Tata Motors Demerger: Here's how analysts are valuing the demerged PV and CV business

Shares of Tata Motors Ltd. have begun trading adjusted for the demerger of the company's Commercial Vehicles business today.

A special pre-open price discovery session valued the currently listed entity at ₹400 per share. The stock fell once trading resumed after the pre-open session.

Today is the record date for the demerger. Here are some potential scenarios after the demerger answered by Nuvama Alternative and Quantitative Research.

The PV unit, which will be named Tata Motors Passenger Vehicles Ltd. (TMPVL), will consist of the domestic PV business, Jaguar Land Rover, stake in Tata Sons, Tata Steel and Tata Technologies, along with other investments.

The now demerged Commercial Vehicles unit will consist of the domestic CV business, Iveco business, whose contribution is not accounted for in the price target, and the stake that it owns in Tata Capital.

Analysts have begun to value the Passenger Vehicle and Commercial Vehicles business independently. Here's a look at some of their projections:

Nomura

The brokerage said that post the demerger, the price target for the two entities is almost split evenly.

Nomura values the Commercial Vehicles entity ₹365 per share, while it values the Passenger Vehicle entity at ₹367 per share.

Nomura wrote in its note that the momentum for the PV business has picked up after the GST cuts as festive and pent-up demand kicked-in. "The premiumization trend remains evident, with a surge in bookings for compact and micro SUVs, including the Punch and Nexon," Nomura's note said.

Goldman Sachs

The brokerage wrote in its note that there will be a special trading session for the discovery of fair value of the Tata Motors Commercial Vehicles entity.

"We currently value the consolidated Tata Motors business at ₹700 per share, which is made up of ₹236 for JLR, ₹436 per share for the India business, which comprises of ₹130 for the Passenger Vehicles and ₹306 for Commercial Vehicles, and another ₹26 per share, for the company's stake in Tata Technologies," the brokerage wrote.

The Tata Technologies stake will be part of the Passenger Vehicles entity.

Nuvama

The brokerage believes that the CV business will be listed in the next 30 to 45 days.

Nuvama has valued the Passenger Vehicles Business at ₹410 per share, which will be divided as ₹176 for the India PV business, ₹188 for JLR, ₹16 for the JLR China JV and ₹33 for the stake in Tata Technologies. This valuation factors in a 20% holding company discount.

The Commercial Vehicles business is valued at ₹280 per share and the value is derived as ₹264 for the India CV business, and ₹14 for the stake in Tata Capital, which also factors in a 20% holding company discount.

Shares of Tata Motors Passenger Vehicles Ltd. are now trading 2.1% higher at ₹408.3.

Also Read: Tata Motors shares settle at ₹400 in special pre-open price discovery session