Tata Motors Shares See Dramatic Drop: A Closer Look at the Demerger Behind the Slide

Tata Motors shares witnessed a significant drop of nearly 40% in early trading on Tuesday, sparking concern among investors. However, this sharp decline is not due to any fundamental weakness or market panic but is instead a technical adjustment resulting from the company's demerger plans.

The demerger involves splitting Tata Motors into two distinct entities: **Tata Motors Passenger Vehicles Limited (TMPVL)** and **TML Commercial Vehicles Limited (TMLCV)**. TMPVL will focus on passenger vehicles, electric vehicles, and Jaguar Land Rover, while TMLCV will handle the commercial vehicle division. As of October 14, the record date for the demerger, shareholders will receive shares in TMLCV on a 1:1 basis for their existing Tata Motors shares.

The stock price adjustment reflects the fact that the current Tata Motors share price now only accounts for the passenger vehicle business. Once both entities are listed, the combined value of the shares is expected to balance out, meaning investors are essentially not losing value but rearranging their holdings across two separate entities.

Despite the initial drop, Tata Motors shares have shown some recovery, trading up later in the day. The Ministry of Corporate Affairs has approved the name change of Tata Motors to Tata Motors Passenger Vehicles Limited, though the trading symbol remains unchanged.