Tata Motors' decision to separate the commercial vehicle and passenger vehicles business as two separate entities is a "non-event" on an immediate basis as the entire process could take about 15 months to complete, says Nuvama Institutional Equities.
"Think of it as JIO's recent demerger from Reliance Industries Limited, where JIO got listed separately and eventually (in the next few days) got excluded from the domestic indices", the broking firm said in a note. It further added that Tata Motors is currently a member of all passive indices.
However, once the demerger is complete, with the smaller entity (CV business) becoming a standalone entity, it will exit Nifty 50 and Sensex.
Also read: Tata Motors demerger aimed at unlocking better value for the two businesses
As far as MSCI and FTSE are concerned, they will evaluate the smaller entity's market cap around listing to determine its eligibility. "Assuming the CV business gets around 25 percent of the total market cap, we believe it should maintain its position in the passive indices," Nuvama said in its note.
Read more: Tata Motors DVR spread contraction may be a good trade to initiate, says Nuvama
On March 4, the automobile major announced its plan to demerge its passenger vehicles and commercial vehicles businesses into two separately listed entities. The move is intended to unlock value for the two businesses, especially the passenger vehicle (PV) business, which will need larger investments going ahead.
The news came after market hours, and the stock closed at Rs 988. In 2023, it was the best performer on the Nifty, gaining over 100 percent.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Disclaimer: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
