Shareholders give a resounding okay to transfer the unit to it own subsidiary
Indian auto major Tata Motors’ plan to hive off its passenger vehicles business received a shot in the arm after being ratified by shareholders.
In a regulatory filing, the company said more than 99% of shareholders were in favor of transferring the passenger vehicles business unit to its subsidiary TML Business Analytics Services. The company said its passenger vehicles business has been valued at 94.17 billion rupees (US$1.28 billion).
Last March, Tata Motors said it would spin off its passenger vehicle business, which includes electric vehicles, into a separate subsidiary and seek a strategic partnership in order to help the unit secure long-term viability. The company plans to sell up to 49% in its passenger vehicles business.
The company expects the hiving-off process to be completed around May-June this year, although it has not yet finalized its potential partner. According to the plan, TML Business Analytics Services will be renamed Tata Motors Passenger Vehicles. Once the process is completed, Tata Motors will be left with the commercial vehicle business unit and investments in Jaguar Land Rover and other subsidiaries.
Tata Motors said this separation was part of an overall business reorganization plan and hoped it would provide a differentiated focus for the passenger vehicles and commercial vehicle businesses and help each of them realize their potential.
As for the potential strategic partner, Tata Motors held talks with Chinese players including Geely, Changan and Chery that owns a 50% stake in Jaguar’s China unit. But the tensions between India and China are proving to be a stumbling block.
It had also held talks with France’s PSA Group, but with the latter merging with Fiat Chrysler, things slowed down. Fiat Chrysler already has manufacturing ties with Tata Motors in India.
In February, Tata Motors recorded its highest sales of passenger vehicles ever. It sold 27,225 units, a 119% jump over last year (12,430 units). Its commercial vehicle segment, which was badly hit by the Covid-19 lockdowns and travel restrictions, also witnessed a turnaround in February. It sold 33,966 units during the month, as against 28,071 units in the year-ago period.
The overall passenger car sales in the country have grown for the seventh consecutive month as people continue to be wary of using public transport amid Covid-19 fears. This is despite a steep hike in gasoline and diesel prices and the rise in the cost of vehicles from January onward after carmakers passed on the rise in input costs to customers.
Tata Motors, previously known as Telco, started operations in 1945 and used to manufacture boilers and locomotives. It started manufacturing commercial vehicles in 1954 and three decades later it entered the passenger car market. In 2008, Tata Motors acquired Jaguar Land Rover from Ford for $2.3 billion.