Tata Motors CV shares settle 27% higher after demerger from passenger vehicle business

Both Tata Motors companies can now chart their own growth: N Chandrasekaran

The shares of Tata Motors’ commercial vehicle business, which will henceforth be known as Tata Motors, were listed at Rs 335 apiece on the NSE on Wednesday. This marks a premium of more than 28.5 percent from the discovered price of Rs 260.75.

The stock then dropped 1.5 percent to close at Rs 330 apiece, marking a rise of 26.56 percent from the discovery price. Its market capitalisation at the end of the debut day stands at Rs 1,21,516.94 crore.

This comes after the demerger of the automaker’s commercial vehicle business from its passenger vehicle segment. The shares of the passenger vehicle segment were discovered at a price of Rs 400 apiece on NSE on October 14.

Earlier this year, the company fixed October 14 as the record date for determining the eligibility of the shareholders set to receive shares in its demerged commercial vehicle business. This means that investors who held Tata Motors shares as on the record date will be eligible for the demerger scheme. The demerger has already officially become effective from October 1.

Following the demerger, the passenger vehicle arm was subsequently renamed Tata Motors Passenger Vehicles (TMPVL), while the commercial vehicles entity was listed today as Tata Motors (TML).

In August last year, Tata Motors' board approved the demerger of its commercial and passenger vehicle divisions into two separate listed entities in order to sharpen business focus and capitalise on future growth opportunities. The 1:1 demerger created two focused entities - Tata Motors Commercial Vehicles (TMCV) and Tata Motors Passenger Vehicles (TMPV).

Tata Motors Passenger Vehicles shares fell 1.3 percent to close at Rs 402.30 apiece. The stock has so far gained more than 0.5 percent since adjusting to the demerger in October.

Demerger separates Tata Motors' fast-growing passenger vehicle, EV business from more stable, cash-generating CV business, allowing investors to value each on its own strength, says Jahol Prajapati of SAMCO Securities.