In the week gone by, the stock of Tata Motors went through its most significant corporate action – the company’s commercial vehicle (CV) business was spun off. The demerger will be accounted as if it took place on June 30, 2025. The listed stock now represents only Jaguar Land Rover (JLR) and the domestic passenger vehicle (PV) business. Investors holding the stock on the record date (October 14), will receive one share of the spun off entity for every share held. The spun off entity is expected to be listed soon.
On the record date, to reflect the demerger, Tata Motors share price adjusted downward from ₹661 to close at ₹396, thus indicating that the market is pricing the CV business at about ₹265 per share. Now that the CV business is gone, is the stock worth investing in now?
While stocks of peers such as Maruti Suzuki, Mahindra & Mahindra and Hyundai have scaled all-time highs in the recent months, Tata Motors has been range-bound at best, after having corrected from its all-time high in July 2024. This largely reflects how the company has been a laggard in terms of volume growth, while peers have gained market share in a lacklustre market. Its financials, too, have followed weak volumes in terms of revenue and margins. While the outlook for JLR isn’t optimistic, that of the PV business appears to be a mixed bag.
This warrants a conservative stance on valuation and our SOTP (sum-of-the-parts) price of ₹420 reflects the same. Hence, as such the risk-reward appears balanced at current levels and existing investors can hold the stock, while new positions can be avoided for now.
Brass tacks
Before diving deep, here’s some context setting. Tata Motors is a ₹4.4-lakh crore company (pre-demerger) in terms of revenue and basically has three businesses – JLR (acquired in 2008), CVs and PVs. Besides, it had a captive financing arm – Tata Motors Finance, which has been merged with Tata Capital recently.
JLR takes the lion’s share of revenue at about 71 per cent, CVs at 17 per cent and PVs at 11 per cent (based on FY25). Net profit-wise (based on FY25 consolidated net profit from continuing operations before considering non-apportionable earnings), JLR accounts for about 73 per cent, CVs 24 per cent and PVs 3 per cent.
Globally, JLR sells (wholesale) around 4.3 lakh units (including those of Chinese JV with Chery), the CV arm around 3.85 lakh units and the PV arm around 5.6 lakh units (based on FY25). JLR volume (FY25) is geographically distributed as – North America around 30 per cent, UK and China (including JV) 19 per cent each, Europe 17 per cent and the rest accounted for by other geographies. A few other financial data have been included in the table.
Q1 performance
JLR: In Q1 FY26, on a year-on-year basis, revenue declined 9 per cent, PBT (before exceptional items) declined 49 per cent and EBIT margin declined 490 bps to 4 per cent. Though warranty costs and forex losses (due to strengthening of the pound against the dollar) had their impact, the larger issue has been a volume decline of 11 per cent (15 per cent including the China JV). This is because of a mix of three reasons – tariffs, a winding down of Jaguar portfolio and lower market demand.
To evade tariffs, JLR exported more units to the US in Q4 FY25, before tariffs kicked in, and so, in this quarter, sales were low, as there was enough inventory with retailers. Tariffs (duty rate of 27.5 per cent) were the leading cause of EBIT margin deterioration too. JLR took a £254-million hit on its P&L (for context, FY25 EBIT was about £2.5 billion), as it partly absorbed the cost of tariffs, made possible by reduction in marketing costs.
In November 2024, the company announced a complete rebranding of ‘Jaguar’ into an EV-only brand. Except for one model, production of all other models has been stopped, until a new product is launched. The management says that this contributed to volume decline in the UK and Europe. In Q1 FY26, Jaguar wholesales were just about 2.6 per cent of total JLR wholesales (ex-China JV). For context, Jaguar accounted for over 12 per cent of wholesales in FY24.
These meant lower production in an already weak demand environment, with little chance for operating leverage.
PV: Domestically, industry volumes for passenger cars in Q1 remained flat, with the under ₹10-lakh segment under higher stress. The PV business’ wholesales declined more by 10 per cent, causing an 8-per cent decline in revenue. EBIT margin declined to -2.8 per cent versus 0.3 per cent in Q1 FY25. Here too, lower production volume is the culprit, as the company calibrated wholesales, so as not to flood an already surplus inventory with dealers. EBIT margin was impacted by discounts and unfavourable commodity prices too.
EVs account for 11 per cent of PV business’ volumes. The company’s market share here has declined to 37 per cent from 84 per cent in FY23, largely due to new launches by peers and discounts.
Outlook
JLR: Going forward, the outlook appears meek. Management had lowered EBIT margin guidance to a range of 5-7 per cent, as against 8.5 per cent in FY25.
There was a cyber attack in early September, halting operations. Production restarted only towards September-end. Per a BBC report, the company is expected to lose about £50 million a week due to this incident. This could roughly mean an 8-10 per cent hit (about £200 million) on EBIT (based on FY25). Wholesales in Q2 FY26 were down 24.2 per cent. With this, the company is less likely to meet the above EBIT margin guidance.
With respect to tariffs, JLR exports to the US from the UK and Slovakia, subject to tariffs on the UK and EU respectively. Tariffs have been lowered to 10 per cent on the UK and 15 per cent on the EU from the earlier 27.5 per cent. Though substantially lower now, whether this will impact demand elasticity favourably remains to be seen, especially when considering that tariffs were a mere 2.5 per cent before the tariffs imposed by the Trump administration. Even at the lower rates, the management expects a £500-600 million hit on the P&L for FY26. It is to be noted that JLR will not be absorbing the tariff costs fully. The company has announced price hikes too and the above estimate is after considering them.
China making a luxury tax of 10 per cent applicable on vehicles priced above RMB900,000 versus RMB1,300,000 earlier, will also be a dampener on sales.
PV: While the higher channel inventory could, sure, slow down sales, the outlook for the PV business appears relatively optimistic. The company posted a volume growth for the first time in FY26 in September and benefits from GST rationalisation will give a boost from here. The new GST rates favour small cars including CNG cars – segments where Tata Motors has good market share. The newly-launched facelifts of Altroz and Tiago small cars are already seeing healthy traction.
With EVs, the new Harrier.ev and existing Nexon.ev and Curvv.ev (after the company announced lifetime warranty) are expected to drive sales. Sierra.ev is on track for a launch soon.
Sum of the parts
Given this outlook, conservative multiples have been assigned for calculation of the SOTP price. JLR’s 7x multiple is based on global peers such as BMW and Mercedes, which trade at 7-9 times trailing earnings. Such a multiple is lower compared to a 30-35x multiple enjoyed by an Indian OEM because, the markets these global OEMs serve are mature in general, and rank lower versus India in terms of headroom for growth. For instance, JLR volume declined at a CAGR of 3 per cent between FY19 (pre-Covid) and FY25, while India’s PV market grew at a 4-per cent CAGR.
Incremental volumes in India come from both penetration of cars and replacement demand, while in mature markets, they largely tend to be from replacement demand. Further, such global OEMs address a narrow market given their price point.
For the PV business, a conservative multiple of 25x is assigned to account for lower EBITDA margin of Tata Motors (7 per cent in FY25) versus peers’ 12 per cent to 20 per cent.
Published on October 18, 2025
