Nomura values Tata Motors passenger and commercial arms nearly equal, flags near-term volatility post demerger

Tata Motors’ long-awaited demerger has drawn a cautious response from Nomura, which has valued the automaker’s passenger and commercial vehicle businesses almost equally while flagging “technical risk for the share price” as the stock began trading ex-demerger on Tuesday.

The brokerage has maintained a ‘Neutral’ rating, citing improving momentum in the passenger vehicle segment and steady prospects in the commercial business but warned that index weight adjustments could trigger near-term volatility.

The separation of Tata Motors’ passenger vehicle (PV) and commercial vehicle (CV) businesses became effective on 1 October, with 14 October set as the record date for shareholder entitlement. Following the demerger, Nomura pegged its target price at Rs 365 per share for the CV entity and Rs 367 per share for the PV entity, reflecting an almost even valuation of the two listed units.


The PV business, which will include Tata Motors’ domestic passenger vehicle arm, Jaguar Land Rover (JLR), stake in Tata Sons, and investments in Tata Steel and Tata Technologies, has seen a revival in demand. “Momentum has picked up after the GST cut as festive and pent-up demand has kicked in,” Nomura said, noting strong bookings for compact and micro SUVs like the Punch and Nexon.

The brokerage added that the recently unveiled Harrier EV has received an “encouraging initial response,” with bookings surpassing early expectations. Management is targeting “double-digit EBITDA margins in the medium term (from 3.9% in 1QFY26), aided by richer mix, improved pricing, and cost efficiencies,” the note said.

JLR operations recovering post cyberattack

Jaguar Land Rover, the group’s UK-based luxury car subsidiary, has started resuming operations across its facilities after a cyber incident in September disrupted production. According to Nomura, demand “has not had any significant impact,” and production is expected to ramp up in the coming weeks.

The brokerage expects JLR’s EBIT margins at 6.2% for FY26 and 7.6% for FY27, broadly in line with management’s 5–7% guidance for FY26. However, it cautioned that “zero FCF… might have some downside risk” as the company restores operations and normalises working capital.

Also read | Did Tata Motors shares really crash 40%? What the demerger plunge actually means

Commercial vehicle arm

For the CV business, which includes the domestic commercial vehicle operations and the upcoming Iveco Group acquisition, Nomura projects a 5% industry growth in FY26, implying a stronger second half of the year. The Rs 365 target incorporates the Iveco deal, valued at EUR 3.8 billion and expected to close in 2026, initially financed through debt and later 40% equity.

“At this stage, we do not assume any significant value creation from this acquisition,” Nomura said, noting Iveco’s weaker performance in 1HCY25 with revenue down 9% year-on-year and EBIT margins of 3.7% versus 6.3% a year ago. The company has guided a 5% revenue CAGR and EBIT margin expansion from 5.4% to 7.5% over 2024–28, driven by operating leverage and improved mix.

Also read | Tata Motors Demerger: Shares to trade ex-CV business from today. What it means for shareholders

Outlook

Nomura reiterated its ‘Neutral’ stance on Tata Motors, saying it would update its estimates once pro-forma financials are available post-results. “The reduced weight in indices could pose technical risk for the share price,” the brokerage said, adding that Tata Motors currently trades at 4.6x EV/EBITDA.

Tata Motors shares opened around 40% lower in early trade on Tuesday, at Rs 399, as the stock began trading ex-demerger following the separation of its commercial vehicle arm. The decline was purely notional, reflecting the removal of the CV business from the parent company’s valuation.

While the demerger marks a major structural milestone aimed at sharper business focus and value unlocking, Nomura signalled that investors may need to brace for short-term volatility as the two entities settle into their new valuations and operational rhythm.

Also read | TCS, Tata Motors tumble up to 42% from peak, with over Rs 4 lakh crore wiped off Tata stocks in 2025 amid boardroom turmoil

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