Tata Motors , one of India's leading automotive manufacturers, has undergone a significant corporate restructuring with the demerger of its passenger vehicle (PV) and commercial vehicle (CV) businesses. This move has caught the attention of market analysts, with Nomura maintaining a 'Neutral' rating on the company post-demerger.

Demerger Details

The demerger became effective on October 1, with October 14 set as the record date for shareholder entitlement. This corporate action has led to a notable change in the company's structure:

• The PV business now includes domestic passenger vehicles, Jaguar Land Rover, and stakes in Tata Sons, Tata Steel, and Tata Technologies.
• The CV business comprises domestic operations and the upcoming Iveco Group acquisition, valued at EUR 3.80 billion.

Nomura's Valuation

Nomura's analysis of the demerged entities reveals an interesting perspective:

The near-equal valuation of both segments underscores the balanced strength of Tata Motors' diverse automotive portfolio.

Passenger Vehicle Segment Outlook

Nomura highlighted several positive factors for the PV business:

• Improving momentum following GST cuts
• Strong bookings for Punch and Nexon SUVs
• Encouraging response to the Harrier EV

Management has set an ambitious target of achieving double-digit EBITDA margins in the medium term, up from 3.90% in Q1.

Jaguar Land Rover (JLR) Recovery

JLR, a crucial component of the PV business, is showing signs of recovery:

• Overcoming a September cyberattack
• Ramping up production
• Projected EBIT margins of 6.20% and 7.60% for the next two fiscal years

Commercial Vehicle Segment Projections

For the CV business, Nomura projects:

• 5% industry growth
• Initially, no significant value creation from the Iveco acquisition

Market Impact and Risks

The demerger has had immediate effects on Tata Motors' stock:

• Shares opened 40% lower at Rs 399.00 as trading began ex-demerger
• This drop reflects the notional removal of CV business valuation

Nomura warns of potential technical risks, including reduced index weights that could lead to share price volatility in the near term.

Corporate Name Change

In line with the demerger, the Ministry of Corporate Affairs has issued a Fresh Certificate of Incorporation, changing the company's name from "Tata Motors Limited" to "Tata Motors Passenger Vehicles Limited". This change is effective immediately, with the company's constitutional documents being amended to reflect the new name.

Conclusion

The demerger of Tata Motors marks a significant milestone in the company's corporate journey. While Nomura maintains a neutral stance, the equal valuation of the PV and CV segments suggests a balanced outlook for both businesses. Investors and market watchers will be keenly observing how this restructuring impacts Tata Motors' performance and market position in the coming years.

Tata Motors shares opened at Rs 399.00 on Tuesday, down from Monday's close of Rs 660.90, following the demerger of its commercial vehicles business. The decline reflects the stock trading ex-demerger value after separating into Tata Motors Passenger Vehicles Ltd (TMPV) and Tata Motors Commercial Vehicles Ltd (TMLCV).

Key Details of the Demerger

• Shareholders receive one TMLCV share for every Tata Motors share held as of October 13.
• TMPV will encompass passenger vehicles, electric vehicles, and Jaguar Land Rover operations.
• TMLCV becomes India's largest commercial vehicle maker with a 37.1% market share.

Market Reaction and Analyst Projections

Brokerages view the split as a value unlocking move. SBI Securities projects:

• TMPV trading between Rs 285.00-384.00
• TMLCV trading between Rs 320.00-470.00

Impact on Jaguar Land Rover Operations

JLR operations were impacted by a September cyberattack, resulting in:

• 24% drop in wholesale volumes
• Estimated losses of £50 million per week
• Full production expected to resume post-Christmas

Future Plans

TMLCV plans a €3.8 billion acquisition of Iveco Group's commercial vehicle operations, expected to be completed in FY27.

Trading Details

A special pre-open session from 9 a.m. to 10 a.m. facilitated price discovery for the ex-Commercial Vehicle entity. Key trading metrics include:

Corporate Action

As part of the restructuring:

• The company's name has changed from "Tata Motors Limited" to "Tata Motors Passenger Vehicles Limited".
• The Ministry of Corporate Affairs issued a Fresh Certificate of Incorporation confirming this change.
• TML Commercial Vehicles Limited (TMLCV) is expected to change its name to "Tata Motors Limited" in due course.

This demerger represents a significant milestone in Tata Motors' strategy to create distinct, focused entities for its commercial and passenger vehicle businesses. The market's reaction and the performance of both entities in the coming days will be crucial in determining the long-term benefits of this strategic separation for shareholders.