Tata Motors Share Price Decline: What Investors Need to Know Post-Demerger
Tata Motors has been in the spotlight this week as its shares continued to drift, even after the long-awaited demerger of its commercial vehicle business took effect. On 16 October, the stock finally showed a glimmer of relief, opening 1.3% higher at 10 AM, breaking its losing streak and offering some optimism to investors. Still, the slide over the past few sessions has left many retail investors wondering why the much-anticipated split did not immediately boost the stock. (moneycontrol)
But what is really behind this correction, and what does it mean for India’s largest homegrown automaker?
How Did the Tata Motors Demerger Affect Its Share Price?
The main reason for the recent decline was the technical adjustment following the demerger of Tata Motors’ commercial vehicle division. On 14 October, the company fixed the record date for separating the commercial vehicle business into a new entity, Tata Motors Commercial Vehicles Ltd (TMLCV). Shareholders holding Tata Motors stock on or before that date are entitled to receive one share of TMLCV for every share they own in the parent company.
When trading began ex-demerger on 15 October, Tata Motors shares reflected a notional 40% drop, opening at ₹399 compared with ₹660.90 the previous day. This sharp movement was not an actual loss of wealth. Instead, it represented a technical split between the passenger vehicle arm and the newly created commercial vehicle business.
Following the demerger, Tata Motors now trades as Tata Motors Passenger Vehicles Ltd (TMPV), which includes the passenger car, electric vehicle, and Jaguar Land Rover (JLR) operations. TMLCV is expected to list separately in November, giving investors exposure to two distinct entities.
Why Are Analysts Cautious About the Stock?
Even with the split, some brokerages remain cautious. On 16 October, BofA Securities downgraded TMPV to “underperform,” assigning a target price of ₹375. The brokerage pointed to ongoing challenges at Jaguar Land Rover (JLR), which contributes 45% of the division’s valuation. (CNBC TV18)
JLR faced disruption following a cyberattack in September that affected key UK and European plants. Wholesale volumes fell by 24%, with estimated weekly losses of £50 million. Production gradually resumed in early October, but full operations are expected only after Christmas, keeping near-term margins under pressure. (Reuters)
Other macroeconomic issues, including US tariffs and slowing demand in China and the European Union, also weigh on investor sentiment. Meanwhile, Tata Motors’ domestic passenger vehicle business, although improving in market share, continues to operate with slim margins of around 3.9%, below the double-digit target the company hopes to achieve. (GoodReturns)
Can the Demerger Unlock Long-Term Value?
Despite near-term volatility, most experts see potential in the split. Brokerages highlight that separating the CV and PV arms allows for sharper strategic focus. They expect TMPV to trade between ₹285 and ₹384, while TMLCV is projected in the ₹320–470 range.
Nomura has set split target prices at ₹367 for the PV unit and ₹365 for the CV unit, maintaining a neutral rating. It anticipates 10% growth in TMLCV’s second-half revenue, supported by GST cuts and the €3.8 billion Iveco acquisition, which could triple combined commercial vehicle revenues over time. (Mint)
For the passenger vehicle business, analysts are optimistic that strong demand for Nexon and Punch, along with growing EV and CNG sales, which already contribute 45% of revenue, will drive sustainable growth through FY26. The focus on premium models and cleaner technologies positions TMPV for a higher-margin future.
What Should Investors Expect in the Coming Weeks?
Investors can expect short-term swings as the market adjusts to two separate entities. The listing of TMLCV, coupled with the pace of JLR’s production recovery, will be closely watched. Once the new commercial vehicle stock begins trading, the market will be able to gauge the combined value of Tata Motors more accurately.
It is important to remember that the notional fall in the stock does not reflect a loss in value. Investors now hold shares in two focused businesses: one targeting India’s commercial vehicle sector and the other catering to passenger and electric vehicles globally.
History shows that well-executed demergers, like those of L&T and ITC, tend to unlock value gradually. Patience may be more rewarding than panic for long-term shareholders.
As TMLCV prepares for its independent listing and JLR ramps up output, the next few months will be crucial. Will this corporate restructuring finally deliver the value investors expect, or will Tata Motors need more time to prove that the split is worth the wait?
Sources
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