[volkman10]

Tata Motors has, in principle, approved a plan to subsidiarise its passenger vehicle business including electric vehicles 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.

However, certain shared services and central functions will be retained at TML to deliver cost efficiencies for the entire group. The proposed transfer is to be implemented through a scheme of arrangement, which will be tabled for approval to the TML Board over the next few weeks.

The Passenger Vehicle business landscape is seeing rapid transformation in the form of tightening emission norms, push towards electrification, enhanced disruptions from autonomous and connected technologies. Additionally, India continues to remain an attractive market for global OEMs while the aspiration levels of the Indian consumer continue to rise requiring stepped up investments in contemporary products in a competitive market. Over the last few years, TML's PV business has implemented a strong turnaround and has earned its right to grow by launching a slew of successful products Like the Tiago, Tigor, Nexon, Hexa, Harrier and most recently the Altroz and Nexon EV. A fully refreshed BS VI-ready product portfolio based on the Impact 2.0 design philosophy, consistently improving NPS scores, improved retail market shares and an exciting entry into the EV space coupled with improved profitability makes the business ready to realise its potential."

"However, the recent outbreak of COVID-19 virus increases the challenges faced by the business. In this situation our first priority is to secure the health and safety of our people while continuing to serve our customers and securing the viability of our ecosystem. Additionally, in sync with our strategy to 'Win Sustainably' we will take decisive steps to strengthen our business over the Long-term. A move towards subsidiarisation 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

Link

[turbo]

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[DeKay]

Pardon my ignorance, but I don’t get it. What does a slump sale mean and what difference will this make to the company and its employees?

[jetsetgo08]

Will there be a split in the shares as well? AFAIK, for a long time the share value has been bogged down due to JLR. Whatever little bouyancy was primarily due to the commercial segment. Now the separate subsidiary if includes JLR, will drive the final nail into the coffin.

However, the upside would be a better management of the profits & budgets for the domestic market. Which would mean better products at the end of the day.

[SmartCat]

Originally Posted by volkman10

A move towards subsidiarisation 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 quoted part is the reason given by Tata Motors for the move. Apparently, they think delinking Commercial Vehicle business from Passenger Vehicle business will somehow help them with tie-ups with other major car manufacturers. I don't think it makes much sense.

Remember that CV business has been consistently profitable for a long time. It is the Indian passenger vehicle business that has been the problem child.

Originally Posted by jetsetgo08

Will there be a split in the shares as well? AFAIK, for a long time the share value has been bogged down due to JLR. Whatever little bouyancy was primarily due to the commercial segment. Now the separate subsidiary if includes JLR, will drive the final nail into the coffin.
However, the upside would be a better management of the profits & budgets for the domestic market. Which would mean better products at the end of the day.

"Will help secure access of capital" bit in the press release will raise a few eyebrows. It means we could eventually see an IPO or private placement. Perhaps we could see (JLR + Tata Motors PV division) as a single entity, separate from commercial vehicle division. But I'm just speculating.

Originally Posted by DeKay

Pardon my ignorance, but I don’t get it. What does a slump sale mean and what difference will this make to the company and its employees?

I think this has something to do with accounting (tax benefits). CAs on the forum might be able to explain this better.

[GTO]

For years, the passenger vehicle business was running huge losses, and kept afloat by either the truck + bus business or Jaguar-Land Rover profits. In recent years though, Tata's car business has seen many improvements. Models like the Tiago & Nexon led that charge.

Being a different subsidiary means additional focus on its own profit & loss statements. It's like the Indian car business is now an independent company and no longer under the shadow or umbrella of the larger group. It will also give the subsidiary more agility & quicker decision making (hopefully). For years, we have complained about the turtle-slow reaction times of Tata Motors. I sure hope this results in a leaner & meaner Tata cars (India) division. In similar ways, it's better for the commercial business & Jaguar-Land Rover too. Both the companies are now less distracted by each other's issues. This will free up management bandwidth for both, the parent and the child.

There will be implications on money coming in & going out, the stock price etc. but that's better addressed by a financial wizard like SmartCat. I can tell you it's a good time to invest if you are up to the risk. Spin-offs like these have usually rewarded investors. And Tata Motors' share price is anyway about half of what it was in Feb.

Here's the official statement:

Tata Motors Announcement

Key highlights:

· Tata Motors Ltd (TML) Board approves plan to subsidiarize TML’s Passenger Vehicles (PV) including Electric Vehicles (EV) business into a separate subsidiary through a scheme of arrangement

· This shall help provide differentiated focus for the PV and CV businesses and help each of them realise their potential

· This decision is a first step in our plans to secure mutually beneficial strategic alliances for the domestic PV business and help secure its long-term viability

Area in bold tells you that the passenger car division is looking for a partner. Remember that they were talking to VW not so far back. Who knows who it will eventually be? With the coronavirus hitting the markets hard, Tata Motors will be desperate for a partner. Spin-offs usually happen because the company is either strong or facing challenges. In this case, I think it's the latter (refer to their statement "and help secure its long-term viability").

Shailesh Chandra, President EV and Corporate Strategy, is appointed President PV business including EV business with effect from April 1, 2020

Don't know much about him or whether he's a car guy, but the man is pretty much a Tata lifer (going by his LinkedIn profile).

· Mayank Pareek, will be superannuating from Tata Motors at the end of February 2021.

Notice how this is smartly placed at the end = to reduce the attention toward it. Mayank Pareek retiring is most definitely a loss to Tata Motors. Equally, I might add, Pareek was more impressive in his COO & Marketing role @ Maruti than overall presidency @ Tata. A good no.2 or no.3 doesn't always make a good no.1. Look at Arvind Saxena whose career lost direction after leaving Hyundai. Please note that I am a big fan of both these personalities, but in their former roles at Maruti & Hyundai respectively.

Here's the rest of the statement for those interested:

Mumbai, March 27, 2020: TML Board has in-principle approved to subsidiarize TML’s PV 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. However, certain shared services and central functions will be retained at TML to deliver cost efficiencies for the entire group. 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. We expect the transfer process to be completed in the next one year.

The Passenger Vehicle business landscape is seeing rapid transformation in the form of tightening emission norms, push towards electrification, enhanced disruptions from autonomous and connected technologies. Additionally, India continues to remain an attractive market for global OEMs while the aspiration levels of the Indian consumer continue to rise requiring stepped up investments in contemporary products in a competitive market.

Over the last few years, TML’s PV business has implemented a strong turnaround and has earned its right to grow by launching a slew of successful products like the Tiago, Tigor, Nexon, Hexa, Harrier and most recently the Altroz and Nexon EV. A fully refreshed BSVI ready product portfolio based on the Impact 2.0 design philosophy, consistently improving NPS scores, improved retail market shares and an exciting entry into the EV space coupled with improved profitability makes the business ready to realise its potential.

However, the recent outbreak of COVID-19 virus increases the challenges faced by the business. In this situation our first priority is to secure the health and safety of our people while continuing to serve our customers and securing the viability of our ecosystem. Additionally, in sync with our strategy to “Win Sustainably” we will take decisive steps to strengthen our business over the long-term. A move towards 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.

Along with this move, we are also pleased to announce the appointment of Shailesh Chandra, President EV and Corporate Strategy as President PV business including EV with effect from April 1, 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. We would like to thank Mayank for his contributions in getting TML PV business back on track to “Win Sustainably” and wish him well for the future.

[K_Drive]

Eagerly waiting for opinion of SmartCat on this. Holding TML shares with 80% loss. Is there any light at the end of tunnel?

[SmartCat]

Originally Posted by K_Drive

Eagerly waiting for opinion of SmartCat on this. Holding TML shares with 80% loss. Is there any light at the end of tunnel?

No point in selling Tata Motors, M&M, Bajaj Auto, Maruti or Hero Honda type companies at a loss. Because of their brand name and marketshare, these stocks have reasonably high probability of getting back to all time highs. What nobody can tell you is when that will happen

Cross-posting from another thread -

Originally Posted by SmartCat

Tata Motors has taken a bigger hit because of its poor financials. Tata Motors has two major problems:

- Debt of Rs. 70,000 crores on which interest outgo is Rs. 7,000 cr per year.
- Depreciation charges of Rs. 20,000 crores per year.

On the bright side -

- Tata Motors is still clocking an operating profit of around Rs. 25,000 cr per year. Operating margins are not too bad at 10%.
- Depreciation is a non-cash expense, and is expected to fall over the next few years. That's because Tata Motors is mostly done with investing in new technologies (emission tech, EVs) and new platforms/models. The fall in depreciation will directly add to profits.

However, as long as Coronavirus is taking up space on mainstream and business news, the stock price is unlikely to recover.

Since that post however, Coronavirus has become a significantly bigger problem for companies like Tata Motors.

[himanshugoswami]

Originally Posted by DeKay

Pardon my ignorance, but I don’t get it. What does a slump sale mean and what difference will this make to the company and its employees?

Slump sale means a sale of a "going concern" i.e. a running business with all its assets and liabilities. its like saying, you buy a business lump sum, with all assets and liabilities.

The Company that you buy it from is not sold, and remains as a stand alone entity. so the buyer will typically buy and move all assets, including employees, as a running business, into a different company.

Hope this helps.

[evoker]

Does this mean that the brand will have a new name and logo?

[KMT]

Wow, they have finally done a MEGA Nexa.

Hopefully as a stand alone entity they will be nimbler and more customer centric. I am expecting the deadwood (assets and unproductive labour) will be left with the parent company.

Mahindra better pull up its socks now. They have too many product categories/customer segments being served at the same showroom/wksp.

Tata can now capitalise on its sexy new product range.

[Tstag]

This makes sense. Tata Motors/ JLR is a minnow in the automotive world. Land Rover and the Truck division is doing all the heavy lifting for Jaguar and Tata cars. If JLR had a partner like BMW or Mercedes a lot of costs could be trimmed. Heavy investments in electric cars and self driving autos would be spread.

A brand like PSA would perhaps be a better fit for Tata motors

[nsbhagwat]

Right now Ralf Speth reports to Tata Sons chairman even though JLR is a TML subsidiary.
The communique is not speaking about this arrangement, nor is it speaking about the future of Mr Buschek. Will he be at the helm of TML?

[DriveT]

Most likely partner for PCBU in current scenario is Cherry from China. TATA Motors JLR has a JV with Cherry and manufactures JLR products for Chinese market. Cherry & TATA Motors were in discussion to have a JV for growing Indian market where Cherry could use TML facilities.
Ralph Speath has already retired but continuing as Vice Chairman for JLR and is also on TATA Sons Board.

[Zed]

The VW group (with Traton and VW cars) and Fiat Chrysler (with CNHi and FCA) underwent similar org transformations. Creating independent pascar and CV (on and off road) entities is a mixed bag but these decisions are taken after extensive due-diligence based on intel\data related to future trends, challenges, legislation and other relevant parameters.
In all likelihood the Tata group was probably evaluating this option before the current crisis. I am merely speculating based on Industry experience and have no insight into the inner workings at Tata.