Tata Motors shares breached the ₹1,000 mark on Tuesday after the company announced demerging its passenger and commercial vehicle businesses. With this push, the company has once again edged out Maruti Suzuki as India’s biggest auto company in terms of market capitalisation.
The Investment: If you invested ₹1,00,000 in Tata Motors shares in January 2008, when — the similarly priced Tata Nano was launched — the shares were trading at around ₹128. You would have bought 779 shares with that money. Fast forward to March 6, 2024, those 779 shares would be worth around ₹7 lakh as each share now trades at around ₹1,021.
The Demerger: The Tata Group company revealed its intentions to demerge into two distinct entities on March 4, 2024. According to the proposed demerger scheme, shareholders of Tata Motors will receive identical shareholding in the demerged entities, which means for each share held in Tata Motors, shareholders will be entitled to one share in each of the new entities resulting from the demerger.
The demerger plan outlines that one of the demerged companies will encompass the commercial vehicle business along with its related investments. The other entity will include the passenger vehicles business, encompassing electric vehicles, as well as the Jaguar Land Rover subsidiary and related investments.
However, the management has not provided a specific timeline for the execution of the demerger plans. This strategic move to demerge Tata Motors into two separate entities is seen as a way to unlock value for shareholders by allowing each business segment to focus more intently on its respective strategic priorities and growth opportunities.
Price Action: Tata Motors’ share price was down 1.04% to trade at ₹1,011.30 on Wednesday afternoon.
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