1:2 Split Soon: Tata's Auto Company Signs MoU For Rs 9,000 Crore With Tamil Nadu Govt Ahead Of Splitting

Tata Group-backed automobile giant, Tata Motors has been in focus due to its demerger plan where the auto player will split into two listed entities. Ahead of the 1:2 split, the company on March 13 announced that it signed a Memorandum of Understanding (MoU) with the Government of Tamil Nadu to explore setting of a vehicle manufacturing facility in the state.

As per the regulatory filing, Tata Motors said, the MoU envisages an investment of Rs 9,000 crores over 5 years and can potentially create up to 5,000 jobs (direct and indirect).

Following the signing of this MoU, teams from Guidance, Tamil Nadu's nodal agency for investment promotion and facilitation and Tata Motors Group will work together to take this opportunity forward, it added.

On March 13, Tata Motors' share price ended at Rs 973.05 apiece, down by 4.3% on BSE with a market cap of Rs 3,23,369 crore.

Also, the company received an upgrade in its credit rating by CARE Ratings on its Long-Term Bank Facilities and Non-Convertible Debentures from 'CARE AA / Stable' to 'CARE AA+ / Stable'. The rating on the Short-Term Bank Facilities and Commercial Papers has been reaffirmed at 'CARE A1+'.

The 79-year-old company of Tata Group has decided to demerge into two separate listed companies housing A) the Commercial Vehicles business and its related investments in one entity and B) the Passenger Vehicles businesses including PV, EV, JLR and its related investments in another entity.

In its statement, Tata Motors pointed out that, the demerger is a logical progression of the subsidiarisation of PV and EV businesses done earlier in 2022 and shall further empower the respective businesses to pursue their respective strategies to deliver higher growths with greater agility while reinforcing accountability.

While there are limited synergies between Commercial Vehicles (CV) and Passenger Vehicles (PV) businesses, there are considerable synergies to be harnessed across PV, EV and JLR, particularly in the areas of EVs, autonomous vehicles, and vehicle software which the demerger will help secure, it said.

Despite mixed responses from brokerages, Tata Motors has already surpassed the target prices of Motilal Oswal, Morgan Stanley, Macquarie, and CLSA among others.

However, both Sharekhan and KR Choksey have recommended buying Tata Motors. Sharekhan sets a target price of Rs 1,188 and KR Choksey's target is at Rs 1,178 apiece.

Part of the USD 150 billion Tata group, Tata Motors, a USD 42 billion organization, is a leading global automobile manufacturer of cars, utility vehicles, pick-ups, trucks, and buses, offering an extensive range of integrated, smart, and e-mobility solutions.

Tata Motors strives to bring new products that captivate the imagination of GenNext customers, fuelled by state-of-the-art design and R&D centres located in India, the UK, the US, Italy, and South Korea. By focusing on engineering and tech-enabled automotive solutions catering to the future of mobility, the company's innovation efforts are focused on developing pioneering technologies that are both sustainable and suited to the evolving market and customer aspirations.

The company is pioneering India's Electric Vehicle (EV) transition and driving the shift towards sustainable mobility solutions by developing a tailored product strategy, leveraging the synergy between Group companies and playing an active role in liaising with the Government of India in developing the policy framework.