Tata Motors' CV, PV demerger is a 'non-event' on immediate basis, says Nuvama

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.