The demerger decision is expected to create separate entities for Tata Motors’ passenger and commercial vehicle businesses, unlocking value for shareholders. Analysts from various brokerages are positive about the move, anticipating improved focus, operational efficiencies, and strategic flexibility for both businesses post-demerger. The market responded positively to this announcement, propelling Tata Motors’ stock to a 52-week high.
Tata Motors’ decision to demerge its passenger vehicle and commercial vehicle businesses is expected to create better value for the company and investors, analysts have said
Tata Motors’ shares rose by 4 percent, reaching a 52-week high of Rs 1,027 on March 5. This surge followed the company’s announcement of splitting its passenger and commercial vehicle businesses, a move that received positive responses from both brokerages and investors. JP Morgan assigned an “overweight” rating to the stock with a price target of Rs 1,000, indicating a 1.2 percent upside from the previous close of Rs 988. Morgan Stanley expressed confidence in the demerger, stating it reflects Tata Motors’ belief in the self-sustainability of the personal vehicle (PV) segment and could lead to enhanced value creation. The brokerage set a target price of Rs 1,013, emphasizing potential synergies in the electric vehicle (EV) sector, especially between Jaguar and Land Rover and the domestic PV business.
Nomura has issued a “buy” call with a target price of Rs 1,057, representing a 7 percent upside from the current market price. The brokerage believes that in the medium term, the split businesses will have the freedom to pursue their respective strategies more effectively. Nomura specifically sees significant value creation potential in the passenger vehicle (PV) business over the next few years, noting its remarkable turnaround since 2020. The demerger is viewed positively for the stock, and a favorable reaction is expected in the coming weeks, potentially attracting increased investments. A research analyst, speaking anonymously, emphasized that investors willing to assign higher valuations to the electric vehicle (EV) sector would likely find the stock more enticing post-demerger.
However, not all brokerages share the same level of optimism. Investec has issued a “hold” call on the stock and anticipates no substantial impact on valuations. The demerger is seen as creating a distinct play for commercial vehicles (CV) and a global play for passenger vehicles (PV).
