Tata Motors Demerger: Why the Stock Fell 40%

Tata Motors’ shares saw a sharp fall of nearly 40% during a special pre-open trading session, opening around ₹400 against the previous day’s close of ₹660.75. The fall is not due to any fundamental weakness in the company but is a normal market adjustment following the demerger of its commercial vehicle (CV) business.

Under the demerger plan, every Tata Motors shareholder will receive one share of Tata Motors Commercial Vehicles Limited (TMLCV) for each share held in Tata Motors as of October 14, 2025, which was the record date. This means investors will continue to hold an equal stake in both the passenger and commercial vehicle businesses after the split.

After the restructuring, Tata Motors Limited has been renamed Tata Motors Passenger Vehicles Limited (TMPV). This entity will manage the passenger vehicle and electric vehicle (EV) segments, including investments in Jaguar Land Rover (JLR). The commercial vehicle business has been transferred to Tata Motors Commercial Vehicles Limited (TMLCV), which will eventually take on the name Tata Motors Limited once all regulatory approvals are completed.

In its latest filing, Tata Motors informed that the Ministry of Corporate Affairs (MCA) has issued a new certificate of incorporation, confirming the name change. The company is also working with stock exchanges to update its name on their platforms and official records. Once the process is complete, both Tata Motors Passenger Vehicles Limited and Tata Motors Commercial Vehicles Limited will exist as independent listed entities.

At present, shares of TMLCV are not yet listed for trading. The process of listing and trading is expected to be completed in four to six weeks from now, likely around mid-November 2025, after taking the necessary approvals from the stock exchanges. This short-term suspension of trading in TMLCV shares is a standard procedure between the allotment of new shares and their listing on the market.

The almost 40% decline in the share price of Tata Motors is a technical adjustment to offset the demerger of the commercial vehicle business from the parent company. The present listed stock reflects just the worth of the passenger and electric vehicle businesses, stripping off the CV business segment. Once TMLCV shares are listed and start trading, the combined market value of both companies is expected to align closely with Tata Motors’ total valuation before the demerger.

This restructuring move is part of Tata Motors’ broader strategy to create focused, independent businesses with greater operational flexibility. By separating the CV and PV segments, the company aims to enhance growth opportunities, strengthen decision-making, and improve transparency for investors.

In short, the decline in share price does not indicate any financial loss to shareholders. It is a normal market reaction to the split. Investors will soon hold two distinct companies — one focusing on passenger and electric vehicles, and the other specialising in commercial vehicles — both carrying the legacy and strength of the Tata Motors brand.

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