Demerger impact: Tata Motors passenger vehicle unit valued at ₹1.45 trn

Don't want to miss the best from Business Standard?

The passenger vehicle (PV) business of Tata Motors, which also includes the electric vehicle and Jaguar Land Rover businesses, post-demerger is now valued at ₹1.45 trillion, almost 40 per cent below the pre-merger valuation, while its commercial vehicle (CV) entity, expected to list separately in about a month, is likely to have similar valuations.

 

Post-demerger, global financial services group Nomura set a target price of ₹365 for the CV business and ₹367 for the PV entity.

 

At close, Tata Motors (PV) shares were down 0.88 per cent at ₹395.5 per share on BSE. In comparison. Sensex ended 0.36 per cent lower at 82,029.98.

 

The PV unit also consists of Tata Sons (unlisted), Tata Steel and Tata Technology along with other investments. 

 

Meanwhile, the CV entity will consist of the domestic CV business, Iveco business (acquisition to be completed in 2026) and the stake in Tata Capital.

 

Nomura expects momentum in the PV business to strengthen following the goods and services tax (GST) cut that came into effect on September 22, supported by festival and pent-up demand. Premiumisation remains a key theme, with robust bookings for compact and micro SUVs, such as Punch and Nexon. The newly unveiled Harrier electric vehicle has also drawn an encouraging initial response, with bookings surpassing early expectations.

 

For CVs, management expects industry growth of around 5 per cent in FY26F (implying circa 10 per cent growth in H2 FY26) aided by GST reduction. The Iveco acquisition is financed initially with €3.8 billion of debt and later 40 per cent equity. Nomura hasn’t factored in any value creation from this deal yet. The company guides to a 5 per cent revenue compound annual growth rate and earnings before interest and taxes margin improvement from 5.4 per cent to 7.5 per cent over 2024–28E.

 

The demerger will also have implications for the firm when it comes to its position in indices. Nuvama Institutional Equities expect the CV business to get removed from the Nifty and the Sensex, while the PV unit will continue to be part of both indices.