Tata Motors Demerger Sails Through: Shares Gain over 4.5% Amidst Strategic Split and FTA Boost

Tata Motors' ambitious plan to demerge its commercial vehicle (CV) and passenger vehicle (PV) businesses has received an overwhelming mandate from its shareholders, paving the way for the creation of two distinct listed entities. The near-unanimous approval, with 99.99% of shareholders voting in favour, sent the company's stock climbing, emerging as the top performer on the Nifty 50 in early trade on Wednesday. As of 13:45 PM, the company’s share was trading at ₹678.40, with an increase of ₹4.66%.

Green Light for Dual Focus

The approved demerger will see Tata Motors bifurcate its operations. One entity will concentrate solely on its commercial vehicle portfolio, while the other will house the passenger vehicle business, including the premium UK-based brand, Jaguar Land Rover (JLR). This strategic separation, initially proposed in March last year, is aimed at allowing each segment to pursue independent growth trajectories. Under the terms of the demerger, existing shareholders are set to receive one share of the demerged company for each share they currently hold in Tata Motors.

JLR Set to Benefit from India-UK Trade Deal

Adding further positive impetus to the market sentiment was the announcement of the India-UK Free Trade Agreement (FTA), signed on Tuesday evening. This agreement includes provisions for a significant reduction in import tariffs on premium cars destined for India. Tariffs, previously exceeding 100%, are set to drop to 10% under a quota system. While the specific quota limits remain undisclosed, this development is widely perceived as a major positive for JLR, providing increased access to the lucrative Indian luxury car market.

Share Performance in Context

Following the demerger approval and the FTA news, Tata Motors' share price gained nearly 4%. Looking at recent performance, the stock has shown a modest 3% gain over the last five days and increased 15% in the past month. However, the longer-term picture presents challenges, with the stock experiencing an 18% drop over the past six months and a 32% decline year-on-year. The year-to-date performance also shows a decline of 11%. Despite this volatility, Tata Motors maintains a substantial market capitalisation of ₹ 2.46 lakh crore. The stock's 52-week range spans from a high of ₹ 1,179.00 to a low of ₹535.75.

The shareholder nod to the demerger alongside favourable trade developments marks a pivotal moment for Tata Motors as it aims to unlock potential value by creating focused business units

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