After breaking the 52-week-high mark on Tuesday, Tata Motors has decided to treat its commercial and passenger vehicles businesses as separate entities after a demerger. Let’s see how this affects a company.
Tata Motors has tripled its stock price in the last 3 years, but the question is: will it continue to do so?
Tata Demerger
Everyone is holding high expectations from Tata’s passenger vehicle business. Jaguar Land Rover is moving up a profitable path, but they still have tough competition in the global market, so they aim to focus more on EVs. The company is already miles ahead with its phenomenal electric vehicles and will be holding this position hopefully.
Even so, Tata’s EV model vehicles are booming, but they still have a long way to go to break profit from them. The company will launch new vehicles, and probably half of its sales will come from the sale of EV vehicles by 2030.
Tata Motors’ passenger vehicle business can be expected to have a higher value in the future than Tata’s commercial vehicle business, where they sell trucks and buses, and their main revenue comes from India. This company might face a setback in the future if India’s economy struggles.
Why Demerger?
- Tata Motors believes the companies will do better and create more value for investors if they run separately.
- Passenger vehicle companies depend heavily on JLR for their profitability, focusing primarily on luxury cars. They want to focus on it more and make this part stronger and more profitable. Tata’s commercial vehicle business is already a leader in the Indian market.
- Separating these companies will lead to better strategy-making as two CEOs and their teams will have better efficiency.
- This will also benefit the shareholders of Tata Motors, as they will get shares of both the company and the company, which also holds promising growth in the future.
Everyone has a different opinion about the merger; some think it might simplify the structure but not lead to any growth; others think it is a strategic move and will take the company to new heights. As investors who are focused on making money out of this situation, we should be focusing more on the passenger vehicle business, as it looks promising now.
Disclaimer: The views and recommendations made above are those of individual analysts or brokerage companies and not of TheStockMarketLive. We advise investors to check with certified experts before making any investment decisions.
