Shares of Tata Motors are showing a decline of up to 40 percent on trading apps today, because this giant company of Tata Group has been demerged. Tata Motors has separated both its passenger vehicles and commercial vehicles. Due to splitting of the company into two parts, the shares have been divided in the ratio of 1:1.
Due to distribution of shares in 1 for 1 ratio Tata Motors Passenger vehicle shares are showing 40 percent down, which is adjusted according to the share price, this is not a fall. Due to separation of commercial vehicles from Tata Motors, the name of the new company will be Tata Motors Passenger Vehicles Limited.
Shares of Tata Motors Passenger Vehicle Limited were listed on NSE at a price of Rs 400, while its opening price on BSE was Rs 399. This price was decided through a special price discovery system. However, after listing, shares of Tata Motors Passenger Vehicles Limited slipped 2% to Rs 391.35.
October 14 was the record date
Tata Motors Company had fixed October 14 as the record date for demerger at the beginning of this month. This means that investors who hold Tata Motors shares on this date can get shares in both the companies after the demerger.
Why did the company demerger?
In August last year, it had decided to split its commercial vehicle and passenger vehicle business into separate listed companies. The objective of this move is to focus separately on both the businesses, utilize capital efficiently and take advantage of future growth opportunities. After the split, the passenger vehicle unit will be named Tata Motors Passenger Vehicles (TMPVL) and the commercial vehicle unit will be named Tata Motors (TML). Commercial vehicle unit Tata Motors (TML) will be listed in the market in November.
(Note- Before investing in any share, take the help of your financial advisor.)
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