In a strategic move set to reshape the investment landscape, Tata Group has announced a merger under the scheme orchestrated by the National Company Law Tribunal (NCLT). The merger, approved by the boards of Tata Motors, Tata Capital, and Tata Motors Finance, is poised to have significant ramifications for investors and stakeholders alike.
According to a statement issued by Tata Motors, the merger process is expected to span a year and will be facilitated through a share swap mechanism. This bold decision, unveiled by Tata Motors on Tuesday, marks a significant step in the restructuring efforts within the conglomerate.
Under the merger plan, the shares of Tata Motors Finance will be amalgamated with the non-banking financial company (NBFC) Tata Capital through a mutually beneficial swap deal. Shareholders of Tata Motors Finance are set to receive 37 equity shares of Tata Capital for every 100 equity shares held, as outlined in the exchange filing released by the company.
The unanimous approval from the boards of Tata Motors, Tata Capital, and Tata Motors Finance underscores the strategic alignment of interests and objectives in pursuit of this merger. Following the completion of the merger, Tata Motors is anticipated to retain a 4.7 percent stake in the newly formed entity.
Assurances have been provided by Tata Motors that the merger will not have any adverse effects on the customers or creditors of Tata Motors Finance. This commitment to safeguarding the interests of stakeholders reflects Tata Group’s dedication to maintaining trust and integrity throughout the transition process.
Tata Capital’s diverse portfolio, encompassing auto loans, home loans, and education loans, adds further depth to the merger’s potential impact on the financial landscape. The closing figures on Tuesday saw Tata Motors experiencing a 4.79 percent decline, settling at Rs 904.95 on the National Stock Exchange (NSE), indicative of the market’s initial response to the announcement.
In contrast, Tata Capital reported a net profit of Rs 3,150 crore for the financial year 2024, underlining its robust financial performance in the preceding period. Similarly, Tata Motors Finance recorded a net profit of Rs 52 crore during the same timeframe, demonstrating its resilience amidst evolving market dynamics.
However, it’s imperative to note that the completion of the merger is contingent upon regulatory approval, underscoring the necessity for adherence to legal frameworks and compliance standards.
