Understanding Tata Motors' 40% Share Price Drop: A Technical Adjustment Due to Demerger Process

Tata Motors has clarified that the significant share price decline represents a technical adjustment following corporate restructuring.

On Tuesday, Tata Motors shares experienced a dramatic decline of approximately 40 percent as trading began on an ex-demerger basis. This substantial drop follows the company's strategic decision to separate its commercial vehicle operations from its passenger vehicle business.

The stock opened at Rs 399, marking a nearly 40 percent reduction from the previous day's closing price of Rs 660.90, resulting in a company valuation of approximately Rs 1.45 lakh crore.

The company has emphasized that this price movement reflects a technical adjustment resulting from the business separation rather than any fundamental issue. According to the official explanation, the demerger process is responsible for the apparent price decline.

Under the terms of the restructuring plan, shareholders registered as of October 14 will receive one share of Tata Motors Commercial Vehicles Limited (TMLCV) for each Tata Motors share they owned. This allocation demonstrates that the share price reduction represents the business separation and not an actual loss in investor value.

In an official statement referenced by Upstox, Tata Motors announced: "The Company has fixed Tuesday, October 14, 2025, as the 'Record Date' to ascertain eligible shareholders of the Company who shall be issued and allotted 1 (one) share (face value of Rs 2/- each fully paid up) in TMLCV for every 1 (one) share (face value of Rs 2/- each fully paid up) held in TML by them as on the Record Date (as per Share Entitlement Ratio under the Scheme)."

Following this restructuring, Tata Motors will continue to be listed under a new identity as Tata Motors Passenger Vehicles Limited (TMPVL), overseeing the passenger vehicle segment, electric vehicle operations, and the Jaguar Land Rover (JLR) business.

Meanwhile, the newly established Tata Motors Commercial Vehicles Limited (TMLCV) will subsequently be rebranded as Tata Motors Limited once all regulatory approvals are completed.

Currently, TMLCV shares are not available for trading as they await listing approval from the exchanges, a process typically requiring between 45 and 60 days.

The company's previous derivative contracts concluded on Monday, with new F&O contracts for TMPVL beginning to trade on Tuesday. TMLCV will not be immediately available in the F&O segment.

Investors should understand that this situation does not warrant concern. For shareholders who held shares on the record date, the allocation is straightforward: they will receive 100 shares of Tata Motors Passenger Vehicles Limited (formerly Tata Motors) and 100 shares of the newly listed Tata Motors Commercial Vehicles Limited for every 100 shares previously held.

According to media reports, TMLCV shares are expected to be listed within four to six weeks, with mid-November being the likely timeframe.