Tata Motors Completes Auto Business Demerger into Passenger and Commercial Verticals; F&O Contracts Adjusted

Tata Motors Limited has successfully demerged its automotive business into two distinct verticals: Tata Motors Passenger Vehicles (TMPV) and Tata Motors Commercial Vehicles (TMCV), with the split taking effect on October 1. The demerger was executed on a 1:1 basis, meaning shareholders received one share of TMPV for each share they held previously in Tata Motors. October 14 was set as the record date to determine eligible shareholders for the new TMCV shares. Following the demerger, shares now represent the passenger vehicle business and trade as TMPV on the BSE and NSE at an adjusted price, significantly lower than the previous day's closing price of ₹661 per share. The commercial vehicles entity (TMCV) is in the process of being listed, which is anticipated to take up to 60 days, contingent on regulatory approvals.

Changes in Tata Motors' Futures & Options (F&O) contracts have also been implemented. All old monthly contracts for Tata Motors were settled on October 13. New F&O contracts for TMPV were launched on October 14, with trading available for November, December, and January 2026 series. The lot size remains unchanged at 800 shares, but option strike prices have been adjusted to reflect TMPV's new trading price, with current November series options ranging from ₹300 to ₹520.

Analyst sentiment from Religare Broking suggests that TMPV is currently trading sluggishly with lower participation. It is expected to trade within a ₹400-₹420 range, supported by open interest in options at ₹400 (Puts) and ₹420 (Calls). The Put-Call Ratio (PCR) for TMPV stands at 0.52, indicating a higher interest in call options.

Impact: This demerger aims to unlock value by allowing each business vertical to focus independently, potentially leading to better operational efficiency and strategic growth. For investors, it introduces two distinct investment opportunities within the automotive sector. The F&O market adjustments affect trading strategies and risk management for derivatives traders. The market could see initial volatility as investors digest the new structure and valuation of the separate entities. Impact Rating: 8/10

Difficult Terms Explained: * **Demerger**: A corporate restructuring where a company splits one or more of its business units into separate, independent companies. * **Verticals**: Distinct business lines or divisions within a larger company. * **Record Date**: A specific date used to identify shareholders who are eligible to receive benefits from corporate actions like stock splits or demergers. * **Adjusted Price**: The price of a stock after it has been modified to account for corporate actions like splits or demergers, allowing for historical price comparisons. * **Derivatives Segment**: A financial market where complex financial instruments, such as futures and options, are traded. These instruments derive their value from an underlying asset like a stock. * **Futures & Options (F&O)**: Types of derivative contracts. Futures are agreements to buy or sell an asset at a predetermined price on a future date. Options give the buyer the right, but not the obligation, to buy or sell an asset at a specific price before a certain date. * **Lot Size**: The minimum quantity of shares that must be traded in the F&O market for a specific contract. * **Strike Price**: The price at which an option contract holder can buy or sell the underlying asset. * **Open Interest (OI)**: The total number of outstanding derivative contracts that have not been settled or closed out. It indicates trading activity and liquidity. * **Put-Call Ratio (PCR)**: An indicator used in options trading that compares the volume of put options to call options. A low PCR (like 0.52) suggests more bullish sentiment, as there are more open call positions than put positions.