Tata Motors Demerger: Record Date Oct 15, Here’s the Likely Post-Split Share Value

Tata Motors shareholders face a pivotal moment as the company finalizes its demerger of the commercial vehicles (CV) business, with the record date set for today. Those listed in the registrar by market close will qualify for shares in the newly separated entity, marking the end of trading the consolidated stock on October 13. Effective October 15, shares will ex-trade the CV segment, ushering in a restructured Tata Motors focused on passenger vehicles and luxury brands. This strategic split, approved by the National Company Law Tribunal in July, aims to unlock value by isolating the high-margin CV operations, which contribute about 25% of profits despite representing just 17% of revenue.

Under the 1:1 demerger ratio, eligible investors will receive one share of the demerged CV entity—renamed Tata Motors Ltd.—for each existing Tata Motors share held. The parent company will rebrand as Tata Motors Passenger Vehicles Ltd., encompassing the domestic passenger car division and the Jaguar Land Rover (JLR) luxury arm.

The CV business, a cornerstone of India's truck and bus market with a 40% domestic share, is slated for listing on stock exchanges in November, pending regulatory nods. This follows Tata Motors' robust FY25 performance, where consolidated revenue hit Rs. 4.4 lakh crore and EBITDA reached Rs. 38,000 crore, buoyed by JLR's 28% sales growth and CV's steady recovery post-pandemic.

Analysts project a combined indicative value of Rs. 668 per share for the post-demerger entities, closely mirroring the current consolidated price of Rs. 670. The CV business, valued at Rs. 312 per share using a 13x EV/EBITDA multiple on projected FY25 EBITDA of Rs. 8,841 crore, reflects its profitability edge in a cyclical sector.

Meanwhile, the passenger vehicles unit is pegged at Rs. 109 per share on a 12x multiple, while JLR—grappling with supply chain woes and geopolitical tariffs—carries a conservative Rs. 244 per share at 2x EV/EBITDA, below historical norms of 3-4x. These estimates, derived from scenario modeling, assume stable macros and no major disruptions, though JLR's recent cyberattack vulnerabilities add caution.

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The demerger could sharpen investor focus on each unit's growth trajectory, with CV poised for EV truck adoption and passenger vehicles eyeing affordable models amid rising competition from Maruti Suzuki and Hyundai. However, brokerages remain tempered: Jefferies maintains an "Underperform" rating with 15% downside potential, citing JLR headwinds, while Motilal Oswal holds neutral, emphasizing execution risks. For shareholders, the split offers diversified exposure without immediate tax implications, but the ex-date price dip to around Rs. 358 for the passenger entity may test sentiment.

As Tata Motors navigates this transformation, the move aligns with broader industry trends toward specialization, potentially boosting long-term efficiencies in a Rs. 10 lakh crore automotive market.

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