Tata Motors to separate passenger vehicles division

Tata Motors on Friday approved plan to subsidiarize Passenger Vehicles (PV) including Electric Vehicles (EV) business into a separate subsidiary through a scheme of arrangement.

Tata Motors (TML) in a regulatory filing said its board has given an in-principle approval to subsidiarize TML's Passenger Vehicle business (including EV) 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.

The proposed transfer shall be implemented through a scheme of arrangement, which will be tabled for approval to the TML board over the next few weeks. Implementation of the scheme will be subject to regulatory and statutory approvals as applicable, including approval of shareholders and creditors. TML expects the transfer process to be completed in the next one year.

The company added that over the last few years, Tata Motor's PV business has implemented a strong turnaround. The company boasts a fully refreshed BS-VI ready product portfolio, consistently improving NPS scores, improved retail market shares and an exciting entry into the EV space coupled with improved profitability.

However, the recent outbreak of COVID-19 virus has increased challenges faced by the company. In this situation, subsidiarization of the PV business is the first step in securing mutually beneficial strategic alliances that provide access to products, architectures, powertrains, new age technologies and capital.

The company also announced the appointment of Shailesh Chandra, President EV and Corporate Strategy as President PV business including EV with effect from 1 April 2020. He will be assuming responsibility for the PV business from Mayank Pareek. Shailesh's appointment at the start of the new financial year gives him the opportunity to shape the organization as we ready it to operate as a subsidiary once the necessary approvals are in place. Shailesh and Mayank will work on transition over the next few weeks and Mayank will be superannuating from Tata Motors at the end of February 2021.

Meanwhile, Moody's Investors Service on Thursday placed on review for downgrade Tata Motors' (TML) Ba3 corporate family rating and Ba3 senior unsecured debt rating. The outlook has been revised to ratings under review from negative. Offering the ratings rationale, Moody's said that the rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. The automotive sector has been one of the sectors most significantly affected by the shock given its sensitivity to consumer demand and sentiment.

Shares of Tata Motors fell 0.21% to Rs 70.65. The stock traded in a range of Rs 75.85 to 69.40 in intraday.

TML is the largest manufacturer of commercial vehicles and passenger vehicles in India. The company's products include light, medium, and heavy vehicles, such as trucks, pick-ups and buses, utility vehicles and passenger cars.

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