Tata Motors on Thursday announced the sale of its defence and aerospace business to Tata Advanced Systems Limited (TASL). The move appears to be an attempt to reduce its debt.
In its statement, the company said that the board has approved the sale of its defence business to Tata Advanced Systems Limited but the pure civilian vehicles segment will remain with Tata Motors.
An upfront consideration of Rs 100 crore will be received by Tata Motors for capital expenditure and working capital incurred till the closing period. 3 percent of the revenue from defence projects of up to 15 years from financial year 2020 to a maximum of Rs 1,750 core will also be received as deferred consideration, the statement said.
The sale of Tata Motors' shareholding in TAL Manufacturing Solutions Ltd to TASL is approved by its board for Rs 625 crore. In return, Tata Motors will buy TAL's non-aerospace business for Rs 10 crore.
Tata Motors has also said that it will continue to provide civilian logistic vehicles to its defence costumers like India's Ministry of Defence.
MD and CEO of Tata Motors said, "On our transition to a full range combat vehicle player, we realised that our current portfolio is small and we need scale to unlock its true potential. We believe Tata Advanced Systems will be better equipped to execute larger and more complex projects and be more globally competitive as part of the larger Tata Group."
"Also, TAL Aerospace Solutions is a non-core business to Tata Motors. We have been working on charting our next phase of growth and would like to use the opportunity of consolidation at Group level to monetize our investment in this area", he added.