Tata Motors demerger: SBI Securities pegs PV arms value at Rs 285-384; check details

Shares of Tata Motors may indicate a sharp fall in its share price on Tuesday, October 14 as the Tata Group's automobile arm will trade ex-spin off today, demerging its passenger vehicle and commercial vehicle business. The demerger of the homegrown automobile player will come into effect from today as Tata Motors Passenger Vehicle (TMPVL).

The price of the demerged entity shall be calculated based on the difference between the closing price of the currently listed entity on Monday, October 13, and the open price of the listed entity discovered during the special pre-open session on Tuesday. The stock settled at Rs 660.90, falling 2.67 per cent for the day, with a total market capitalization of Rs 2.43 lakh crore.

The stock is likely to trade between Rs 285-384 post demerger. Any potential upside remains dependent on the recovery in JLR volumes and improvement in profitability, said SBI Securities in its note. TMPVL remains exposed to the global passenger vehicle industry, it said.

"JLR contributes 87 per cent to its revenue as of FY25 while the domestic business revenue share is at only 13 per cent. JLR is currently facing its own set of challenges on multiple fronts from the production disruption due to the cyberattack to the intense competitive intensity in China to overall consumer slowdown across North America and Europe," SBI Securities. added.

The ongoing derivative contracts of Tata Motors expired on Monday itself. The new derivative contracts of the already listed entity- TMPVL-will be re-introduced on Tuesday, and will begin trading at 10 am from today. However, the demerged entity of commercial vehicles will not be immediately included in the F&O segment.

Tata Motors Ltd, the passenger vehicle arm, not only owns the passenger vehicle business but also stake in electrical business (EVs) and Jaguar Land Rover (JRL) under its umbrella, with the entity being renamed Tata Motors Passenger Vehicles Limited. TML Commercial Vehicles shall be renamed as Tata Motors Limited. Shares of both entities will have a face value of Rs 2 each.

Upon finalization of the list of eligible shareholders of TML, the shares in TMLCV shall be allotted and thereafter, such shares shall be listed on the stock exchanges- BSE and NSE. "The process of obtaining listing and trading permission generally takes 45-60 days from the date of filling necessary applications with Stock Exchanges," said the company in an exchange filing.