Tata Motors Demerger: Share-Swap Ratio Explained For Retail Investors

Tata Motors Ltd.'s much-awaited demerger is set to take effect from Oct. 1, with the company splitting its commercial vehicle and passenger vehicle businesses.

While no record date has yet been set for the demerger, retail investors must note the share-swap ratio is 1:1.

To understand what a 1:1 share-swap ratio means, it is important to note how the Tata Motors demerger will work.

The current entity—Tata Motors Ltd. —will become Tata Motors Passenger Vehicle Limited, which will also house the electric vehicle and Jaguar Land Rover arm, whereas Tata Motors Commercial Vehicle will be the demerged entity. However, the demerged entity is to be named Tata Motors Limited.

If you currently hold one fully paid Tata Motors share, you will automatically receive one share of the new commercial vehicle company — to be named Tata Motors Limited.

The existing Tata Motors share will continue to represent the passenger vehicle company, which will be renamed Tata Motors Passenger Vehicle Limited.

If you own 100 shares of Tata Motors on the record date, here's what you will receive as a retail investor.

100 shares of the passenger vehicle company (your existing holding, renamed).

100 shares of the newly listed commercial vehicle company (renamed as Tata Motors Limited).

No extra payment will be required from your end and the transfer will be completely automatic. It will show up in your account once corporate actions are processed.

Once the demerger process is approved and completed, your demat account will automatically show two separate stocks credited.

Each stock will have its own ticker, market symbol and market price.

However, it must be noted that Tata Motors is yet to announce a record date for the demerger.