Tata Motors Aims for $1 Billion Revenue per Segment with New Demerger

Restructuring into Two Focused Entities, Tata Motors Aims to Unlock Greater Value

Tata Motors is moving forward with a significant restructuring plan, dividing the company into two separate listed entities. The first entity, TML, will focus on the commercial vehicle business and related investments. In contrast, the second TMPV will handle the passenger vehicle business, electric vehicles (TPEM), Jaguar Land Rover (JLR), and their respective investments.

As part of this plan, Tata Motors is currently working on separating its commercial vehicle unit. The company expects that each of its eight business segments will generate more than $1 billion in revenue and profitability after the restructuring. These segments include heavy commercial vehicles, intermediate, light commercial vehicle, and medium commercial vehicles, commercial vehicle passenger services, international business, TML Smart City Mobility Solutions, and non-vehicular services like spares, fluids, and aggregates. Each of these units will operate independently as profit centres once the demerger is complete.

Girish Wagh, Executive Director of Tata Motors, emphasized that with dedicated teams for each segment, the company will sharpen its focus on value creation. This approach will involve using data to explore key metrics such as revenue growth, profitability, return on capital employed, and cash flow.

Official Statement by Tata Motors' Executive Director

When asked if each of these businesses could have at least a billion dollar revenue potential, Girish Wagh, Executive Director of Tata Motors, remarked, "So, I think, see, each of these businesses has already looked at what the revenue potential could be. And, you know, it would be surprising to have a business that is not of that scale."

Wagh explained the rationale for focussing on these eight segments, noting that each caters to different customer needs, pain points, and convenience requirements, necessitating distinct business models. Some segments also have a geographical aspect tied to international expansion plans. Within the non-vehicular segment, sub-businesses like spare parts, automotive fluids, and aggregates require tailored approaches. This strategy aims to reduce cyclicality and shift from product-based offerings to services and solutions, supported by robust digital infrastructure.

Each segment has clear financial targets and is being analyzed for growth potential and aspirations to shape their business plans.

Tata Motors to Demerge Commercial Vehicle Business

In line with the restructuring, Tata Motors will separate its commercial vehicle unit and related investments into a new entity, TMLCV. The existing passenger vehicle business under TMPV will then merge into TML, the entity currently listed on the stock exchange.

This major restructuring plan, announced by Tata Motors in March, is designed to unlock greater value across its businesses by creating two focused entities, each with a clear strategic direction.