Tata Motors demerger: Shares fall 7% in seven days. Will the restructuring lead to profits or more volatility?

Shares of Tata Motors fell 7% in seven sessions to touch Rs 679.05 on Monday after falling as much as 2% in intraday trade as investors braced for the company’s high-profile demerger. The automaker is separating its commercial and passenger car businesses this week, a move that is expected to “unlock value” for investors but has created near-term volatility in a stock that is already down nearly 11% through 2025.

On Thursday, October 9, Tata Motors said its Composite Scheme of Arrangement involving TML Commercial Vehicles Ltd (TMLCV) and Tata Motors Passenger Vehicles Ltd (TMPV) came into effect from October 1, following approval by the Mumbai Bench of the National Company Law Tribunal.

The company has set October 14 as the record date to determine whether shareholders are eligible to receive one fully paid share of TMLCV for each share in Tata Motors. Post-restructuring, Tata Motors will be rebranded as Tata Motors Passenger Vehicles Ltd, which will house its passenger car, electric vehicle and Jaguar Land Rover (JLR) businesses. TMLCV, renamed Tata Motors Ltd, will focus on domestic commercial vehicle operations. Shareholders will receive shares of both companies at a 1:1 ratio, with the share price adjusted at the ex-date to reflect the new structure.

Analysts weigh in on the demerger of Tata Motors

YES Securities expects the restructuring to “unlock value” for investors. “In principle, pure play CV and PV verticals will be available for an investor to play auto cycles, which are currently merged into one. We think this is a good opportunity to unlock value,” said the broker, who maintained a “buy” rating on the stock with a target price of Rs 720 in a staggered manner, while cautioning that “volatility in F&O and MTF is likely is before the ex date, as the price will go ex CV.” company.”

Khushi Mistry, research analyst at Bonanza, said the separation will sharpen the business focus for both entities. “TMLCV will enter the market as India’s largest commercial vehicle manufacturer with a market share of 37.1%,” she said. “TMPV, comprising passenger cars, EVs and JLR, is expected to grow 8-10% in the second half of FY26, aided by new launches, strong SUV positioning and rising demand for EVs and CNG, which account for 45% of PV segment revenue.”

JLR’s restart supports sentiment

Jaguar Land Rover, the British subsidiary of Tata Motors, began a phased restart of operations on October 8 after a cyber attack disrupted global production in early September. Mistry noted that the incident caused a 24% drop in wholesale volumes and a 17% drop in retail sales for the September quarter, with losses estimated at £50 million per week. Full production is expected to resume after Christmas. YES Securities said: “JLR Q2 2026 shipments (-24% YoY and QoQ) witnessed the impact of production loss due to cyber attack since early September. However, the impact at the retail level was much lower. We believe volumes will gradually improve in the third and fourth quarters, which should support sentiment.”

Technical picture

Technically, Tata Motors remains under pressure. The stock is trading below all eight major simple moving averages, while the RSI at 44.2 indicates neutral momentum. MACD at -1.1 strengthens the bearish trend.

Ajit Mishra, SVP, Research at Religare Broking, warned that “sustained trading below Rs 670 could trigger a further correction towards Rs 640-625 levels. Conversely, a decisive close above Rs 720 could revive bullish momentum, opening the way to Rs 750-770.”

Meanwhile, Hitesh Tailor, technical research analyst at Choice Broking, noted that a bullish setup was emerging. “The stock is forming an ascending triangle pattern on the weekly chart – a bullish setup that often precedes a breakout. A decisive move above Rs 715 could open the way for a rally towards Rs 775.”

Bonanza’s Drumil Vithlani advised to hold existing positions and “avoid new entry until clarity emerges post-event”, noting that the stock is trading below its 20-week EMA of Rs 688.46 and now acts as resistance.

What should investors pay attention to?

With the record date set for October 14, market attention is divided between the potential value released from the restructuring and short-term trading volatility. Analysts recommend being cautious with new positions, although long-term sentiment remains positive as JLR’s production increases and both entities settle into their respective businesses.

Also read | TCS and Tata Motors plummet to 42% from peak, wiping out more than Rs 4 lakh crore of Tata shares by 2025 amid boardroom turmoil

Investors will soon learn whether Tata Motors’ restructuring will bring renewed momentum, or whether the stock will remain stagnant until both engines start running again.

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