Tata Motors has called a meeting of secured creditors and equity shareholders on March 05. 2021, to consider and approve the scheme of arrangement involving the transfer of passenger vehicle (PV) unit to TML Business Analytics Services on a slump sale basis for a lump sum consideration.
The Tata Group's flagship automobile last year had announced its plan to turn its PV unit into a separate entity and also seek a strategic partnership to enable the unit to secure its long term viability.
A fair valuation has been announced for Tata Motors PV unit.
"Vikrant Jain, Independent Chartered Accountants, Registered Valuer and S R B C & Co LLP Independent Chartered Accountants, both have separately undertaken the valuation of the Passenger Vehicles Undertaking of the Company and have recommended the fair value of the Passenger Vehicles Undertaking vide their valuation reports both dated July 31, 2020," Tata Motors said on Tuesday.
With that, upon the coming into effect of the scheme, TML Business will purchase Tata Motors Passenger Vehicles Undertaking for a considering of Rs9417cr.
As per the regulatory filing, the transaction comprises by way of issuance and allotment of 941,70,00,000 equity shares of the Transferee Company at Rs10 each, being the fair value of equity share.
In its rationale for the transfer of PV undertaking, Tata Motors said, "As part of an overall business reorganisation plan and in order to provide for the optimum running, growth and development of the Passenger Vehicles Undertaking and interests of the Transferor Company, it is necessary to realign the PV Business."
The scheme is expected to enable Tata Motors in (a) providing a differentiated focus for the said passenger vehicle business and commercial vehicle business and help each of them realise their potential, and (b) unlocking business value and enhanced management focus and operational flexibility in each of the businesses.
Further, Tata Motors said, "The passenger vehicle business (which also includes the passenger electric vehicle business) landscape is seeing the rapid transformation in the form of tightening emission norms and safety norms, push towards electrification, enhanced disruptions from autonomous and connected technologies. Additionally, India continues to remain an attractive market for global OEMs while the aspiration levels of the Indian consumer continues to rise requiring stepped up investments in contemporary products in a competitive market. Over the last few years, PV Business has implemented a strong turnaround and has earned its right to grow by launching a slew of successful products."
"A fully refreshed BS-VI ready product portfolio based on the Impact 2.0 design philosophy, consistently improving Net Promoter Scores, improved retail market shares and an exciting entry into the electric vehicle space makes the business ready to realise its potential. Further, this restructuring would facilitate mutually beneficial strategic alliances for the PV Business in the future," Tata Motors added.
Notably, Tata Motors has Accumulated Losses amounting to Rs11,173.59cr and also has balance in the Securities Premium Account amounting to Rs22,194.89cr as on June 30, 2020.
Upon the Scheme becoming effective, the Securities Premium Account of Tata Motors shall be written down in part with a corresponding adjustment to the Accumulated Losses appearing in Retained Earnings amounting to Rs11,173.59cr.
At around 10.38 am, Tata Motors was trading at Rs329.90 per piece up Rs7.6 or 2.4% on Sensex. The stock has hit a fresh 52-week high of Rs341.50 per piece on the index.