Tata Motors’ demerger is backed by a dual-lane strategy

livemint.com:

It was common once for the word ‘conglomerate’ to be prefixed by ‘unwieldy’ and ‘unfocused’ by reflex. If that sounds strange today, then the Tata Group could claim some credit for it. Sure, survival amid competition demands an edge sharpened in focal fields of specialization, and Tata did withdraw from some markets in the 1990s (soaps and suds, for example), but its operations still span a spectrum from salt to software.

Critically, the group has proven that a clutch of diverse companies can keep business risks in control well enough to enable long-horizon plans with minimal short-term pressure from investors at large. Although a recent bout of instability at the top—the Cyrus Mistry interlude—had briefly put that advantage at threat, India’s foremost conglomerate appears back in form as a strategic planner. True, the glitter of Tata’s crown jewel TCS may have dimmed a bit lately, tackling which must be top priority for group chief N.

Chandrasekaran, but its proposed demerger of Tata Motors reveals an approach with its sights set on emerging paths to success. It’s not a simple split-up of the group’s auto business into two. Since 2021, on-a-revival Tata Motors has been operating as three distinct units under separate chief executives: one for Tata trucks and buses, another for its cars, both combustion and electric, and the third being Jaguar Land Rover (JLR), acquired in 2008.

As approved by Tata Motors’ board, the proposal is to place truck-making under one listed firm and merge Tata’s cars unit with JLR to create a second, with shareholders to get equal shares in both. This is subject to approvals, of course, but the rationale is clear: It is likely to unlock value. As the company has stated, the motive is to further