Tata Motors has announced a strategic move to split the company into two separate publicly traded entities.

The board has approved the demerger plan, which will see one entity dedicated to commercial vehicles and related investments, while the other will focus on passenger vehicles, electric vehicles, Jaguar Land Rover, and their respective investments.

This process is expected to be completed within the next 12 to 15 months.

In a regulatory filing, Tata Motors revealed that the board's decision aligns with the company's quarterly performance announcement.

The demerger will be executed through a National Company Law Tribunal (NCLT) scheme of arrangement, ensuring that all Tata Motors shareholders will retain identical shareholding in both new entities.

The company's management explained that this move is a natural progression following the subsidiarization of the passenger vehicle and electric vehicle businesses in 2022.

The separation is intended to empower each business unit to pursue tailored growth strategies with greater agility and accountability.

While the synergies between commercial and passenger vehicles are limited, significant benefits are anticipated in the areas of electric vehicles, autonomous driving technologies, and vehicle software among the passenger vehicles, electric vehicles, and Jaguar Land Rover segments.

In parallel, Tata Motors is progressing with the merger of Tata Motors Finance with Tata Capital, a process expected to conclude within the next 9 to 12 months.

Additionally, the company aims to complete the cancellation of DVR shares and issuance of ORD shares within approximately two months, subject to necessary approvals.

Tata Motors reported a robust 74% year-on-year growth in consolidated net profit, reaching Rs 5,566 crore for the first quarter ended June 2024.

Revenue from operations also saw a 6% year-on-year increase to Rs 1.08 lakh crore, although this fell short of market expectations of Rs 1.15 lakh crore.

Despite the positive financial performance, Tata Motors shares closed 1% lower at Rs 1,144.60 on the BSE ahead of the announcement.

Over the past year, the stock has experienced a substantial 78% rally.