Tata Motors Ltd. today said that it will sell its non-core defence business to an entity promoted by the parent Tata Sons for over Rs 725 crore.
The asset sale to Tata Advanced Systems was approved by the board and includes getting Rs 100 crore for capital expenditure and Rs 625 crore for transfer of share in wholly owned subsidiary TAL Manufacturing Solutions, an official statement said.
The move comes a month after Tata Power Ltd. also announced a similar move to sell off assets to TASL, which will be housing all of the diversified group’s defence assets. Sale of non-core assets also help reduce debt of companies and reduce cross holdings.
Tata Motors’ deal also includes a deferred consideration of 3 percent of the revenue generated from identified specialised defence projects for up to 15 years from fiscal year 2020 subject to a maximum of Rs 1,750 crore, the company said.
Tata Motors Managing Director and Chief Executive Officer Guenter Butschek said it will continue supplying 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 TASL will be better equipped to execute larger and more complex projects,” he said.