- Tata Motors plans to split into separate businesses for commercial vehicles and passenger vehicles.
- Nomura India believes the move could lead to greater freedom for each business to pursue its strategies.
- The split, expected to take 12-15 months, aims to enhance value for shareholders and improve prospects for employees.
Tata Motors is planning to split its business into two parts: one for making commercial vehicles (CVs) and the other for making passenger vehicles (PVs).
This change might not immediately affect how investors see the company, according to Nomura India, a foreign company that advises on investments.
But in the long run, Nomura thinks this split could let each part of Tata Motors do what it wants more freely.
Nomura is especially hopeful about Tata Motors’ passenger vehicle business. They think it has a good chance to grow and make more money in the next few years. Since 2020, Tata Motors’ passenger vehicles have gotten more popular in India.
Nomura thinks this is because the company is focusing on safety, making nice-looking cars, and adding cool features.
They even thought Tata Motors might have two of the top three SUVs in India.
Nomura thinks Tata Motors might become the second biggest passenger vehicle company in India by the financial years 2025 or 2026.
They also mentioned that Hyundai, another big car company, might start selling its shares to the public in India for around $22-28 billion.
But Hyundai makes more money from each car it sells compared to Tata Motors. Nomura says they’re keeping their estimate of Tata Motors’ share price at Rs 1,057 for now.
Tata Motors is also leading the way in bringing electric cars to India. They have over 70% of the market for electric cars right now.
By the financial year 2026, they plan to have 10 different electric car models. They hope that by 2030, half of all the cars they sell will be electric.
Nomura thinks if Tata Motors can do this, it will make the company much more valuable.
Right now, Tata Motors’ passenger vehicle business makes about 6.5% profit from each car it sells. But for cars with regular engines (not electric ones), the profit is higher at 9.4%.
However, Tata Motors loses money on electric cars – about 8.2% for each one sold. But Nomura thinks Tata Motors can start making more money from electric cars as they get more popular.
Tata Motors’ commercial vehicle business might also become more valuable in the future. They’re getting more popular, and they’re making more money.
Nomura also thinks there could be more money to be made from electric buses and smaller electric trucks in the future.
The split of Tata Motors into two companies will happen through a legal process called a scheme of arrangement.
All the people who already own shares in Tata Motors will also own shares in both of the new companies.
This split is the next big step after Tata Motors separated its passenger vehicle and electric vehicle businesses in 2022.
Tata Motors’ bosses think this split will be good for customers, employees, and the people who own shares in the company.
The plan to split Tata Motors will need approval from the company’s board of directors and from shareholders, creditors, and government regulators.
It might take about 12 to 15 months for everything to be finished.