Business and Finance

Tata Motors Share Price Down 40% — Is This the Right Time to Buy or Sell?

Tata Motors Shares Fall 40% After Demerger — Here’s Why Investors Shouldn’t Panic

Shares of Tata Motors witnessed a sharp decline on Tuesday, showing a drop of nearly 40% on several trading platforms. However, this fall is not due to a market crash or weak financial performance. Instead, it follows the company’s much-anticipated demerger, where Tata Motors separated its commercial vehicle business from its passenger vehicle division.

Why Tata Motors Shares Fell 40%

The decline in Tata Motors’ share price reflects a technical price adjustment resulting from the ex-demerger trading status. Under the demerger plan, investors holding one share of Tata Motors as of the record date will receive one share of the new commercial vehicle company.

This means the reduction in Tata Motors’ main share price is purely a result of the commercial vehicle business being separated, not because of any loss in company value.

On Tuesday, Tata Motors opened at ₹399, marking a 39.62% decline from Monday’s closing price of ₹660.90. Following this adjustment, the company’s market capitalization stood at approximately ₹1.45 lakh crore. The apparent crash seen on trading apps is essentially a book value adjustment — not a sell-off or investor panic.

Demerger Timeline and Record Date

October 13 (Monday) was the last trading day to purchase Tata Motors shares to become eligible for shares in the new demerged entity. October 14 (Tuesday) served as the record date, determining which shareholders will receive shares in the new company.

Tata Motors follows the T+1 settlement cycle, meaning all share transactions are finalized the next trading day.

New Entities and Trading Details

After the demerger, Tata Motors now operates under two main entities:

Tata Motors Passenger Vehicles Limited (TMPVL)
Tata Motors Commercial Vehicles (TMLCV)

While fresh derivative contracts for TMPVL began trading at 10 AM on Tuesday, the commercial vehicle entity (TMLCV) will not immediately be available for futures and options (F&O) trading.

Eligible shareholders will receive TMLCV shares in a 1:1 ratio. Once allotted, these shares will be listed on both the BSE and NSE. The process of approval and listing typically takes 45 to 60 days, depending on exchange clearances.

Analyst Predictions Post-Demerger

According to estimates by SBI Securities, the post-demerger price of Tata Motors is expected to trade between ₹285 and ₹384. The brokerage firm also suggested that the stock’s future growth will depend heavily on the performance of Jaguar Land Rover (JLR) and the profitability of the passenger vehicle division, both of which are influenced by global automobile trends.

What the Demerger Means for Investors

The Tata Motors demerger aims to unlock shareholder value and sharpen focus on the company’s two key business segments — passenger and commercial vehicles.

While the sudden drop in share price may appear alarming, experts emphasize that this is purely an accounting adjustment and not a sign of any financial weakness. In fact, many analysts view the demerger as a strategic step that could help each business grow independently with greater efficiency and accountability.

Investor Advisory

(Disclaimer: The views and recommendations shared by experts and brokerages are their own and do not necessarily reflect those of AWADH DARSAN. Investors are advised to consult certified financial advisors or stockbrokers before making any investment or trading decisions.)