Understanding the Tata Motors Demerger: Why Your Portfolio Shows TMCV and TMPV
- Rajasekar Maruthasalam
- 6 days ago
- 4 min read
If you have been checking your investment portfolio lately, you might have noticed a major change. You likely saw your Tata Motors shares replaced by two new names: TMCV and TMPV.
Even more confusingly, one is showing a significant profit (in green) while the other is showing a loss (in red).
If you are worried that you lost money, please be assured: Your investment is safe. This is a standard corporate process called a "Demerger." Let’s break down exactly what happened in simple, clear terms.
1. What exactly happened to Tata Motors?
In the past, Tata Motors was one single large company that did everything—from making small cars and luxury SUVs to massive trucks and buses.
The management decided that to grow faster and be more efficient, the company should split into two independent businesses. This allows each side to focus on its own unique goals.
TMCV (Tata Motors Commercial Vehicles): This company now handles the "heavy-duty" side, including trucks, tempos, and buses.
TMPV (Tata Motors Passenger Vehicles): This company handles "personal" cars, including the Electric Vehicle (EV) segment and the global luxury brands Jaguar and Land Rover (JLR).
The Result: For every 1 share you owned of the original Tata Motors, you were automatically given 1 share of TMCV and 1 share of TMPV.
2. Why does one look like a "Profit" and the other a "Loss"?
This is the most common question from beginner investors. When you look at your dashboard:
TMCV may show a gain of nearly +97%.
TMPV may show a loss of around -25%.
Why the difference?
When a company splits, the "Purchase Price" (what you originally paid) must also be split. The stock exchanges and tax authorities assigned a specific percentage of your original cost to each new share. For this demerger:
The Passenger Side (TMPV) was assigned about 69% of the original cost.
The Commercial Side (TMCV) was assigned about 31% of the original cost.
Because the system assigned a much lower "cost" to the Commercial shares, the current market price looks like a massive profit. Conversely, the Passenger side was assigned a higher cost, and since the stock price adjusted after the split, it currently appears as a loss.
Example: Imagine you bought a large plot of land for Rs 1,00,000. You then divided it into a small front yard and a large back yard. If the system says the front yard "cost" you only Rs 30,000, but you could sell it for Rs 60,000 today, it looks like a 100% profit. It doesn't mean you made extra money; it's just how the cost was divided on paper.
3. Is this a good move for investors?
Generally, the answer is Yes. Here is why this split is beneficial for you in the long term:
Better Focus: The passenger car team can now focus entirely on competing with global car brands and expanding their Electric Vehicle lineup.
Operational Clarity: Profits from the truck business will no longer be used to fund the car business, and vice versa. Each company is now responsible for its own success.
Accurate Valuation: The stock market can now value these businesses separately. Often, specialized companies are valued more highly by investors than large, mixed conglomerates.
4. What should you do now?
As a beginner investor, there is no need to make any panicked decisions. Follow these simple steps:
Verify Your Quantity: Check your statement to ensure the total number of shares of TMCV and TMPV matches the number of Tata Motors shares you originally held.
Look at the Total Value: Instead of looking at the "Red" or "Green" for each stock individually, look at the combined value of both. You will see that your total wealth remains largely the same.
Hold for the Long Term: Do not sell the "loss-making" stock simply because it is red. Remember, that loss is a technical adjustment due to the split, not necessarily a drop in the company's actual performance.
Tax Records: Keep a note of your original purchase date. For tax purposes, your "holding period" usually starts from the day you bought the original Tata Motors shares, not the day of the split.
Conclusion
The Tata Motors demerger is a strategic move to create two world-class Indian companies. While the numbers on your screen might look strange right now, it is simply a result of the accounting rules followed during a split.
Your investment has transitioned from a single giant into two focused specialists. As India's economy and infrastructure continue to grow, both these entities are well-positioned for the future.
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