Tata Motors Completes Demerger, Splitting into Passenger and Commercial Vehicle Entities

Tata Motors has officially completed its long-planned demerger, resulting in two distinct listed companies.

Tata Motors Passenger Vehicles Ltd (TMPV) will now encompass the India passenger vehicles (PV) business, the electric vehicle (EV) arm (Tata Passenger Electric Mobility), and Jaguar Land Rover (JLR). The legacy name 'Tata Motors Ltd' will be used for the separate commercial vehicles (CV) company.

As per the scheme, assets, liabilities, and employees are now assigned to their respective companies. Shareholders will receive one share in the new CV company for every share they hold in the original Tata Motors, ensuring continuity of ownership across both entities.

**Asset and Debt Split:** An approximate 60:40 asset split is expected between TMPV and the CV company. All CV-related investments will move to the CV entity, while PV investments remain with TMPV. Consolidated net automotive debt stood around ₹13,500 crore in Q1 FY26. JLR-related debt and liquidity are now within TMPV, while CV business working capital and term borrowings are with the CV listco.

**Rating Agency Views:** Rating agencies like Icra and CARE note that TMPV's India PV/EV business is largely net-cash positive with minimal debt. However, JLR ended FY25 with around ₹10,600 crore net debt due to working capital movements and tariff headwinds. The CV listco (TML Commercial Vehicles Ltd) shows minimal reliance on debt, holding significant cash and liquid investments.

**Interest Burden:** TMPV's interest burden will be significantly driven by JLR's substantial debt (£4.4 billion). Conversely, the CV listco has modest core debt and relies more on short-term working capital lines, resulting in a lower interest burden.

**Impact:** This demerger aims to allow focused management and capital allocation for each distinct business vertical (PV/EV/JLR vs. CV). It provides clearer financial structures and separate growth paths, potentially unlocking value for shareholders by highlighting the performance of each segment. The move is expected to improve operational efficiency and strategic focus. Impact Rating: 8/10

**Difficult Terms Meaning:** Demerger: The process of splitting a company into two or more separate entities. Listed Companies: Companies whose shares are traded on a public stock exchange. PV (Passenger Vehicles): Cars and other vehicles designed primarily for transporting small numbers of people. EV (Electric Vehicles): Vehicles that are propelled by one or more electric motors, using energy stored in rechargeable batteries. JLR (Jaguar Land Rover): A British multinational automotive manufacturer that designs, manufactures, and sells vehicles under the Jaguar and Land Rover brands. CV (Commercial Vehicles): Vehicles designed for business or trade purposes, such as trucks, buses, and vans. Appointed Date: The specific date on which a corporate restructuring event, like a demerger, becomes effective. Listco: A company whose shares are listed on a stock exchange. Net Automotive Debt: The total debt of an automotive company minus its cash and cash equivalents. Net-Cash Surplus: A situation where a company has more cash and liquid assets than its short-term liabilities, indicating a strong liquidity position. Term Debt: Loans or borrowings that must be repaid over a period longer than one year. Working Capital Movements: Changes in the difference between a company's current assets and current liabilities, reflecting its short-term financial health. Tariff Headwinds: Challenges faced by a company due to increased taxes or duties on imported/exported goods. Fund-based: Refers to credit facilities or financing provided directly to a company, like term loans or working capital loans. NCDs (Non-Convertible Debentures): Debt instruments that cannot be converted into equity shares. CP (Commercial Paper): Unsecured, short-term debt instrument issued by corporations. Non-fund-based: Refers to credit facilities that do not involve direct lending, such as bank guarantees or letters of credit. Liquidity: The ability of a company to meet its short-term obligations and pay its debts. Bond/Loan Stack: The portfolio or structure of all outstanding bonds and loans issued by a company.