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Tata Motors demerger: Why Tata Motors share price went from ₹660 to ₹400 overnight
Tata Motors stock is trading ex-demerger, which lowers the share price to ₹400 to reflect only Tata Motors PV shares. Tata Motors CV shares will list later.
Shares of Tata Motors Ltd. recorded a notional fall from ₹660.75 apiece on Monday to ₹399 apiece on Tuesday as a demerger came into effect. Meaning, the 40% “decline” in Tata Motors' share price today is a technical adjustment and not a material one.
After a one-hour pre-market session in Mumbai, Tata Motors shares started trading at ₹400 apiece for PV shares. The gap from Monday's closing of ₹660.75 implies a valuation of ₹260.75 for the CV unit.
Indian exchanges have introduced these so-called special trading sessions in 2023 for companies undergoing a demerger to minimize market gyrations.
Tata Motors Demerger
The Tata Motors demerger, first announced in March 2024, aims to split and list the company's passenger-vehicle and commercial-vehicle units. As part of the demerger:
- Tata Motors will be renamed Tata Motors Passenger Vehicles Ltd. to house all the car-making businesses including electric cars and JLR.
- TML Commercial Vehicles Ltd., which is India's largest truckmaker, will then become Tata Motors Ltd.
Tata Motors shareholders will get one share in the spun-off CV unit for each held in the parent firm, implying that the two Tata Motors companies will have identical shareholding to begin with.
What's trading today in essentially Tata Motors PV, before the name change. The listing of Tata Motors CV can take as long as 60 days.
India’s corporate affairs ministry has issued a new certificate to reflect the modified name for the passenger vehicles business.
Tata Motors Share-Price Volatility
Tata Motors shares are likely to remain volatile in the transition period and until the Tata Motors CV business gets listed, according to JM Financial.
Following the demerger, Nomura pegged its target price at ₹365 per share for Tata Motors CV and ₹367 per share for Tata Motors PV, reflecting an almost even valuation of the two listed units.
Nomura reiterated its ‘Neutral’ stance on Tata Motors, saying it would update its estimates once pro-forma financials are available post-results.
Tata Motors PV: JLR risks
While the Tata Motors demerger is aimed at unlocking value of the passenger-vehicle business, it also magnifies JLR troubles, which seem to keep piling on.
JLR earlier this year was grappling with US tariffs on its UK-made cars. Then, a cyberattack stalled manufacturing operations for more than a month. That, when Jaguar itself is transitioning into an electric-only avatar.
ALSO READ | Timeline of Tata Motors demerger
Tata Motors CV: Iveco boost
The Tata Motors demerger also comes when the company has boosted its CV business by acquiring Italy's Iveco Group in a €3.8-billion deal to expand its global footprint. The combined entity is projected to sell over 540,000 units annually, with €2 billion in total revenue.
