Tata Motors shareholders are marking an important day today, October 14, as the record date for the company’s much-anticipated demerger.
From today onwards, Tata Motors shares will trade ex-commercial vehicle (CV) business, following the demerger scheme that became effective on October 1.
Let’s take a look at what investors need to know –
Tata Motors demerger: What the demerger means
Under the scheme, Tata Motors’ commercial vehicle division is being separated into a new entity called TML Commercial Vehicles Limited (TMLCV).
The existing passenger vehicle business, which includes domestic passenger cars and Jaguar Land Rover, will continue under Tata Motors, which will now be renamed Tata Motors Passenger Vehicles (TMPVL).
Shares of TMLCV are expected to list on both BSE and NSE in November.
Tata Motors demerger: Importance of record date
The record date of October 14, is one of the key factor for determining which shareholders are eligible to receive shares in the new commercial vehicle entity.
According to the entitlement ratio, only those holding Tata Motors shares as of today will get TMLCV shares.
Tata Motors demerger: Share entitlement ratio
Shareholders will receive one equity share in TMLCV for every one share of Tata Motors held on the record date. Both shares have a face value of Rs 2.
Now, this 1:1 ratio simplifies the allocation process.
Furthermore, this process ensures that every investor in Tata Motors gets an equal stake in the newly demerged CV unit.
Tata Motors demerger: How share prices are adjusted
The price of Tata Motors’ ex-CV shares will be adjusted based on the difference between the closing price of Tata Motors on October 13 and the opening price of TMLCV shares during a special pre-open session between 9 -10 am today.
Tata Motors demerger: What each unit now holds
The passenger vehicle unit (TMPVL) will include the domestic PV business, Jaguar Land Rover, Tata Sons stake, Tata Steel, Tata Technologies, and other investments.
The commercial vehicle unit (TMLCV) will comprise the domestic CV business, the Iveco business, and the stake held in Tata Capital.