Tata Motors demerger slashes share price 40% – What investors need to know

When Tata Motors Limited unveiled its long‑awaited demerger on Tuesday, the market reacted like a startled horse – the stock plunged roughly 40% to a opening price of ₹399 on the Bombay Stock Exchange.

The split, slated to take effect on the record date of October 14, 2025, will carve the conglomerate into two listed entities: Tata Motors Passenger Vehicles (TMPV) and Tata Motors Commercial Vehicles (TMLCV). Shareholders must own Tata Motors shares as of October 13, 2025 to receive the new TMLCV shares.

Why the demerger matters

In a nutshell, the move aims to unmask the true value of two very different businesses. TMPV will house the passenger‑car lineup, the electric‑vehicle push, and the luxury arm Jaguar Land Rover. TMLCV, on the other hand, will own the trucks, buses, pickups and, crucially, the upcoming €3.8 billion takeover of Iveco Group NV's commercial‑vehicle division.

By separating the high‑growth electric and luxury segments from the more cyclical commercial side, investors can price each business on its own merits – a classic “unlocking value” play that has worked for other auto groups in Europe and the U.S.

Structure of the split

For every Tata Motors share you hold, you’ll keep that share and receive one new TMLCV share. In practice, a portfolio of 100 Tata Motors shares will become 100 Tata Motors shares plus 100 TMLCV shares. No cash changes hands; the exchange is purely a share‑for‑share allocation.

The demerger will be executed through a special pre‑open session on the BSE and NSE on October 14, 2025, running from 9:00 am to 9:45 am IST. Orders can be placed, modified, or cancelled until 9:45 am, after which the matching engine will settle the new TMLCV issue. Regular trading resumes at 10:00 am.

Analyst forecasts and valuation

Pankaj Pandey, research analyst at ICICI Securities, reckons the commercial‑vehicle arm will trade around 11 times EV/EBITDA by FY27 – roughly a ₹300 valuation per share, aligning with global peers.

"Overall, we expect value creation, as the commercial vehicles (CV) business is likely to trade at around 11 times EV/EBITDA on a FY27 basis, which translates to roughly Rs 300," Pandey said.

He added a bullish outlook for the passenger‑vehicle side, pegging a fair‑value range of ₹450‑₹500 per share once the split is reflected in market pricing.

Meanwhile, SBI Securities projects TMPV to sit between ₹285 and ₹384, driven mainly by Jaguar Land Rover’s ongoing turnaround. For TMLCV, they see a valuation band of ₹320‑₹470, bolstered by the impending integration of Iveco, which should triple the combined turnover and deepen exposure to electric and alternative‑fuel trucks.

"The integration of Iveco Group NV, most likely in FY27, will expose the company to the global CV cycle," an SBI analyst noted, while cautioning that short‑term margins may dip due to Iveco’s historically lower EBIT performance.

Investor reaction and market impact

The 40 % drop on October 1, 2024 was abrupt, but not entirely unexpected. Market participants had been chewing on the demerger talk for months, and the stark price adjustment reflects the need to re‑price the combined entity into two separate “books.”

Yes Securities called the split a "value unlocking opportunity," stressing that stand‑alone vehicle segments will enable laser‑focused capital allocation – a point that resonated with institutional investors seeking clearer exposure to either electric‑luxury or heavy‑duty trucks.

Retail investors, however, expressed concern about the logistics of holding two tickers, the tax implications of share allocation, and the timing of futures and options (F&O) contracts. All contracts expiring in Oct‑Dec 2025 will cease on October 13, 2025, and be re‑issued with revised lot sizes from October 14, 2025, as per NSE circular NSE/CHX/56921 dated September 15, 2025.

Roadmap to separate listings

Post‑record date, TMLCV shares will land in shareholders’ demat accounts within 30‑45 days. The Central Depository Services Limited (CDSL) will email investors once the allocation is complete.

Both the BSE and NSE will list the new entity after the usual regulatory clearances. The exact listing date is still pending a formal circular, but market chatter suggests a target window in early Q1 2026.

Meanwhile, the parent company, Tata Motors Limited, will retain a 100 % stake in TMPV, allowing the passenger‑vehicle business to continue trading under the existing ticker while the commercial vehicle arm obtains its own symbol.

Potential risks and longer‑term outlook

Separating the businesses does not erase the underlying operational challenges. TMPV’s fortunes remain tied to Jaguar Land Rover’s turnaround, which depends on luxury‑segment demand in Europe and North America. Any slowdown there could blunt the upside.

TMLCV faces integration risk with Iveco. While the acquisition promises scale, merging cultures, aligning product roadmaps, and harmonising supply chains across continents is a massive undertaking. Short‑term earnings may feel the strain.

Finally, the broader automotive market is still grappling with semiconductor shortages and fluctuating fuel prices. Both entities will need to navigate these macro headwinds while chasing electric‑vehicle (EV) ambitions.

What this means for you

If you own Tata Motors shares, you’ll automatically become a shareholder in both TMPV and TMLCV. Consider whether you want exposure to the high‑growth EV/luxury segment or the more stable, volume‑driven commercial‑vehicle business. It might be a good time to rebalance, perhaps selling one half and keeping the other, depending on your risk tolerance.

For new investors, the split creates a clearer entry point: buy TMPV if you’re bullish on EVs and premium brands; buy TMLCV if you see upside in global truck demand and the Iveco synergies.