Tata Motors on Monday announced the demerger of its commercial and passenger vehicle segments into two separate listed entities.

The commercial vehicles business and its related investments would be housed in one entity while the passenger vehicle business, including electric vehicles, Jaguar Land Rover (JLR) and its related investments, would be part of the second entity, the auto major said in a regulatory filing.

Tata Motors chairman N. Chandrasekaran said the company has scripted a strong turnaround in the last few years.

“The three automotive business units are now operating independently and delivering consistent performance. This demerger will help them better capitalise on the opportunities provided by the market by enhancing their focus and agility,” he added.

According to the proposal approved by the company board in a meeting on Monday, the demerger will be implemented through an NCLT scheme of arrangement and all shareholders of Tata Motors shall continue to have identical shareholding in both the listed entities.

Chandrasekaran said the scheme of arrangement for the demerger shall be placed before the company board for approval in the coming months and will be subject to all necessary shareholder, creditor and regulatory approvals which could take a further 12-15 months to complete.

The auto major stated that the demerger is a logical progression of the subsidiarisation of PV and EV businesses done earlier in 2022.

Tata Motors shares on Monday ended 0.12 per cent down at Rs 987.20 apiece on the BSE.

An analyst with a foreign brokerage told The Telegraph that once listed the PV business is likely to get a better valuation than the CV entity, which is in a cyclical business.

The spinoff will enable investors to take exposure in specific businesses and the induction of strategic or financial investors in these businesses cannot be ruled out in the future.

Tata Motors Passenger Vehicles (TMPV) is a wholly-owned subsidiary of TML at present. In 2021-22, TML transferred its passenger vehicle undertaking to TMPV.

In the same fiscal, Tata Passenger Electric Mobility Ltd (TPEM) was incorporated as a wholly owned subsidiary of TML to undertake the passenger electric mobility business.

TPEM had then secured funding of Rs 7,500 crore from TPG Rise, at a valuation of up to $9.1 billion.

Tata Motors is now the largest player in India’s EV business. JLR has also been betting heavily on this segment.

Last month, JLR said its Range Rover Electric has generated strong interest with over 15,000 sign-ups to the waiting list.

For the shareholders, the development comes just months after Tata Motors pared its stake in Tata Technologies through an IPO.