In a move to consolidate all defence related business under one banner, Tata Motors Ltd (TML) to sell its defense and aerospace portfolio to Tata Advanced Systems. TML board has approved the sale of its defense business to group entity Tata Advanced Systems Limited (TASL). This will not include the pure civilian vehicles which will continue to be with TML. TML will receive an upfront consideration of Rs 100 crore, adjusted for capex incurred and changes in working capital in the intervening period until closure date, and a deferred consideration of 3 per cent of the revenue generated from identified specialised defence projects for upto 15 years from FY20 subject to a maximum of Rs 1750 crore.
The Board has also approved the sale of its shareholding in its wholly owned subsidiary, TAL Manufacturing Solutions Ltd (TAL) to TASL at an enterprise value of Rs 625 crores. As a condition precedent, Tata Motors will acquire the non-aerospace business from TAL at a value of Rs.10 lakhs.
The move is in line with Tata Motor’s plan to drive Turnaround 2.0, take necessary steps to further its defense business by leveraging the scale and strengths of the unified aerospace and defense entity at the Group level, while monetising its non-core assets to reduce net-debt.
Speaking on the two strategic deals, Guenter Butschek, CEO & MD, Tata Motors, said, “Tata Motors has been a strategic partner to the Indian Ministry of Defence in defence mobility solutions for several decades. We will continue providing civilian logistics vehicles to the Defence customers. On our transition to a full range combat vehicle player, we realised that our current portfolio is small and we need scale to unlock its true potential. We believe Tata Advanced Systems Limited 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 interests to sell this part of the business to Tata Advanced Systems Limited and participate in the future growth of this business through a revenue share agreement.”
He added, “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 the opportunity of consolidation at Group level to monetize our investment in this area.”
Tata Motors has been associated with the country’s off-road defence and security forces, since 1958 and has supplied over 150,000 vehicles to the Indian Military and Paramilitary forces, so far. The company offers products and services that not only meet the needs of the domestic market, but are also positioned to meet most stringent requirements across the world. Tata Motors exports its range of specialised defence vehicles to the SAARC, ASEAN and African regions. With Tata Motors’ rich portfolio in multi-axle range like 12×12, 8×8 & 6×6, the company has started supplying to leading missile OEMs across the world. The company has also established itself as a supplier of specialist vehicles for UN peacekeeping missions. Tata Motors’ range of off-road vehicles are also being procured by the agencies involved in AID & Development, across the world like GSA, KBR, Oxfam, RONCO, RA International & Riders.
TAL, a wholly owned subsidiary of Tata Motors, is one of the leading companies in India, wherein its automotive and heavy engine range business has been successfully delivering manufacturing solutions for over 40 years to customers and more recently, to robotics, aerospace and defence sectors. TAL has been structured to deliver solutions through its three business units – aerospace, robotics & automation and manufacturing solutions. The aerospace business unit focuses on manufacture of precision components including exotic materials and composites and assemblies for aero-structures.