that its shareholders have approved a demerger proposal that will see its commercial vehicles segment hived off from its passenger vehicles segment into a separate listed entity—called Tata Motors Limited Commercial Vehicles—effectively ending a common holding structure that was associated with both its segments ever since the inception of the mobility division of the salt-to-steel conglomerate.

In March last year, the company had first made public its intention to separate its commercial vehicle arm for the passenger vehicle arm. The two divisions—along with Jaguar Land Rover—are being independently operated with different CEOs since 2021. Tata Sons chairman N Chandrasekaran had said at the time that the demerger will help unlock value for shareholders and better growth prospects for the companies and its employees.

In August last year, Tata Motors had approved the demerger proposal, in which shareholders of Tata Motors will have an identical shareholding in both the listed entities. The company said that the proposal was approved by 99.9995% of the shareholders.

While Tata Motors is a market leader in commercial vehicles, the unit does not share many synergies with the passenger vehicles segment, where it competes with homegrown automakers Maruti Suzuki and Mahindra & Mahindra, along with Hyundai Motor India, one of the top three contributors of Hyundai Motor Company’s global sales.

Tata Motors, which was known as Tata Engineering and Locomotive Company Limited, originally started with the manufacturing of locomotives and steam rollers in 1948. In 1954, TELCO signed an agreement with Daimler-Benz, under which the latter supplied 3,000 heavy commercial vehicles, which were manufactured in a facility in Jamshedpur.

Until 1991, TELCO manufactured commercial vehicles, when it launched the Sierra, its first utility vehicle. In 1998, it launched its first indigenously developed car with the Indica. In 2008, Tata Motors acquired British luxury carmaker Jaguar Land Rover from Ford at the height of the global financial crisis.

In the third quarter FY25, Tata Motors recorded wholesale volumes of 1.4 lakh passenger vehicles, whereas domestic wholesale volumes of commercial vehicles were 91,100 units.