Tata Motors demerger: Is it now worthwhile to purchase shares of the listed automaker now that the CV division has been split off?

Tata Motors Demerger: From a fundamental standpoint, Prashant Tapse of Mehta Equities believes that the PV company has more upside potential because to its strategic placement in the luxury and EV markets and robust growth levers.

Tata Motors Demerger: The anticipation for Tata Motors' eagerly anticipated demerger has only increased as it finally enters its last phase. One of the top Indian automakers, the Tata Group, formally divided its passenger vehicle (PV) and commercial vehicle (CV) divisions into two distinct companies.

While investors eagerly anticipate the CV arm's IPO, the PV arm, which contains the company's electric vehicle (EV) division and Jaguar Land Rover (JLR), trades independently on the Indian stock exchanges.

Details of the Tata Motors Demerger

The demerger ratio was set at 1:1 by Tata Motors. This implies that for every share of Tata Motors owned, each shareholder will receive one share of TML Commercial Vehicles Ltd (TMLCV).

The demerge's record date was October 14.

The parent of Jaguar Land Rover (JLR) changed hands for ₹400 during the day's one-hour pre-market session. The spin-off commercial vehicles unit is valued at ₹260.75 per share, which is the difference from Monday's closing price of ₹660.75.

Cars, EVs, and JLR are the main focus of Tata Motors PV.

The passenger vehicle division of Tata Motors, which encompasses both Jaguar Land Rover and the domestic PV business, which comprises the ICE and EV sectors, is represented by the company's current stake. In addition, the interest in Tata Technologies is held by the publicly traded Tata Motors.

As a result, the new Tata Motors will be a technology and consumer-focused business.

Prashant Tapse, Research Analyst, Senior Vice President of Research at Mehta Equities, stated that while the PV industry has greater growth potential, it also has a larger risk because of its global exposure (via JLR) and substantial ongoing investments in EVs.

According to him, the listed PV market stands to benefit from rising EV adoption in India, higher JLR margins, and a pipeline of high-end product launches.

According to Tapse, the PV company is valued at about ₹500 per share based on our evaluation of financial performance, growth drivers, and peer valuation multiples.

Tata Motors Passenger Vehicle (TMLPV) stock is expected to trade between ₹285 to ₹384 after the demerger, according to SBI Securities. According to the brokerage, any future gains are still contingent upon JLR volumes rebounding and profitability increasing.

The CV Arm Departs

The commercial vehicle business, along with other investments, such as the share in Tata Capital, will be housed under TML Commercial Vehicle, the demerged arm of Tata Motors.

According to Tapse, the industry is essentially cyclical, B2B, and strongly related to both infrastructure development and general economic activity.

With a domestic market share of more than 37%, Tata Motors holds a commanding lead in this industry. With the acquisition of a stake in Inveco Group, the business will now also expand globally.

The independent CV firm is projected to be worth around ₹400 per share based on financial parameters, growth potential, and peer valuation multiples. According to Tapse, investors looking for cyclical value possibilities and consistent cash flows are likely to be drawn to it.

When the shares of Tata Motors Commercial Vehicle (TMLCV) go public on the stock exchanges, which is expected to happen in November, they will be renamed as Tata Motors. The company of the PV arm will list at TMPVL in the interim.

Investors have a crucial concern now that the split is complete: Is it still a good idea to own listed Tata Motors stock?

Are Listed Tata Motors Shares a Good Investment?

The recent demerger of Tata Motors, according to Harshal Dasani, Business Head, INVAsset PMS, represents a significant shift. "This structural split is aimed at sharper capital allocation, operational efficiency, and unlocking long-term value across independent growth cycles," he stated.

Regarding the financials, the CV segment produced an EBITDA margin of about 12.2% in Q1 FY26, despite a 4-5 percent decline in volumes. This was made possible by strict cost control and a well-balanced product mix. India's expanding electric mobility ecosystem and strong domestic demand continue to help the passenger and EV sectors. With updated EBIT margin projection of 5–7% for FY26, which reflects increased investment in next-generation EVs and product transitions, the worldwide JLR business is still facing some pressure.

Dasani believes that both organizations will unlock value in the medium term by executing their strategies with focus and maintaining better balance sheets. "Tata Motors remains attractive for long-term investors who believe in the company’s EV leadership, global diversification, and ability to sustain double-digit operating margins," he stated.

Although Tapse thinks both of these companies are good investments for a portfolio, he thinks the investor's investment horizon and risk tolerance will determine which one they choose.

Fundamentally speaking, Tapse believes that the PV industry has more upside potential because to its robust growth levers and strategic placement in the luxury and EV markets. However, he continued, the CV company has more defensive features that are especially alluring in a macroeconomic and infrastructure-driven growth environment that is favorable.