Tata Motors stock may face near-term volatility post demerger: Analysts

Analysts expect Tata Motors' stock to face near-term volatility after the PV-CV demerger, with JLR's production resumption and festive demand outlook key monitorables

The demerger of Tata Motors’ commercial and passenger vehicle segments — taking effect on October 1 — may lead to increased stock volatility in the near term, according to analysts.

 

On Wednesday, the Tata Motors stock was up 5.54 per cent on the BSE, ending at ₹718.15.

With this move, two separate listed entities will be created. 

The commercial-vehicle (CV) business will move to Tata Motors Commercial Vehicles (TMLCV) while the passenger-vehicle (PV) business, including the electric-vehicle (EV) and JLR businesses, will remain with Tata Motors. 

“This demerger will help us better capitalise on market opportunities by enhancing focus and agility,” N Chandrasekaran, chairman, Tata Motors, had said. 

The share-entitlement ratio will be 1:1, meaning Tata Motors shareholders will hold the same proportion in both companies, keeping overall ownership unchanged. JM Financial said Tata Motors was set to undergo a strategic demerger with a tentative record date of October 14. 

“(After) that date, the CV segment will be carved out of the listed entity (Tata Motors Ltd), which may lead to increased stock volatility, primarily driven by the rebalancing of the PV-only valuation,” the analysts said. 

The newly formed CV entity is expected to be listed by early November, approximately 30 days after getting regulatory approvals (pending the completion of some formalities). After the listing of the CV business, it will be renamed Tata Motors, while the PV business will operate under the name Tata Motors Passenger Vehicles  (TMPV). 

Moreover, a key monitorable is how Jaguar Land Rover handles the resumption of production after the cyber-attack it faced on August 31. 

JM Financial analysts said while demand was stable in the United States (US), the United Kingdom (UK), and China, liquidity will be affected. 

On CVs, rationalisation in goods and services tax (GST) is likely to benefit the smaller segments where buyers don’t claim input-tax-credit (ITC), and JM Financial noted double-digit growth in the second half of FY26 was likely aided by festival demand and the GST cut. 

Nomura analysts who attended the recent analyst meet with the company said the management expected GST reduction to support CV demand because of trucks becoming more affordable and increase in freight demand. 

Nomura said: “In the longer term, management expects the industry to grow at 1-1.5x of real GDP or around 6-8 per cent year-on-year. Tata Motors’ PV division aims to achieve double-digit Ebitda (earnings before interest, tax, depreciation, and amortisation) margins in the long term, helped by operating leverage, a better mix and planned price hikes in January 2026.”

Meanwhile, the JLR cyber-attack was not covered by insurance (no such coverage exists for incidents of this nature).   

JM Financial said: “While sales have resumed, and production restarted in a phased manner from September 25, the company noted that retail and wholesale volumes were not materially impacted due to sufficient inventory levels. However, the attack will affect JLR’s liquidity, though the management stated it is currently difficult to quantify the exact impact.” 

The focus remains on how quickly JLR can scale up production. On demand the outlook remains positive: Demand in the US is resilient with the tariff uncertainty resolved, and the UK maintains similar momentum. And demand in China is stable although JLR will absorb near-term cost pressure due to reduction in the luxury tax threshold. 

Nuvama analysts pointed out that the buyout of the Iveco (ex-defence) for 3.8 billion euros would be completed by April and the acquisition will be earnings per share-accretive initially, and would become meaningfully accretive in two years.

 

Collaboration with the Tata Motors-CV business is likely in areas of platform sharing, research & development (R&D), and procurement.

 

Nomura pointed out there were synergies, especially on costs. For instance, the supply chain can increase sourcing from Asia and there are overlapping R&D expenses, which can be reduced and which can help address niche segments such as deep mining tippers in India.