Tata Motors Limited (TML) shares climbed 8% and hit a 52-week high of Rs 1,065.60 on 5 March after the company’s board of directors approved the merger proposal.

As per the proposal, the Demerged entities will include two separate companies. One entity will have the Commercial Vehicles business and its related investments. The other entity will have a Passenger Vehicles business, which will include Passenger Vehicles (PV), Electric Vehicles (EV), Jaguar Land Rover (JLR), and their associated investments.

All shareholders of TML will continue to have an identical shareholding in both the listed entities through a National company law tribunal (NCLT) scheme of arrangement. The Commercial Vehicles (CV), Passenger Vehicles (PV+EV), and Jaguar Land Rover (JLR) businesses of Tata Motors have shown a strong performance over the past few years by effectively implementing distinct strategies. Since 2021, these businesses have been operating independently under their respective CEOs.

The demerger is a logical progression of the earlier Subsidiarisation of PV and EV businesses in 2022. It will further empower the respective businesses to pursue their strategies with greater agility while reinforcing accountability, which will lead to higher growth. While there are limited synergies between the 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.

Chairman N Chandrasekaran stated that Tata Motors has made 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 utilise the opportunities provided by the market by enhancing their focus and agility. This will lead to a superior experience for customers, better growth prospects for employees, and enhanced value for shareholders.

The NCLT scheme of arrangement for the demerger will be placed before the TML Board of Directors for approval in the coming months. It will be subject to all necessary shareholder, creditor, and regulatory approvals, which could take a further 12-15 months to complete. The demerger will have no adverse impact on employees, customers, and TML’s business partners.

At 10:53 am, the shares of Tata Motors Limited were trading 4.62% higher at Rs 1,032.80 on NSE.