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Benzinga – Tata Motors (NS) saw its share price climb around 2% on Wednesday morning, rebounding from a sharp 5% drop on Tuesday. However, the stock remained extremely volatile.
What Happened: On Tuesday evening, the auto giant announced that its board had approved the creation of a wholly-owned subsidiary for its commercial vehicles business. The new unit, set to be named TML Commercial Vehicles Ltd (TMLCVL), will operate as a wholly-owned subsidiary of Tata Motors.
This decision follows Tata Motors’ March announcement to split its commercial and passenger vehicle segments into two distinct listed entities. The goal is to capitalize on growth opportunities more effectively in each segment. The commercial vehicle business and its related investments will be housed in TMLCVL, while the passenger vehicle business, including electric vehicles and the luxury brand Jaguar Land Rover, will be organized under a separate listed entity.
This restructuring aims to enhance focus and operational efficiency within each business segment, allowing for targeted growth strategies and increased shareholder value.
In addition, Tata Motors announced the merger of Tata Motors Limited (TML), Tata Capital Limited (TCL), and Tata Motors Finance Ltd (TMFL) through an NCLT scheme of arrangement. TCL will issue equity shares to TMFL shareholders, resulting in TML holding an effective 4.7% stake in the merged entity.
For FY24, TCL reported a profit after tax (PAT) of ₹3,150 crore, while TMFL reported a PAT of ₹52 crore. This merger supports TML’s strategic goal of exiting non-core businesses and focusing on capital expenditures for emerging technologies and products.
Currently, TCL has a limited presence in the commercial vehicle (CV) and passenger vehicle (PV) financing sectors. The merger will allow TCL to attract new customers in these fast-growing segments, which it plans to serve with innovative products and digital offerings, according to a company press release.
Price Action: As the markets opened on Wednesday, Tata Motors’ share price dropped 0.24% to ₹901.70.
