Tata Motors Limited (TML) has decided to split into two separate listed companies, reports emerged.

One entity will house the commercial vehicles (CV) business and its related investments, while the other will encompass the passenger vehicles (PV) businesses, including domestic PV, electric vehicle (EV), Jaguar Land Rover (JLR), and their related investments.

The demerger will take place using a scheme of arrangement approved by the National Company Law Tribunal (NCLT), and all shareholders of Tata Motors Ltd will maintain the same ownership in both the listed companies.

The demerger was approved during the meeting of the Board of Directors of Tata Motors Limited (TML) on Monday.

The demerger, according to Tata Motors, is a logical progression of the subsidiarisation of PV and EV businesses done earlier in 2022 and shall further empower the respective businesses to pursue their respective strategies to "deliver higher growths with greater agility while reinforcing accountability."

Furthermore, while there are limited synergies between Commercial Vehicles (CV) and Passenger Vehicles (PV) businesses, there are considerable synergies to be harnessed across PV, EV and JLR, particularly in the areas of EVs, autonomous vehicles, and vehicle software which the demerger will help secure, the company said in a release.

"Tata Motors has scripted a strong turnaround in the last few years. The three automotive business units are now operating independently and delivering consistent performance. This demerger will help them better capitalise on the opportunities provided by the market by enhancing their focus and agility," said Chairman N Chandrasekaran.

The NCLT's plan to divide the company will be presented to the Board of Directors for their approval in the upcoming months. This plan will need to go through various approvals from shareholders, creditors, and regulators, which may take an additional 12-15 months to complete.