Ratan Tata's 27 year-old vision comes true as Tata Motors demerger completes with trucks business listing
Wednesday's listing of bus and truck maker Tata Motors marks the demerger of the erstwhile company's passenger and commercial vehicles businesses. The market cap of the two entities adds up to ₹2.7 trillion, up 12.5% from a pre-split ₹2.4 trillion. Read how Ratan Tata foresaw this back in 1998.
New Delhi/Mumbai: More than a quarter of a century after the late Ratan Tata first hinted at Tata Motors splitting its operations into two companies, one making cars and the other trucks and buses, the automaker has finally consummated the demerger.
Tata Motors Ltd, formerly known as Tata Motors Commercial Vehicles, shares started trading on the exchanges on Wednesday after the trucks and bus business was demerged from Tata Motors Passenger Vehicles Ltd, which now houses the car business including British unit Jaguar Land Rover.
The shares of the commercial vehicle company, which will also house recently acquired Iveco, closed at a 27% premium to the discovered price at ₹330 each on the NSE on Wednesday.
The passenger vehicle firm, which started trading on 14 October, closed 1.3% down from Tuesday at ₹404.55. Comparatively, the Nifty Auto index gained 1.2%.
At these prices Tata Motors has a market capitalization of about ₹1.2 trillion and that of Tata Motors Passengers Vehicles is around ₹1.5 trillion. Before the demerger, the unsplit Tata Motors was valued at ₹2.4 trillion on 13 October—marking a 12.5% jump in post-demerger value of the entities.
Ratan Tata had foreseen such unlocking of value 27 years ago. “What may well happen in the future is we may split the company into two business units," the former chairperson of the Tata Group said in an interview to the Time magazine in 1998.
Sixty years old then, he was speaking after Tata Motors, then known as Telco, had made its most ambitious gamble with a $400 million investment in developing a small car ground up: the Tata Indica.
Superior metrics
N Chandrasekaran, the chairperson of Tata Sons and Tata Motors, acknowledged that the split wasn't easy and took several years of efforts to implement.
“It was clear to me 8-9 years ago that these companies need to have different paths," he said, speaking at a listing ceremony hosted on the BSE's iconic trading floor in South Mumbai. “And they have the right to pursue different ambitions."
Before splitting the auto major, the company had to ensure that each of the two halves was ready for the split, he said. The commercial vehicles business was always profitable, and its cashflows funded the investments in the passenger vehicles business.
Now, the group has two strong and independent auto companies, he said.
The financial metrics of Tata Motors Ltd, the newly-listed commercial vehicles business, will be superior, Chandrasekaran said, bringing smart returns on capital invested.
This will help the company make bold moves, including the acquisition of Italian trucks maker Iveco. The acquisition should be completed in a few months, he said, pending all regulatory approvals.
Tata Motors started as Tata Engineering and Locomotive Company, better known as Telco for long, over eight decades ago, making trucks. It was renamed Tata Motors in 2003. The commercial vehicles business has retained the name today.
Close to Tata's heart
The passenger vehicles business, which was meaningfully ramped up under the leadership of Ratan Tata, has finally become an independent company as the late corporate leader had envisioned nearly three decades ago.
The passenger vehicle business accounted for over 82% of Tata Motors’ ₹4.4 trillion revenue in financial year 2025, while the commercial vehicle unit contributed roughly 18% at ₹75,055 crore.
The Tata Motors board decided in August 2024 that separating the businesses would drive better strategic focus and returns for shareholders, a plan later approved by the National Company Law Tribunal.
For Chandrasekaran, delivering success for the automobile business has been a key goal by his own admission.
The chairperson spoke of Ratan Tata, the group's chairman-emeritus who died last October, during the annual general meeting of Tata Motors in June this year.
“I had the opportunity to constantly share updates with Ratan Tata about the business in the last few years. While we all miss him, I want you to know that he would have been very proud of the turnaround of the business as Tata Motors was very close to his heart," Chandrasekaran told shareholders.
As per a PTI report from April 2018, Ratan Tata had expressed pain at the fact that Tata Motors was seen as a failed company.
“It hurt me that we lost market share in the last four to five years and we became the company that the country looked at as a failing company," Tata is reported to have said.
Plan for CV
Tata Motors commercial vehicle business, which is the country’s largest seller of trucks and buses, has twin challenges of navigating a tough domestic market and integrating the new Iveco business which it acquired for $4.4 billion in July.
The Iveco acquisition, for which it has taken a bridge loan, is expected to be completed by April 2026. The combined Tata Motors-Iveco entity is expected to sell over 540,000 units annually and generate more than $25 billion in revenue.
Domestically, the company has to deal with the challenge of a stagnant commercial vehicle market which is expected to pick up from the second half. Between April and September this year, Tata Motors's total CV sales declined 0.9% to 156,973, as per Society of Indian Automobile Manufacturers data.
Analysts note that after the demerger, both the passenger vehicle and commercial vehicle business can look to unlock synergies.
“The CV business can concentrate on improving profitability through scale, electrification, and exploring R&D synergies (with the IVECO acquisition serving as a recent example)," analysts at Ambit Capital, Amey Dargude, Raghvendra Goyal and Viraj Sanghvi, wrote in a 14 October note.
“The PV (including EV) and JLR businesses will focus on premiumization, technology collaborations, and strengthening their global brand presence," the analysts added.
Both the companies will also have separate managements now with Tata Motors CV being led by Girish Wagh while Shailesh Chandra heads the passenger vehicle business.
“The stock is likely to trade between ₹320-470 post listing. The domestic CV industry is likely to start recovering in 2HFY26 on back of tailwinds such as GST rate reduction on CVs from 28% to 18%, replacement demand and pickup in the infrastructure, construction and logistics sectors," SBI Securities analysts Sudeep Shah and Sunny Agrawal wrote in a 13 October note.
“The integration of Iveco Group NV, most likely in FY27 will expose the company to the global CV cycle."
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