Indian automaker Tata Motors said on Monday it will split into two listed companies, separating its commercial vehicle business from its passenger vehicle arm, which will house the lucrative Jaguar Land Rover business.
Tata Motors, India's top automaker by revenue, has seen a turnaround in its business over the past few years, and has been operating its commercial vehicles, passenger vehicles and Jaguar Land Rover segments independently under separate CEOs since 2021.
The company reported its first annual profit in five years in fiscal 2023, helped in part by strong demand for its JLR luxury cars. JLR contributes about two-thirds of Tata Motors' revenue while commercial vehicles like trucks and buses account for about a fifth.
After the demerger, one company will house the passenger and electric vehicles as well as Jaguar Land Rover businesses, and related investments.
The commercial vehicle business and related investments will be spun into the other entity. Tata Motors is India's market leader in the commercial vehicles space.
Shares of Tata Motors have risen about 27% in 2024 after more than doubling last year.
Post the split, shareholders will continue to have an identical shareholding in both the listed entities, the company said.
While there are limited synergies between commercial vehicle and passenger vehicle businesses, there are considerable synergies across passenger, EV and Jaguar Land Rover, particularly in electric, autonomous mobility and vehicle software, Tata Motors said.
The demerger will help better growth prospects for employees and enhanced value for shareholders, Chairman N Chandrasekaran said in a statement.
The scheme of arrangement for the demerger shall be placed before the board 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 company said.
The demerger will have no adverse impact on employees, customers, and business partners, it added.
