Tata Motors' board on Monday approved the proposal of demerger of the automaker into two separate listed companies — one housing its commercial vehicles business and the other its passenger vehicles businesses including electric vehicles (EV) and British marque Jaguar Land Rover (JLR)

While there are limited synergies between commercial vehicles (CV) and Passenger Vehicles (PV) businesses, there are considerable synergies to be harnessed across PV, EV and JLR particularly in the areas of EVs, autonomous vehicles, and vehicle software which the demerger will help secure, the Tata Group-controlled automaker says in a statement.

The demerger will be implemented through an NCLT (National Company Law Tribunal) scheme of arrangement and all shareholders of Tata Motors will continue to have identical shareholding in both the listed entities, the company says.

Over the past few years, the commercial vehicles (CV), domestic passenger vehicles and Jaguar Land Rover (JLR) businesses of Tata Motors have delivered a strong performance by implementing distinct strategies. Since 2021, these businesses have been operating independently under their respective CEOs.

"The demerger is a logical progression of the subsidiarisation of PV and EV businesses done earlier in 2022 and shall further empower the respective businesses to pursue their respective strategies to deliver higher growths with greater agility while reinforcing accountability," the automaker says.

"Tata Motors has scripted a turnaround in the last few years. The three automotive business units are now operating independently and delivering consistent performance. This demerger will help them better capitalise on the opportunities provided by the market by enhancing their focus and agility. This will lead to a superior experience for our customers, better growth prospects for our employees and, enhanced value for our shareholders," says Tata Sons chairman N Chandrasekaran.

The NCLT scheme of arrangement for the demerger will be placed before the board of directors for approval in the coming months and will be subject to all necessary shareholder, creditor and regulatory approvals which could take a further 12-15 months to complete. The demerger will have no adverse impact on employees, customers, and our business partners, the automaker says.

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