Tata Motors demerger creates two distinct bets: EVs and global luxury vs India’s infra backbone

Your next Land Rover car and the truck that carried it from the factory will no longer be made by the same company.

Tata Motors’ demerger is more than a structural tidying-up. It is a redesign of financial logic. By splitting into two listed firms -- one for passenger vehicles (including Jaguar Land Rover and Tata’s EV portfolio) and the other for commercial vehicles -- the group aims to align each with its natural priorities: growth capital for the consumer-facing side, balance-sheet strength for the trucking arm. According to Chairman N Chandrasekaran, the goal is to give each business sharper focus and agility.

For investors, this also means a cleaner choice. One company will offer exposure to global luxury cars and the EV transition, the other to India’s infrastructure build-out and domestic transport demand.

Growth capital vs balance-sheet strength

Management has acknowledged that the two businesses operate under very different imperatives.

Passenger vehicles (PV, JLR and EVs): JLR has committed GBP 15 billion through FY30 for electrification. Tata Motors has earmarked up to Rs 35,000 crore over five years for EVs and new models in India. This is capital-intensive by design. Tata remains India’s EV market leader, even with its share slipping to ~55% in FY25 from over 70% earlier, as rivals entered the segment. EV volumes fell by about 11% YoY in FY25, enhancing the need for sustained investment to defend its position.

Commercial vehicles (CV): The trucking arm is tied more directly to India’s economic cycle. In Q2 FY26, Tata sold 94,681 CV units, up 12% year-on-year, and retained nearly 49% market share in medium and heavy trucks. In FY25, CV division reported revenue of Rs 75,000 crore, with EBIT margin 9.1%. Capital expenditure here is modest, focused on fleet upgrades and compliance with emission norms.

As of March 2024, Tata Motors’ net automotive debt was Rs 16,022 crore. For FY25, the management has indicated steady deleveraging. Post demerger, debt will be apportioned between the two companies, with the PV side expected to tolerate higher leverage in pursuit of growth and the CV side optimising for stronger credit metrics.

Two investor propositions

The demerger is intended to address what analysts call the “conglomerate discount” -- the market’s tendency to undervalue mixed businesses.

• The PV company is expected to be valued on growth multiples, given its investment commitments and exposure to luxury markets. In FY25, JLR reported revenues of GBP 29 billion with an EBIT margin of 8.5%, reflecting strong demand for Range Rover and Defender models. JLR has trimmed its FY26 EBIT margin guidance to 5-7%, citing headwinds from tariffs, elevated capital expenditures (including EV investment), and model transition pressures.” Tata’s domestic PV business generated ~Rs 48,500 crore revenue in FY25. While competition has intensified, this company will present itself as a growth story rooted in EVs and global luxury demand.


• The CV company will likely be judged as a play on India’s infrastructure cycle. The segment has of late benefited from freight demand and government capital expenditure. Margins remain sensitive to commodity costs and fleet utilisation, but the business offers a visible link to GDP and logistics spending. Investors seeking steadier domestic exposure may prefer this arm, which is expected to emphasise dividends and balance-sheet discipline.

Some brokerage commentary suggests the two firms, once separately listed, could together trade at a premium of 10-15% over Tata Motors’ current market capitalisation, though estimates vary.