Tata Motors saw a massive surge in its stock price on Tuesday, with shares rising by almost 8 per cent following the company's announcement of dividing its commercial and passenger vehicle segments into two distinct listed entities. The shares also crossed Rs 1,000-mark during the trading session. This strategic move aims to optimise the utilisation of growth opportunities within each segment.
The stock soared by 7.94 per cent, reaching its peak for the past 52 weeks at Rs 1,065.60 on both the BSE and the National Stock Exchange (NSE). This surge contributed to a significant increase in the company's market valuation, rising by Rs 12,601.83 crore to Rs 3,40,633.29 crore.
In a regulatory filing on Monday, Tata Motors said that the commercial vehicles business and associated investments would form one entity, while the passenger vehicle business, encompassing electric vehicles and the Jaguar Land Rover (JLR) brand along with its investments, would constitute the second entity.
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Chairman of Tata Motors, N Chandrasekaran, said the company's notable turnaround in recent years, stating, "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."
The demerger would lead to a superior experience for customers, better growth prospects for employees and enhanced value for shareholders, Chandrasekaran stated.
He highlighted the expected benefits of the demerger, citing a superior customer experience, improved growth prospects for employees, and enhanced shareholder value.
As per the proposal approved by the company's board in a meeting on Monday, the demerger will be executed through an NCLT (National Company Law Tribunal) scheme of arrangement, ensuring that all Tata Motors shareholders maintain identical shareholding in both listed entities.