Tata Motors demerger: Tata Motors Passenger Vehicles (TMPVL) shares, the listed arm of Tata Motors following the recent demerger of its commercial vehicles business, witnessed a setback on Thursday, October 16, as BofA Securities downgraded the stock to ‘Underperform’.
According to a CNBC-TV18 report, BofA Securities has a target price of ₹375, which is lower than its last closing price of ₹390.75. However, Tata Motors’ share price, after falling for two days, rebounded in trade today, rising almost 2%.
BofA joined a list of other brokerages that expressed concerns around the PV business, given JLR’s significant contribution to its revenues.
BofA downgrades Tata Motors on JLR woes
According to BofA, the luxury car subsidiary will weigh on the Tata Motors Passenger Vehicle stock. JLR forms 45% of BofA’s overall price target for the passenger vehicle division, as per the report.
The existing share of Tata Motors houses only the PV business – both JLR and the domestic PV (ICE+EV) business, along with the investment in Tata Technologies Ltd. Tata Motors stock will be subsequently renamed as Tata Motors Passenger Vehicle.
Cybersecurity concerns, worries over US tariffs, and a slowdown in the European Union and China could lead JLR to lower its guidance once again, according to BofA Securities. The brokerage also noted that the company’s balance sheet may experience another increase in debt.
While the India Passenger Vehicles business is showing improvement in market share, its margins still require enhancement, the BofA report added, as quoted by CNBC TV-18.
PV vs CV business: Which one do analysts prefer?
Ambit Institutional Equities, in a report released earlier this week, stated that despite a positive long-term outlook for JLR/PV, challenges from US tariffs, weak macroeconomic conditions, China’s luxury tax, a cyberattack, and slow EV adoption would weigh on near-term performance.
Meanwhile, for the CV business, it sees immediate value in unlocking given its market leadership, industry-matching margin, and healthy cash flow generation. Global reach and synergies from the Iveco acquisition would provide re-rating upside, opined the brokerage.
Similarly, SBI Securities said that Tata Motors Passenger Vehicle, the listed entity, remains exposed to the global passenger vehicle industry. “JLR contributes 87% to the company’s revenue as of FY25, while the domestic business revenue share is at only 13%. JLR is currently facing its own set of challenges on multiple fronts, from the production disruption due to the cyberattack to the intense competitive intensity in China to overall consumer slowdown across North America and Europe,” it opined.
Any potential upside in Tata Motors PV stock is dependent on the recovery in JLR volumes and improvement in profitability, it opined.
Tata Motors demerger details
The record date for the Tata Motors demerger was fixed as October 14. Following the demerger, the stock now represents only the passenger vehicle business, while the CV business will list separately on the exchanges sometime in November.
As per the demerger plan, shareholders holding Tata Motors shares on the record date are entitled to receive one share of the newly demerged Tata Motors Commercial Vehicle (TMCVL) for every share they own, with the demerger ratio set at 1:1.
In the one-hour pre-market session on Tuesday, Tata Motors PV shares traded at approximately ₹400. Compared to Monday’s closing price of ₹660.75, this suggests an implied valuation of ₹260.75 per TMCVL share.
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