[Santy19]

Originally Posted by SmartCat

Splitting a company like Amoeba does not always guarantee 'value unlocking'. Under most circumstances, it actually increases risk -> because you cannot move capital from one division to another. Remember, all these years, it was Tata CVs that was keeping Tata Motors' head above the water, when the passenger division was bleeding. If management had decided to split CV & PV business 10 years ago, does anybody think Tata Motors would be this successful now? Or hypothetically, in the year 2034, if Tata passenger division is struggling because of bad decisions but Tata CV division is booming thanks to global sales, what will be PV division's future outlook? There is no cash flow support from CV division this time.

Also, it is mostly Indian promoters who are fascinated with demergers. Most large US/Europe companies think opposite - they are focussed on becoming bigger in size.

We have to understand and acknowledge that TATA motors or any of the TATA group companies is different from their competitors or any listed company for that matter.

A 7.2 trillion rupee organization is looking after each of the TATA business units i.e TATA SONs

In case of TATA motors they have TATA Sons to bail them out of any trouble no matter how big or small it is.

FYI Tata sons own 43% of tata motors and tata motors own 3% of tata sons.

TATA Sons not just help them in times of trouble but also make strategic investments to makes each of their umbrella companies stronger for example the recent announcement of a battery factory in UK, though its made by funding from TATA sons it will be directly benefiting TATA motors and JLR. Or the recent announcement of a new semiconductor Fab plant, its anyones guess who will their first customers.

IMO This demergers will only add value to the each entities as each of them can have leverage of their own instead of averaging out their strengths and weaknesses.

And if we go back we’ll find many instances when the promotor cleared their debts or helped them buy a international brand

Adding some quick reads

https://www.tata.com/business/tata-sons

https://trendlyne.com/portfolio/supe...vate%20limited

https://timesofindia.indiatimes.com/...w/71768122.cms

[V.Narayan]

Originally Posted by SmartCat

So now, after this news, we will have:
Tata Electric Vehicles Ltd
Tata Passenger Vehicles Ltd
Tata Commercial Vehicles Ltd

From what little I read the split is into two separately listed companies - one for commercial vehicles and the other for cars (ICE + EV + JLR)

How about cranking it up a notch? Tata SUVs Ltd & Tata Cars Ltd? How about Tata Buses Ltd & Tata Trucks Ltd?

Sarcasm? A further split makes no sense either from a capital markets/valuation point of view nor from a improved business focus point of view.

Splitting a company like Amoeba does not always guarantee 'value unlocking'. Under most circumstances, it actually increases risk -> because you cannot move capital from one division to another.

There are no universal rules. Each situation is unique. Tata passenger cars has in their view reached a size where it can access the capital markets independently. I believe even a marginally profitable/loss making Tata Cars will be able to raise capital?

Also, it is mostly Indian promoters who are fascinated with demergers. Most large US/Europe companies think opposite - they are focused on becoming bigger in size.

My experience on the ground of acquisitions (several), merger (one) and demerger (one) is that the one's that give a real headache are the mergers & large acquisitions where clash of cultures, processes, the bigger amobea not understanding the intricacies of the market/customers of the smaller amobea, the leadership of the big one squashing the culture of the small one etc etc leads to loss of customers, loss of intangibles of relationships and worst loss of key personnel & finally value. Demergers, at least in the one and only I experienced led to a 2X increase in combined valuation within a year and far greater focus on business by the demerged amobea. :-)

Overall, I believe this is a move in the right direction. But it will improve Tata Cars' A.S.S. , shoddy dealer behaviour and quality control only if the Tata Car leadership get down to the trenches. I do not know if they do that.

When I worked for Tata Motors in the 1980s the National Head of Sales would visit each and every dealership once or twice a year* across the length and breadth of the country and in my case I would get a few truck owners to come meet him and at my tutoring spill the beans of lack of support from Head Office or the two plants. I would not be surprised if this sort of earthy touch is missing now.

* needless a car OEM will have many more dealers than a truck OEM but I suspect our readers get the drift.

[amitayu]

Sounds like a good plan, as they are clearly looking to have fully dedicated vertical management for passenger cars, with greater autonomy and accountability.

What is also means is differentiated accounting, with lesser option of cross-subsidisation with one division bailing out the other. This in turn means both enterprises will have to be in the green on their own account.

[SR-71]

Originally Posted by SmartCat

Personally, I'm against demerger of any company, but especially Tata Motors. Because it is already a demerged entity (part of Tata Group) with focus on automobiles.

So how does this split impact Tata Motor stocks? If one holds a sizeable quantity with some really handsome returns, is it recommended to hold on to the stock or sell it? If the recommendation is to hold on to it, what do we do after the split, sell the PV division stocks (or) the CV division ones?

[SmartCat]

Originally Posted by SR-71

So how does this split impact Tata Motor stocks.

Tata Motors CV is likely to behave similar to Ashok Leyland stock. Tata Motors PV stock is likely to have slightly higher volatility compared to pre-split Tata Motors. Like before, price performance will mostly depend on JLR's fortunes.

If one holds a sizeable quantity with some really handsome returns, is it recommended to hold on to the stock or sell it! If the recommendation is to hold on to it, what do we do after the split, sell the PV division stocks (or) the CV division ones?

Wait & watch I guess? You don't have to do "something" immediately. Later on, treat them as separate stock/investment and decide accordingly based on its merits (financials/valuation/future outlook).

[Yohan Poncha]

Unlikely that both companies will remain in the Sensex
https://www.businesstoday.in/markets...071-2024-03-05

[Garud]

I think it's high time that the PV entity focuses on providing a better experience. I am sure that the Tata higher ups are aware of the dealership issues. Maybe sectioning off the CV business would help them focus on the customer experience of PV owners and prospective buyers.

One can only hope at this point.

[Fuldagap]

I wonder what cars would still be manufactured at CVBU given that the two entities are separating.

[shortbread]

Mercedes did this successfully, separated their PV and CV businesses and listed them individually.

[SmartCat]

Originally Posted by shortbread

Mercedes did this successfully, separated their PV and CV businesses and listed them individually.

Slightly different because Mercedes Benz still holds 35% shares in Daimler Truck. This is equivalent to listing a subsidiary, rather than proper separation (demerger)

Meanwhile, I think Tata Motors should list Jaguar Landrover in UK/USA and use the IPO proceeds to reduce debt. Now that makes lot of sense because Tata Motors pays Rs. 10,000 cr per year as interest on debt!

[Venkatesh]

Demerger of CV business undertaking of Tata Motors Ltd into a separate listed company.

Press Release