Many investors might have been left puzzled this morning as Tata Motors share price tanked nearly 40% within an hour of trade. From its 52-week high of Rs 940, the stock slipped sharply to around Rs 376, sparking confusion and concern across trading platforms. In afternoon trade it has recovered significant ground and is now trading up 2%.
But here is the catch. This fall is not a market panic or due to any fundamental trigger. It is a technical adjustment linked to Tata Motors long-awaited demerger.
Why Tata Motors shares are down today
The sharp decline in Tata Motors share price comes as the company’s commercial vehicle (CV) business officially separates from its main entity.
The split will be effective from October 14. This marks the record date for the demerger, when shareholders become eligible to receive shares in the new unit – TML Commercial Vehicles Limited (TMLCV).
To understand it more simple, Tata Motors has now split into two independent companies. This include:
Tata Motors Passenger Vehicles (TMPVL) – This will include passenger vehicles, electric vehicles, and Jaguar Land Rover.
TML Commercial Vehicles (TMLCV) – This will handle the commercial vehicle division.
The big adjustment behind the fall
The near 40% fall you are seeing is not a real loss. This is just a stock price adjusting for the demerger. Since the commercial vehicle business is being carved out, the current Tata Motors share price now reflects only the passenger vehicle business.
So, while the stock looks like it has fallen sharply, investors are actually getting one share of TMLCV for every one share they hold in Tata Motors. The total combined value, once both entities are listed, will balance out.
Why investors should not panic
This is not the first time a company’s stock price has seen a big move after a demerger. Such adjustments are standard practice in the market, as the value gets redistributed between the parent and the newly listed entity.
Tata Motors shareholders still hold their investment value. It is just split between two businesses now. The TMLCV shares are expected to be listed on the BSE and NSE in November, restoring the full value of the holding.