TATA Motors Implement Plans to Support Their Demerger Tata Motors Finance Limited (TMFL) is merging with Tata Capital Limited (TCL) through National Company Law Tribunal (NCLT) scheme of arrangement ahead of its demerger between Tata Motors' passenger and commercial vehicles.
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Amid the planned demerger of its passenger vehicles (PV) and commercial vehicles (CV) businesses, Tata Motors announced on Tuesday the union of its subsidiary company, Tata Motors Finance, with Tata Capital Limited. Tata Motors' Board of Directors, along with those of Tata Capital and Tata Motors Finance, approved the merger through an NCLT scheme of arrangement. All shareholders of TATA Motors shall continue to have the identical shareholding in both the listed entities.
In an exchange filing, Tata Motors explained that, "As consideration for the merger, Tata Capital will issue its equity shares to the shareholders of Tata Motors Finance, resulting in Tata Motors effectively holding a 4.7 percent stake in the merged entity."
The company also added that the merger will not have any adverse impact on customers or creditors of Tata Motors Finance Limited. E&Y, ICICI Securities, and Wadia Ghandy & Co are the transaction advisors for Tata Capital Limited (TCL), while PwC, Axis Capital, and AZB & Partners are the advisors for Tata Motors Finance Limited (TMFL).
In FY '24, Tata Capital reported profits after tax of INR 3,150 crore and Tata Motors Finance of INR 52 crore. The deal, according to the company, is in line with its goal of leaving non-core businesses to concentrate on developing new goods and technology.
The Backstory
In March, the auto giants announced the demerger of its vehicle companies into two separate listed companies, commercial vehicles (CV) and passenger vehicles (PV). According to Tata Motors executive director, Girish Wagh, this separation will help the company to better capitalize on growth opportunities and help improve focus and make the company more agile to capitalize on opportunities in the CV market globally.
In the company's latest annual report, Chairman of Tata Motors, Natarajan Chandrasekaran, highlighted that, "The demerger of Tata Motors' commercial vehicle and passenger vehicle businesses will enable each entity to focus on its unique strengths and market opportunities," Chandrasekaran also believes the move is crucial for driving forward the company's vision of creating greater value for the shareholders and better serving the customer base.
In recent years, Tata Motors has seen robust performance across its commercial vehicles (CV), passenger vehicles (PV), electric vehicles (EV), and Jaguar Land Rover (JLR) divisions, each driven by distinct strategic approaches. Since 2021, these divisions have been operating independently, each under the leadership of their respective CEOs.
While harmony between the commercial vehicles (CV) and passenger vehicles (PV) businesses are limited, significant synergies exist between passenger vehicles (PV), electric vehicles (EV) and Jaguar Land Rover (JLR), especially in the fields of electric vehicles, autonomous driving, and vehicle software. The demerger will facilitate the realization of these synergies.
