Tata Motors demerger: Can the stock split save JLR's face?
The widely discussed demerger of Tata Motors took place on October 14, resulting in the creation of two entities: Tata Motors Passenger Vehicles (TMPV) and Tata Motors Commercial Vehicles (TMLCV).
The existing listed company, under the name Tata Motors, was renamed to Tata Motors Passenger Vehicles Ltd. The listing of the other entity, Tata Motors Commercial Vehicles, is expected to take place anytime from mid-November to mid-December 2025.
Premium vehicle brand Jaguar Land Rover (JLR), which Tata Motors was a parent company of, will now fall under Tata Motors Passenger Vehicles.
What happened to JLR?
Jaguar Land Rover was hit by a major cyberattack, which forced the company to shut down for a brief period, although the operations have resumed recently. As per Reuters, JLR has already struggled this year, reporting a near 11 per cent quarterly sales drop in July, due, in part, to a temporary pause in shipments to the United States after the Donald Trump administration imposed tariffs on all car imports.
PTI reported that the cyber attack caused a financial hit of 1.9 billion pounds to the UK economy. The cyber-attack in late August forced a complete shutdown of production through September across the automotive major's global operations.
Why was Tata Motors demerged?
"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 growth with greater agility while reinforcing accountability. Furthermore, 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," mentioned the firm in an official press release.
"Tata Motors has scripted a strong 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," said Chairman N Chandrasekaran.
Will the demerger help JLR?
Recently, BofA Securities downgraded JLR's parent stock, Tata Motors Passenger Vehicles Ltd, to 'underperform'. This could be because of the financial fundamentals of JLR that weigh on the stock.
According to a CNBC TV-18 report, the BofA report mentioned that, while the India Passenger Vehicles business is showing improvement in market share, its margins still require enhancement.
Tata Motors demerger details:
As a part of the demerger, shareholders will receive shares in both new entities. For example, if a shareholders possess 20 shares of Tata Motors as on the record date, they would receive 10 new shares in each of the new companies that were formed after the demerger.
For more updates, visit the official website.
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