The demerger of the automobile giant Tata Motor’s business segments will be effective from October 1 onwards. In August 2024, the company approved the demerger of its commercial and passenger vehicle businesses into two listed entities to sharpen focus and capitalise on growth opportunities. However, the stock has corrected by over 30% in the last one year.
What’s the demerger plan?
Both TMLCV and TML will be renamed, resulting in two separate listed entities. According to the demerger, Tata Motors’ commercial vehicle division will be demerged into TML Commercial Vehicles (TMLCV), while passenger vehicle operations will remain under Tata Motors, which will be renamed Tata Motors Passenger Vehicles Limited.
What’s the plan for passenger vehicles?
The existing Passenger Vehicle business in TMPV (Tata Motors Passenger Vehicle) will be merged into TML, the existing listed entity. This will include the passenger vehicle business, the electric vehicle (TPEM) business, JLR, and their related investments, under the name TMPV.
What’s the plan for commercial vehicles?
Tata Motors will demerge its Commercial Vehicle business. All the assets, liabilities and employees relating to the Commercial vehicle business and all related investments of the commercial vehicle business will be transferred to the newly formed TMLCV (Tata Motors Limited Commercial Vehicle). The Commercial Vehicle business and its related investments, under the name TML.
What is the share entitlement ratio?
The shareholders of Tata Motors will have identical shareholding in the de-merged entity. The company has a share entitlement ratio of 1:1. The shareholders of Tata Motors will have one share of Tata Motors Commercial Vehicle (TMLCV) of Rs 2 face value for every share they hold. “Pursuant to the Scheme, shareholders of TML 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”),” said the company. Also, the demerger includes the transfer of non-convertible debentures worth Rs 2,300 crore to the commercial vehicle entity, which is proposed to be listed in November.
Tata Motors stock performance
The share price of Tata Motors has fallen 0.75% in the last five trading sessions. The stock has declined by over 1% in the last one month. However, it has given a return of 1.6% in the past six months. Tata Motors’ share price has corrected by almost 30% in the last one year.