Tata Motors CV vs Tata Motors PV: Which stock could re-rate after demerger?

Tata Motors demerger: While analysts believe the split will provide a clear roadmap for Tata Motors' growth, investors are wondering which stock -- Tata Motors PV or Tata Motors CV -- could be better?

Tata Motors demerger news: Share trading of Tata Motors' two separated entities -- Tata Motors passenger vehicles (Tata Motors PV), and Tata Motors commercial vehicles (Tata Motors Ltd) – may begin as soon as this month. 

 

While analysts believe the split will provide a clear roadmap for Tata Motors' growth, and unlock value for shareholders, investors have been wondering which stock of the conglomerate could be a better bet?

 

Tata Motors CV vs PV: Valuation and where to invest?

A special trading session, conducted on October 14, to ‘discover’ the price of both the entities valued Tata Motors PV stock at ₹400 per share and Tata Motors CV at ₹261. 

 

 

Analysts at SBI Securities, however, value the Passenger Vehicles entity, which includes Jaguar Land Rover (JLR) and the domestic electric vehicles (EV) business, in the range of ₹285–₹384 per share, lower than the current market price of ₹417. 

 

It estimates the value of the soon-to-be-listed CV arm at ₹320 and ₹470 per share, up to 80 per cent higher than the 'discovered' price. 

 

According to their report, JLR contributes nearly 87 per cent of the PV entity’s total revenue with the JLR division’s operating margins standing at 14.2 per cent at the end of the previous financial year (FY25). 

 

"Near-term challenges due to global demand moderation and competitive pressures in key markets, like China and Europe, may affect the operations of the PV business. In contrast, the domestic CV business' margins have improved from 7.4 per cent in FY23 to 11.7 per cent in FY25. It it, further, expected to benefit from a cyclical recovery in infrastructure and logistics demand from FY26 onward," it noted.

 

Notably, Tata Motors CV is set to acquire Iveco Group NV (ex of defence business). Its product portfolio consists of trucks, buses, powertrain (engines, drivelines, ePowertrains) and financial services. 

 

Iveco NV (ex-Defence) reported revenue of 14.1 billion euros in calendar year 2024 CY24) with an adjusted Ebitda margin of 6.3 per cent. While the transaction could close by April, 2026, subject to regulatory approvals, the acquired business of Iveco is expected to constitute 65-70 per cent of the combined revenue of TMLCV. 

 

  Analysts estimate the combined revenue to be 3x of the current revenue, providing a solid growth runway. 

 

Tata Motors will gain access to critical technologies especially in EV & alternate fuel powertrains as well as software solution offerings such as ADAS and SDV. 

 

"Although, the Ebitda margin profile is similar to the existing domestic business of TMLCV, Ebit margin for Iveco is lower than the existing domestic business, leading to margin dilution for the combined entity," said the SBI Securities report.

 

Tata Motors PV vs CV: Peer comparison

According to analysts, Tata Motors' demerger will pave the way for both businesses to pursue targeted strategies and capital allocation, setting the stage for a long-term value creation, aided by tailwinds such as GST rate cuts, infrastructure growth, and EV adoption.

 

"The split provides a clearer and focused investment proposition for investors. The PV entity is positioned to capitalise on high-growth EV and luxury segments via JLR, while the CV arm will benefit from its domestic dominance and the strategic acquisition of Iveco Group’s assets, which will expand its global footprint," pointed out Narender Singh, investment manager on smallcase, and founder of Growth Investing.

 

And though analysts see valuations of both the verticals compelling, compared to peers, they see the PV arm facing a tough EV competition.

 

For instance, Singh chalks out the PV entity’s implied valuation at ₹400 per share at current levels, translating into a price-to-earnings (P/E) of 7x.

 

"This is below than peers like Maruti Suzuki and Mahindra & Mahindra, who trade at P/E of 35x and 33x, respectively, signaling room for re-rating provided JLR's profitability improves and the domestic EV market grows," he said. 

 

The CV business, meanwhile, could list between ₹300 and ₹470, suggesting a likely higher value than the discovered price.

 

"At 13x EV/Ebitda, Tata Motors' CV business trades at a discount to Ashok Leyland (23x), suggesting room for multiple re-rating once its global integration with Iveco bears fruit," Singh added.

 

Vaqar Javed Khan, senior analyst (Fundamental) at Angel One, meanwhile, values Tata Motors' PV arm at ₹420 per share, and the CV arm at ₹310 per share, after factoring in a 20 per cent holding company discount. 

 

"To us, the CV business appears in-line with peers, valued at around 13x EV/Ebitda on FY26E earnings. The PV arm, however, may command higher multiples only if JLR's profitability sustains and the EV segment scales up," he said. 

Pramod Amthe, head of institutional equity research at InCred Capital, meanwhile, peg Tata Motors PV value at ₹386 per share, and Tata Motors CV value at ₹358 per share.   "Post demerger, we feel CV business gives interesting option to play the Indian economic recovery where Tata Motors' market share recovery could drive superior valuation. We prefer CV over PV as the latter business may face challenges from a slow and gradual recovery of JLR and increased competition from Hyundai and Maruti Suzuki India in the domestic market," he said.