Tata Motors demerger: Will it unlock value or more volatility for investors next week?

Under the arrangement, Tata Motors will be renamed Tata Motors Passenger Vehicles Ltd, while TMLCV will be renamed Tata Motors Ltd, continuing the CV business.

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Tata Motors shares logged a six-day losing streak on Friday, with investors bracing for next week’s key demerger record date. The stock had lost over 5 per cent in the past six sessions and is down 9.4 per cent so far in 2025, with traders weighing the impact of the separation of its commercial and passenger vehicle businesses and the gradual restart of production at Jaguar Land Rover (JLR) after a crippling cyberattack.The stock however closed 0.2 per cent lower at ₹679.05 on Friday.On Thursday, Tata Motors said its Composite Scheme of Arrangement involving TML Commercial Vehicles Ltd (TMLCV) and Tata Motors Passenger Vehicles Ltd (TMPV) became effective from October 1, after receiving approvals from the National Company Law Tribunal’s Mumbai Bench.

The auto major has fixed October 14 as the record date to determine eligible shareholders who will receive one fully paid-up share of TMLCV for every share held in Tata Motors. The move will result in two independent listed entities — Tata Motors Passenger Vehicles, which will include the passenger vehicle, electric vehicle, and JLR businesses, and TML Commercial Vehicles, which will house the domestic CV operations.

Under the arrangement, Tata Motors will be renamed Tata Motors Passenger Vehicles Ltd, while TMLCV will be renamed Tata Motors Ltd, continuing the CV business. The company has also set October 10 as the record date for transferring ₹2,300 crore worth of non-convertible debentures (NCDs) to TMLCV.

Shareholders will receive shares of both companies in a 1:1 ratio, with Tata Motors’ share price adjusting on the ex-date, October 14, to reflect the new structure. “Investors are encouraged to avoid creating new leveraged positions in F&O or MTF until restrictions are lifted,” SAMCO Securities advised, adding that trading activities will resume normally once the process is complete.

YES Securities expects the demerger to “unlock value” for investors. “Fundamentally, pure play CV and PV verticals will be available for an investor to play auto cycles, which is currently aggregated into one. We think it is good value unlocking opportunity,” the brokerage said. It has a “BUY” rating on the stock in a staggered manner with a target price of ₹720, but cautioned that “volatility in F&O and MTF is likely ahead of the ex-date as price will go ex CV business.”

JLR restart: A sentiment lever

Tata Motors’ UK-based subsidiary Jaguar Land Rover began a phased restart of its manufacturing operations on October 8, after a cyberattack in early September disrupted production across global facilities.Khushi Mistry, Research Analyst at Bonanza, said the attack led to a 24 per cent drop in wholesale volumes and a 17 per cent decline in retail sales during the September quarter, with losses estimated at £50 million per week. “Full production is expected to resume post-Christmas due to the scale of restoration needed,” she said.YES Securities noted that “2QFY26 JLR dispatches (-24 per cent YoY and QoQ) witnessed the impact of production loss due to cyberattack since start of Sep’25. However, retail level impact was much lower. We think gradually volumes to improve in 3Q, 4Q which should support sentiments.”

How analysts view the fundamentals post demerger

Mistry of Bonanza said the demerger will lead to a sharper business focus for both entities. “TMLCV will enter the market as India’s largest commercial vehicle manufacturer with a 37.1 per cent market share,” she said, noting that the CV segment maintained a 12.2 per cent EBITDA margin in Q1FY26 despite revenue decline.

She added that the TMPV segment — comprising passenger vehicles, EVs, and JLR — “is expected to grow 8–10 per cent in H2FY26, aided by new launches, strong SUV positioning, and rising EV and CNG demand, which form 45 per cent of its PV segment revenue.”

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Technical setup

From a technical perspective, Tata Motors remains under pressure despite Friday’s rebound. The stock is trading below six of its eight key simple moving averages (5-day, 10-day, 20-day, 30-day, 100-day, and 200-day), while it holds above its 50-day and 150-day SMAs. The RSI stands at 45, indicating neutral momentum, while the MACD at 0.1 remains above the centre line but below the signal line.

Ajit Mishra, SVP, Research at Religare Broking, said the stock is “facing resistance from the 200-day moving average positioned around ₹720, which has repeatedly capped its upside attempts.” He said, “Sustained trade below ₹670 may trigger further correction toward ₹640–625 levels. Conversely, a decisive close above ₹720 could revive bullish momentum, opening the path toward ₹750–770.”

Drumil Vithlani, Technical Analyst at Bonanza, observed that the stock “has seen a sharp correction of -4.89 per cent this week, indicating selling pressure ahead of the event. It is trading below the 20-week EMA (₹688.46), which is now acting as resistance.” He recommends investors hold existing positions and “avoid fresh entry until clarity post-event.”

In contrast, Hitesh Tailor, Technical Research Analyst at Choice Broking, sees a bullish setup forming and noted the stock “is forming an ascending triangle pattern on the weekly chart — a bullish setup often preceding a breakout.” He added, “A decisive move above ₹715 could open the path for a rally toward ₹775.”

What’s next for investors?

With the record date just days away, the market’s focus is split between Tata Motors’ demerger-led value unlocking and short-term trading volatility. YES Securities remains positive in the long term, while Bonanza analysts recommend caution until clarity emerges post-listing.

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As JLR’s production ramps up and the demerger takes effect, investors will soon see whether Tata Motors’ split drives renewed momentum, or if the stock idles until both engines start firing again.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)