Companies

Tata Motors to hive off passenger vehicle unit

Our Bureau Mumbai | Updated on March 27, 2020 Published on March 27, 2020

A ringside view of the Tata Motors stall at the Auto Expo 2020 in Greater Noida   -  AFP

Shailesh Chandra to head the subsidiary, replacing Mayank Pareek

Tata Motors Ltd will spin off its passenger vehicle business, which includes electric vehicles, into a separate subsidiary. Financial details of the arrangement were not disclosed by the company. Tata Motors said the move was aimed at providing differentiated focus for its passenger and commercial vehicle businesses and help each of them realise their potential.

The spin off could be a precursor to a potential stake sale, according to analysts. There were reports of Chinese automaker Chery Automobiles being interested in a stake though there is no official word on any such deal.

Tata Motors said that the move is a first step in its plans to “secure mutually beneficial strategic alliances for the domestic PV business and help secure its long-term viability”,

Shailesh Chandra, currently the president of EV and corporate strategy, has been appointed as the president of PV business, including EV business, with effect from April 1. He will be replacing Mayank Pareek as the president of the PV business.

The plan to subsidiarise is by transferring relevant assets, IPs and employees directly relatable to the PV business for it to be fully functional on a standalone basis through a slump sale, said Tata Motors.

Transfer process

The proposed transfer to subsidiarise shall be implemented through a scheme of arrangement, which will be tabled for approval to the TML Board over the next few weeks, it said.

Tata Motors said that it expects this transfer process to be completed in the next one year. However, certain shared services and central functions will be retained at TML to deliver cost efficiencies for the entire group, it added.

The company said the recent outbreak of Covid-19 increases the challenges faced by the business and it will take decisive steps to strengthen its business over the long-term. Suraj Ghosh, Principal Analyst, Powertrain & Compliance Forecasts, IHS Markit, told BusinessLine the new subsidiary would enable Tata to channel its key resources in a more specific way and open up avenues to explore strategic and technological alliances.

“TML as a single organisation is a behemoth catering to diverse classes and categories of vehicles, it sometimes led to a slightly confusing brand image. However, this step is expected to change that and create altogether a new branding for its PVs,” said Ghosh.

Published on March 27, 2020
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