Tata Motors stock drops 40% after demerger news
TMLCV shares will remain non-tradable from allotment date until officially listed on the BSE and NSE.
Tata Motors Shares Plunge 40% After Commercial Vehicle Demerger Announcement
Shares of Tata Motors fell sharply during a special pre-open session on Monday, with the stock discovered at ₹400 per share, reflecting a decline of 39.5% (₹260.75 per share) from the previous closing. The drop comes as investors adjust to the demerger of Tata Motors’ commercial vehicle (CV) business, a long-anticipated corporate restructuring that will split the company into separate listed entities.
The decline is largely technical in nature, as share prices often adjust to account for newly created entities and the allocation of shares. Tata Motors clarified that the demerger process is part of its strategic plan to unlock value and streamline operations between its passenger vehicle, electric vehicle, and commercial vehicle businesses.
In an official statement, Tata Motors said, “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 one (1) share (face value of ₹2 each fully paid up) in TMLCV for every one (1) share (face value of ₹2 each fully paid up) held in TML by them as on the Record Date (as per Share Entitlement Ratio under the Scheme).”
This means that shareholders of Tata Motors as of October 14 will receive shares of the newly formed commercial vehicle entity, TMLCV, in a 1:1 ratio. However, these shares will not be immediately tradable. From the date of allotment until TMLCV’s official listing on the BSE and NSE, its shares will remain non-tradable, which is standard practice for demerged entities to ensure orderly market introduction.
Following the demerger, Tata Motors Limited will be renamed Tata Motors Passenger Vehicles Limited (TMPV) and will continue to operate its passenger vehicle business. This includes investments in electric vehicles (EVs) and the British luxury car maker Jaguar Land Rover (JLR). The restructuring allows TMPV to focus on passenger and EV markets, while separating the commercial vehicle business into a standalone entity.
The commercial vehicle business, meanwhile, will be listed under the name Tata Motors Limited (TML). While no official listing date has been confirmed, media reports suggest the listing could occur within four to six weeks, likely by mid-November 2025. Once listed, TML will carry the commercial vehicle operations and related investments, while TMPV will manage the passenger vehicle and EV segments, along with JLR.
Investors have been anticipating this move for months, and the sharp correction in Tata Motors shares reflects an adjustment in valuation rather than a negative outlook for the underlying businesses. In essence, the decline mirrors the technical distribution of value between TMPV and TML, allowing shareholders to hold proportional stakes in both entities.
Industry analysts suggest that the demerger could unlock significant long-term value for shareholders. By creating focused entities, management can pursue tailored strategies for different market segments. TMPV can now devote resources entirely to passenger vehicles and EV growth, while TML can strengthen its commercial vehicle offerings without being weighed down by unrelated operations.
“The demerger is a smart strategic move by Tata Motors,” said a senior market analyst. “It allows both entities to operate independently, attract targeted investments, and pursue growth without competing priorities. Short-term price adjustments are natural, but long-term, this could create substantial shareholder value.”
The commercial vehicle business is a core segment of Tata Motors, supplying trucks, buses, and other commercial vehicles domestically and internationally. TMPV, on the other hand, is positioned to accelerate EV adoption in India and globally through its JLR partnership. By separating the entities, the company aims to improve operational focus, enhance investor clarity, and streamline governance.
Shareholders should note that during this transitional period, TMLCV shares will not be available for trading until officially listed. Tata Motors’ passenger vehicle shares (TMPV) will continue to trade on the market, and investors can monitor developments on both the BSE and NSE. Analysts advise that long-term investors maintain a perspective beyond the initial price correction, focusing on growth potential and strategic clarity resulting from the demerger.
The restructuring represents one of India’s most significant automotive corporate moves in recent years, signaling Tata Motors’ commitment to modernization and specialization. While the initial market reaction has been sharp, the long-term implications are likely positive, as both TMPV and TML can pursue dedicated strategies tailored to their respective markets.
In conclusion, the 40% drop in Tata Motors shares on Monday reflects a natural market adjustment following the demerger announcement. Shareholders will soon receive shares in TMLCV, while TMPV continues to trade as a focused passenger vehicle and EV company. As the listing of TML approaches, investors will have the opportunity to participate in two distinct entities, each with specialized growth potential. The demerger underscores Tata Motors’ ambition to optimize operations, unlock value, and strengthen its position across India’s competitive automotive landscape.