Tata Motors gains after NCLT order on TASL

Tata Motors rose 0.71% to Rs 177.30 after the National Company Law Tribunal (NCLT) sanctioned scheme of agreement between the company and Tata Advanced Systems for transfer of the defense undertaking.

In an exchange filing made after market hours yesterday, Tata Motors (TML) announced that NCLT, Hyderabad Bench vide its order dated 20 December 2019 sanctioned the scheme of arrangement between the company and Tata Advanced Systems (TASL) for transfer of the defense undertaking. TML will sell its defense and aerospace portfolio to TASL to unlock their full potential.

It added that the said scheme would be effective on receipt of necessary approvals from authorities, including the Ministry of Defense.

The scheme will not include transfer of the pure civilian vehicles which will continue to be with TML. TML will receive an upfront consideration of Rs 100 crore, adjusted for capex incurred and changes in working capital in the intervening period until closure date, and a deferred consideration of 3% of the revenue generated from identified specialized defence projects for upto 15 years from FY20 subject to a maximum of Rs 1750 crore.

The scheme will also include sale of TML's shareholding in its wholly-owned subsidiary, TAL Manufacturing Solutions (TAL) to TASL at an enterprise value of Rs 625 crore. As a condition precedent, TML will acquire the non-aerospace business from TAL at a value of Rs 10 lakh.

This is in line with Tata Motor's plan to drive Turnaround 2.0, take necessary steps to further its defense business by leveraging the scale and strengths of the unified aerospace and defense entity at the group level, while monetizing its non-core assets to reduce net-debt.

TML and TASL approved the said scheme by passing the board resolulion on 3 May 2018 and 25 June 2018 respectively and thereafter they approached the NCLT for sanction of the scheme.

TML reported a consolidated net loss of Rs 227.62 crore in Q2 September 2019 as compared to net loss of Rs 873.27 crore in Q2 September 2018. Net sales declined 9.2% to Rs 64,763.39 crore in Q2 September 2019 over Q2 September 2018.

Tata Motors is a leading global automobile manufacturer of cars, utility vehicles, buses, trucks and defense vehicles.

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