Tata Motors announces demerger of Commercial Vehicle and Passenger Vehicle business; know how shareholders will be affected

“In furtherance to the announcement made on March 4, 2024, the Board of Directors of Tata Motors Limited (TML), today, has approved a Composite Scheme of Arrangement amongst TML, TML Commercial Vehicles Limited (TMLCV), Tata Motors Passenger Vehicles Limited (TMPV) and their respective shareholders under Sections 230-232 and other applicable provisions of the Companies Act, 2013 (“Scheme”),” Tata Motors said in a press release.

As a part of the scheme, Tata Motors will demerge its Commercial Vehicle undertaking involving the Commercial Vehicle business (all the assets, liabilities and employees relating to the Commercial vehicle business) and all its related investments into its commercial vehicle arm.

Further, the existing Passenger Vehicle business in TMPV, will be merged into Tata Motors, the existing listed entity.

Upon the Scheme becoming effective, both TMLCV and TML will be renamed, resulting in two separate listed entities: 1) The Commercial Vehicle business and its related investments, under the name Tata Motors Limited or TML, and 2) The Passenger Vehicle business, the Electric Vehicle (TPEM) business, JLR and their related investments, under the name Tata Motors Passenger Vehicles Limited or TMPV.

“Under the scheme, shareholders of Tata Motors will receive one share of TMLCV of face value Rs 2/- fully paid up for every one fully paid-up share of Rs 2/- held in TML of the same class (“Entitlement Ratio”),” according the press release.

These actions would further empower the respective business groups to pursue their differentiated strategies with greater agility while reinforcing accountability and will enhance shareholder value, it added.

The scheme will not have any adverse impact on employees, customers, creditors and other business partners.

The scheme is subject to all the necessary shareholder, creditor and regulatory approvals which can take around 12-15 months to complete.

PwC Business Consulting Services LLP has provided the share entitlement report for the transaction, with SBI Capital Markets acting as fairness opinion provider for share entitlement ratio for the demerger. AZB & Partners are the legal advisors to the transaction. Deloitte Touche Tohmatsu India LLP are the tax advisors for the transaction.