The board of Tata Motors has approved, subject to regulatory approvals, the sale of its defence business to group company Tata Advanced Systems Ltd (TASL) for an upfront payment ₹100 crore and a deferred consideration of 3% of the revenue generated from identified specialised defence projects for up to 15 years from FY20 subject to a maximum of ₹1,750 crore. The pure civilian vehicles business will stay with Tata Motors.
The board has also approved the sale of its shareholding in its wholly-owned subsidiary TAL Manufacturing Solutions to TASL at an enterprise value of ₹625 crore. Tata Motors will acquire the non-aerospace business from TAL for ₹10 lakh.
Commenting on the development Guenter Butschek, CEO & MD Tata Motors said, “On our transition to a full range combat vehicle player, we realised that our current portfolio is small and we need to scale up to unlock its true potential. We believe TASL will be better equipped to execute larger and more complex projects and be more globally competitive as part of the larger Tata Group. Therefore, we have decided that it is in our best interest to sell this part of the business to TASL and participate in the future growth of this business through a revenue share agreement.”
He said, “Also TAL Aerospace Solutions is a non core business to Tata Motors. We have been working on charting our next phase of growth and would like to use this opportunity of consolidation at group level to monetise our investment in this area,” Mr. Butschek said.
