Tata Motors, one of India’s most iconic automobile giants, has officially set the wheels in motion for its much-awaited demerger. The company is splitting its Commercial Vehicles (CV) business from its Passenger Vehicles (PV) business, a move that markets are hailing as a big step toward value unlocking for shareholders.
This restructuring comes after years of strategic discussions, with the aim of giving each business segment the freedom to pursue independent growth strategies, capital allocation, and market valuations.
🔑 Why is Tata Motors Demerging?
The logic behind the split is straightforward:
-
Focused Strategies – Each business will operate independently, with sharper strategies tailored to its own growth path.
-
Independent Capital Allocation – The CV and PV units can now allocate funds in line with their own priorities.
-
Clearer Valuation – Investors and analysts will finally be able to evaluate the businesses separately, unlocking hidden shareholder value.
Historically, Tata Motors’ CV business has been the stronger performer, while the PV segment and JLR (Jaguar Land Rover) have faced challenges. By unbundling the businesses, management hopes to highlight the true potential of each.
📅 Key Dates & Share Allotment
-
Record Date: October 14th has been set as the record date for the demerger.
-
Shareholders’ Benefit: Those holding Tata Motors shares on this date will automatically receive shares in the new CV entity.
-
Allotment Ratio: For every 1 Tata Motors share, shareholders will get 1 CV share.
-
What Remains in PV Entity: The Passenger Vehicle unit, EV division, and JLR will continue under Tata Motors.
📊 Sum-of-Parts (SOTP) Valuation Breakdown
Analysts use a Sum-of-Parts valuation to understand Tata Motors’ business. Here’s the rough breakup:
| Business Segment | Approx. Value | Valuation Metric | Notes |
|---|---|---|---|
| Commercial Vehicles (CV) | ₹336 | 10x 1Y forward EV/EBITDA | Will become a separate listed entity |
| JLR (Jaguar Land Rover) | ₹190 | Not specified | Remains in PV entity |
| Passenger Vehicles (Standalone) | ₹20 | 14x 1Y forward EV/EBITDA | Remains in PV + JLR entity |
| Other Subsidiaries | ₹33 | Not specified | Includes Tata Tech & others |
👉 This means ₹336 worth of CV business is being spun out, while PV + JLR + subsidiaries stay within Tata Motors.
📢 Expert Take: Why This Matters
Market experts widely see the demerger as shareholder-friendly.
-
Clearer Benefits for CV Business: Tata’s expansion in CVs (including hydrogen and future-ready solutions) will now shine through.
-
Focus on Growth: The CV unit, with strong domestic dominance, will get undivided attention.
-
Valuation Re-rating Potential: With Ashok Leyland trading at ~12x CV EBITDA, analysts believe Tata Motors’ CV arm could command an even higher premium.
For the PV + JLR entity, JLR will continue to dominate valuation trends, but the EV business could emerge as a long-term growth catalyst.
⚖️ What Should Shareholders Expect?
-
The real test begins after October 14th, when markets start valuing the two entities separately.
-
CV Business → Likely to get an immediate valuation bump due to its strong fundamentals.
-
PV + JLR Business → JLR performance will remain key, but EV growth could add upside in coming years