Tata Motors demerger: UBS doesn't see any material value; maintains 'Sell'

Tata Motors Demerger, Tata Motors share price: In a major development, Tata Motors announced on Monday, March 4, that its board has approved the proposal for the demerger of the company into two separate listed companies. First, the commercial vehicle business and its related investments in one entity; and second, the passenger vehicle businesses, including PV, EV, and JLR, and their related investments in another entity.

Most analysts are positive on the news, saying the pure plays will drive better value discovery. However, not everyone is on the same page. For instance, UBS has maintained a sell rating on the stock, saying the move simplifies the structure, but it does not see any material value from the move at present. The brokerage further added that its value-unlocking awaits more clarity on other aspects. The brokerage's target price stands at Rs 600. On Monday, shares of the company settled at Rs 987.20 on the BSE.

Echoing similar views, analysts at Motilal Oswal Financial Services (MOFSL) note that while the demerger seems to be a step in the right direction, "we do not foresee any need to revisit our target price, which is already based on SoTP valuation. Moreover, despite factoring in most of the positive triggers in our estimates, we get limited upside given the recent sharp run-up in the stock. We, hence, downgrade Tata Motors to Neutral (from Buy) with an unchanged TP of Rs 1,000 per share," the brokerage adds. 

ALSO READ: What experts say on Tata Motors demerger

Further, InCred Equities has maintained a "Reduce" rating on the stock with a target price of Rs 639.