Morgan Stanley goes ‘overweight’ on Tata Motors on demerger decision

Global brokerage firm Morgan Stanley assigned an ‘overweight’ call on Tata Motors after the automobile major declared its decision to split the commercial vehicle (CV) and passenger vehicle (PV) businesses in two separate entities.

The firm is of the view that the decision reflects the company’s confidence in the PV segment being self-sustaining and could lead to better value creation for the company. Analysts have assigned a target price of Rs 1,013, an upside of 25 percent from the last close of Rs 988.

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On the electric vehicle (EV) front, analysts are of the view that the company’s British arm Jaguar and Land Rover and the domestic PV business will also have “synergies in the EV era”.

According to an exchange filing by the company, the proposed demerger will be executed through an NCLT (National Company Law Tribunal) scheme of arrangement. All shareholders of TML (Tata Motors Limited) will maintain identical shareholding in both of the resulting listed entities post-demerger. However, the company noted that obtaining necessary approvals from shareholders, creditors, and regulatory authorities for the demerger might take an additional 12-15 months to complete.

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