Tata Motors split: How will passive funds respond to CV arm demerger?

As investors await the listing of the newly carved out Tata Motors' commercial vehicles (CV) arm, all eyes will be on how passive funds will react once the shares of the new entity begin trading on bourses. 

 

The already listed Tata Motors stock will represent the passenger vehicle (PV) arm, which includes the electric vehicle (EV) business and the company’s stake in Jaguar Land Rover (JLR). The stock now trades under the name Tata Motors PV (TMPV).

 

Under the approved demerger scheme, the commercial vehicles arm will have the name Tata Motors, which is expected to be listed soon. Tata Motors' commercial vehicle business comprises trucks, buses, and associated operations. 

 

The demerger scheme became effective on October 1, 2025 and October 14, 2025 was the record date to determine eligible shareholders entitled to receive shares in the newly formed entity. The company expects the listing of the new entity within 45-60 days from the date of submission of the requisite applications to the exchanges.  ALSO READ | Tata Motors demerger: Key things every investors should know before listing

How will passive funds react?

Nuvama Institutional Equities does not expect TMPV business to be excluded from the Nifty 50 and Sensex in their respective reviews. The CV business, however, is expected to be removed from the indices a few days after listing, typically three trading sessions.

 

Nuvama said two low-probability scenarios could still lead to TMPV exclusion from the Nifty 50. A sharp fall of over 40 per cent on October 13, 2025, or a 45-50 per cent decline on the record date, October 14, 2025, assuming 75 per cent of the current market capitalisation. This, however, did not happen on the bourses. 

 

For the Sensex, Nuvama noted that the exclusion threshold is lower than for the Nifty 50. A correction of over 20 per cent either on October 13, 2025, or on the record date, October 14, 2025, could make Tata Motors’ Sensex eligibility vulnerable following the demerger. This, too, failed to happen.   ALSO READ | When can investors start trading Tata Motors CV shares? Listing update 

With regards to the MSCI & FTSE Indices, the brokerage said that TMPV will be maintained in the indices with revised free float market-capitilsation. It added that the they also do not expect the demerged CV entity to be deleted from MSCI or FTSE indices.

 

"Given that the Tata Motors demerged entity is expected to have a substantially higher market capitalisation of $7.5 billion significantly exceeding both precedents - we believe it is well-positioned to meet the relevant index inclusion criteria for both MSCI and FTSE, making retention the more likely outcome."