What does Tata Motors demerger mean for investors & why did the share price drop 40%? Explained | India Business News
Tata Motors shares dropped by 40% during early trading on Tuesday, with shares opening at Rs 399 on the Bombay Stock Exchange, compared to Monday’s closing price of Rs 660.90. This is a notional decline in Tata Motors’ share price post its demerger, according to an ET report.This adjustment occurred as the shares commenced trading ex-demerger value following the division of its commercial vehicles operations into a separate listed company. The reduction corresponds to the commercial vehicle division’s removal from the parent company’s valuation.October 14 is the record date for the company’s division into Tata Motors Passenger Vehicles Ltd (TMPV) and Tata Motors Commercial Vehicles Ltd (TMLCV). Investors holding shares through October 13 will be allocated one TMLCV share for each Tata Motors share owned. The company will adopt the name Tata Motors Passenger Vehicles Ltd (TMPV), comprising passenger vehicles, electric vehicles and Jaguar Land Rover (JLR) units. TMLCV shares will be transferred to demat accounts within 30-45 days, followed by independent listing on the NSE and BSE after securing regulatory clearances.The existing F&O contracts due in October, November and December were concluded on Monday, with new contracts featuring adjusted lot sizes introduced from today.
What does Tata Motors demerger mean for investors?
Financial experts anticipate the separation to enhance value assessment and business specialisation.SBI Securities indicates that the division “enables clearer valuation of the company’s distinct businesses.” They forecast TMPV, generating 87% of revenue from JLR, to be valued between Rs 285 and Rs 384 following the split, with growth prospects tied to JLR’s operational improvements.For TMLCV, SBI Securities estimates a valuation range of Rs 320-470, highlighting its forthcoming €3.8 billion purchase of Iveco Group NV’s commercial vehicle division, which should triple combined turnover and strengthen presence in electric and alternative fuel technologies. “The integration of Iveco Group NV, most likely in FY27, will expose the company to the global CV cycle,” they note, whilst cautioning about temporary margin reduction due to Iveco’s lower EBIT performance.YES Securities views the separation as a “value unlocking opportunity,” observing that standalone passenger and commercial vehicle operations will enable targeted investment in specific automotive sectors.According to Bonanza Research Analyst Khushi Mistry, the division “will lead to sharper business focus for both entities.” TMLCV debuts as India’s premier commercial vehicle manufacturer, commanding 37.1% market share and achieving 12.2% EBITDA margin in Q1FY26, despite reduced revenue. TMPV anticipates 8-10% growth in H2FY26, driven by product launches, strong SUV market position, and increasing EV and CNG adoption, representing 45% of its passenger vehicle earnings.Following a September cyberattack, Jaguar Land Rover (JLR), the UK subsidiary of Tata Motors, initiated phased manufacturing operations on October 8. Khushi Mistry reported that wholesale volumes decreased by 24% while retail sales fell 17% in the September quarter, resulting in estimated weekly losses of £50 million. “Full production is expected to resume post-Christmas due to the scale of restoration needed,” she stated.YES Securities assessed that “2QFY26 JLR dispatches (-24% YoY and QoQ) were impacted by production losses due to the cyberattack from early Sep’25. However, the retail-level impact was much lower. We expect volumes to gradually improve in 3Q and 4Q, which should support sentiment.”The share distribution plan allocates one TMLCV share per Tata Motors share owned. Details regarding acquisition costs for both entities will be provided subsequently to facilitate portfolio and tax calculations.Share price fluctuations are anticipated during the structural transition period. Industry analysts indicate that future performance will be determined by JLR’s production recovery and TMLCV’s operational success following the Iveco integration.The investment community remains focused on whether the corporate separation will boost Tata Motors’ share performance or if value enhancement will require a longer timeline.(Disclaimer: Recommendations and views on the stock market and other asset classes given by experts are their own. These opinions do not represent the views of The Times of India)
