InvestorQ : What is the purpose of Tata Power hiving off its defence division into a separate company?
diksha shah made post

What is the purpose of Tata Power hiving off its defence division into a separate company?

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Dawn Cherian answered.
3 weeks ago
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When Tata Power decided to finally move out its defence business to Tata Advanced Systems it was the culmination of an effort that had in the works for almost four years since Chandra took charge at the helm of Tata Sons after the ouster of Cyrus Mistry.

When Chandra took charge of Tata Sons, one of the first priorities was to realign the businesses into more linear formats. For example, various group companies like Tata Motors, Tata Power, Tata Elxsi, all had distinct defence divisions. With the government likely to open up defence for private participation, it made business sense to consolidate them under a single head.

The move by Tata Power to hive off its defensive unit is to meet this long term need of the company and bring all defence portfolios spread across various Tata group companies under a single banner.

At present, Tata Advanced Systems is a fully owned subsidiary of Tata Sons. That also gives the Tatas more power in their negotiations with the Mistry family about the valuation of Tata Sons. Tata Power will receive Rs.1076 crore as the enterprise value of the business transferred.

Even for Tata Power, this move fits into its plan to divest non-core businesses. The strategic engineering division of Tata Power, which is being hived off to Tata Advanced Systems, currently manufactures and assembles missile launchers, night vision systems, gun systems and electronic warfare systems for the Indian armed forces.

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