Tata Motors shares tumble 40% after demerger; market experts call it 'technical adjustment'
PTC Web Desk: Shares of Tata Motors witnessed a sharp fall of nearly 40% on Tuesday as the company’s stock began trading ex-demerger, marking the separation of its commercial vehicle (CV) business from the passenger vehicle (PV) arm. The decline, analysts say, is purely technical and not a reflection of weak fundamentals or a market crash.
Under the demerger arrangement, investors holding one share of Tata Motors as of the record date will receive one share of the newly formed Tata Motors Commercial Vehicles (TMLCV). The price drop on trading platforms represents the exclusion of the commercial vehicle division’s value from Tata Motors’ main stock.
On Tuesday, Tata Motors shares opened at Rs 399, down around 39.6% from Monday’s close of Rs 660.90. Following this adjustment, the automaker’s market capitalisation stood near Rs 1.45 lakh crore. October 13 (Monday) was the last day to purchase Tata Motors shares to be eligible for receiving the new entity’s shares. The following day, October 14, was the record date to determine eligible shareholders.
The company operates under a T 1 settlement cycle, meaning transactions are settled the next business day. While ongoing derivative contracts for Tata Motors expired on Monday, fresh F&O contracts for Tata Motors Passenger Vehicles Limited (TMPVL) began trading from 10 am on Tuesday. However, the newly created TMLCV will not immediately be available for futures and options (F&O) trading.
Eligible shareholders will get TMLCV shares in a 1:1 ratio, which will later be listed on the BSE and NSE. The listing process is expected to take around 45 to 60 days after the necessary filings are made with the exchanges.
According to SBI Securities, Tata Motors’ post-demerger share price is expected to trade between Rs 285 and Rs 384. The brokerage added that future performance will depend largely on the Jaguar Land Rover (JLR) business and the profitability of the passenger vehicle division, both of which remain influenced by global automotive market trends.
The demerger is part of Tata Motors’ strategy to unlock shareholder value and streamline focus on its two major businesses—passenger and commercial vehicles. Market experts advise investors not to be alarmed by the price correction, as it is merely a book-value adjustment rather than a sign of financial weakness.
- With inputs from agencies
