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Tata Motors May Sell Its Design Division To TCS

The Indian carmaker is in-talks with the Tata Consultancy Service (TCS) to sell its automobile and aerospace design unit.

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Tata Motors is planning to give away its design division in-house in the Tata Group. The Indian carmaker is in-talks with the Tata Consultancy Service (TCS) to sell its automobile and aerospace design unit after they couldn't seal the deal with Warburg Pincus early this year. Tata Motors was to gain ₹ 2300 crore from Warburg in return of 43 per cent stake in the design unit, Tata Technology (Tata Tech). The company is ready to give away the design unit citing a fragile business case as the reason and Tata Motors has held its investments in the unit for the time being.

At present, Tata Motors holds 72 per cent stake in the Tata Tech and the remaining 28 per cent is owned within the Tata Group. The company had announced during its FY18 earnings that it is looking for purchasers for even the Tata Elxsi and was also concerning TCS to invest in it. Hence, there have been speculations by brokerage firms that Tata Elxsi could also be merged with TCS. 

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The money that will come from divestments will be used in pruning its ₹ 1.03 lakh crore debt as the company currently is saddled by weak performance by Jaguar Land Rover (JLR). Tata Motors on Wednesday reported a loss of ₹ 1048.80 crore for the Q2 of FY19 while it had posted a profit of ₹ 2482.78 crore in the same quarter last year. The loss is the result of weak JLR sales that has taken a hit due to BREXIT and US-China trade war. Europe and China are two of the biggest markets for JLR. However, Tata Motors domestic Commercial Vehicles (CV) and Passenger Vehicles (PV) continued to post profits benefiting from the turnaround plan.

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