In a significant corporate restructuring, Tata Motors has successfully completed its demerger, resulting in the separate listing of its commercial vehicles business on Indian stock exchanges. The landmark event, which took effect on October 1, marks the culmination of a strategic move to unlock value for shareholders.
Strong Market Debut for Commercial Vehicles Business
Tata Motors Commercial Vehicles shares made an impressive debut on Wednesday, listing at ₹335 per share on the National Stock Exchange. This represented a substantial premium of 28.48% over the discovered price of ₹260.75 per share. On the Bombay Stock Exchange, the stock, trading under the ticker symbol 'TMCVL', listed at ₹330.25 apiece, reflecting a 26.09% premium.
More than 368 crore equity shares with a face value of ₹2 each were admitted to trading in the 'T' Group of Securities. According to BSE guidelines, the stock will remain in the trade-for-trade segment for the initial 10 trading sessions to facilitate smooth price discovery and market stability.
Demerger Creates Two Distinct Entities
The demerger scheme has effectively split Tata Motors into two separately listed companies. Tata Motors Passenger Vehicles Ltd (TMPVL) now houses the prestigious Jaguar Land Rover (JLR) brands and the electric vehicle business, while Tata Motors Ltd (TMCV) comprises the commercial vehicles operations.
At Wednesday's peak trading levels, TMPVL reached ₹411.35 while TMCVL touched ₹346.75, translating to a combined value of approximately ₹758.10 per share. This represents a nearly 15% increase compared to Tata Motors' pre-demerger closing price of ₹660.75. The combined market capitalization of both entities crossed the remarkable milestone of ₹2.7 lakh crore following the listing.
Implications for Stock Indices and Passive Funds
The demerger has immediate consequences for major indices, particularly the Nifty 50. The previously merged Tata Motors entity was a Nifty 50 constituent, and post-demerger, both TMPVL and TMCV have been listed separately. This development has temporarily increased the Nifty 50 constituent count to 51 until index rebalancing is completed.
As per NSE's revised demerger rules, Tata Motors Passenger Vehicles will retain its position in the Nifty 50, while Tata Motors Commercial Vehicles shares will be included at a constant price for a few sessions before eventual exclusion. This methodology aims to minimize disruption during the transition period.
For passive index funds and exchange-traded funds (ETFs), the listing necessitates portfolio adjustments to reflect the revised index composition. Funds tracking affected indices are required to realign their holdings on the listing day, either retaining both Tata Motors entities if they qualify for inclusion or divesting the non-eligible stock according to index methodology.
The long-term eligibility of Tata Motors Commercial Vehicles for inclusion in major indices like Nifty 50 will depend on whether it meets the index's criteria regarding market capitalization, free-float, and trading liquidity during subsequent reviews.
On Wednesday's closing, Tata Motors share price settled 0.79% lower at ₹327.65, while Tata Motors Passenger Vehicles share price ended 1.28% lower at ₹402.30 on the BSE, indicating initial market adjustments following the historic corporate restructuring.
