Tata Motors Thursday announced the sale of its defence and aerospace business to group entity Tata Advanced Systems (TASL) in a bid to unlock value. The non-core defence business sale excludes vehicles made for civilian.
Tata Motors will receive an upfront consideration of Rs 100 crore adjusted for capital expenditure incurred and changes in working capital inn the intervening period until closure date.
A deferred consideration of three percent of the revenue generated from specialized defence projects for upto 15 years from FY20 subject to a maximum of Rs 1,750 crore. Revenues from the defence business in 2016-17 stood at Rs 295 crore.
Also Tata Motors holding in TAL Aerospace Solutions will be sold to TASL at an enterprise value of Rs 625 crore. The operating revenue of the aerospace business in FY17 was Rs 228.8 crore while its net worth during the same year stood at Rs 82.4 crore.
Guenter Butsheck, managing director and chief executive officer, Tata Motors said, “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 will be better equipped to execute larger and more complex projects and be more globally competitive as part of the larger Tata Group.”
“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”, added Guenter.
This is in line with Tata Motors’ plan to drive Turnaround 2.0, take necessary steps to further its defence business by leveraging the scale and strengths of the unified aerospace and defense entity at the Group level, while monetizing its non-core assets to reduce net-debt, Tata Motors said in a statement