Tata Motors share: Is this stock to buy amid top officials resignation ahead of demerger?

Tata Motors Ltd has witnessed the departure of several senior executives as the company restructures its operations, separating its car and truck manufacturing divisions to enhance competitiveness in each segment and maximize value.

Mint earlier reported that at least half a dozen exits have taken place since August which were all in the ranks of team heads or above.

The list includes Biswaroop Mukherjee, former head of human resources for the commercial vehicles division; Anurag Mehrotra, who served as vice president for international business and strategy; Vinay Pant, the chief marketing officer for passenger vehicles; Vinay Pathak, responsible for product planning and program management in the commercial vehicles segment; Sampada Inamdar, head of training and development; and Devendra Katiyar, the chief safety officer.

Additionally, Ashish Tandon, senior general manager for small commercial vehicles, also resigned during this period.

Tata Motors has a market share of approximately 12% and ranks third in position with an early mover advantage in the EV space.

Tata Motors demerger

In March 2024, Tata Motors revealed its decision to separate its business into distinct passenger vehicle (PV) and commercial vehicle (CV) divisions. As part of this transition, the company is conducting a talent-mapping exercise to reassign senior executives managing shared business functions to one of the newly formed entities.

Tata Motors appointed separate chief executive officers for its commercial vehicle (CV) and passenger vehicle (PV) divisions back in 2021 and later spun off its PV unit into a subsidiary in 2022. The company stated last March that the ongoing demerger was a natural step in this restructuring process when it initially revealed its plans.

The company has engaged executive search firm Egon Zehnder along with consultants Boston Consulting Group and McKinsey to oversee talent mapping and strategize the specifics of the split.

“The upcoming merger will enable the company to enhance its operational efficiency and unlock value for shareholders by allowing each segment to focus on its core competencies, making decision-making in the respective segment more agile and efficient. The demerger will also help participants better assess the company’s financial performance based on each division’s performance,” said Sagar Shetty, Research Analyst, StoxBox.

Shetty further added, “We believe the demerger will enable the company to streamline its focus on the respective industry, being able to enforce the necessary strategies to capture market share in the respective industry. With the muted demand witnessed in H1FY25, we believe the demerger comes in at a good time, with varying strategies required to create a stronger foothold in the CV and PV space. Thus, we maintain a positive outlook for the company, believing that the demerger will help unlock value for the stakeholders.”

Should you buy or sell Tata Motors stock?

Tata Motors’ shares have declined by more than 30 per cent since the demerger announcement on March 4, 2024. On Friday, the stock ended nearly 2.5 per cent lower at ₹672.90 on the Bombay Stock Exchange (BSE).

According to Anshul Jain, Head of Research at Lakshmishree Investment and Securities, believes that Tata Motors share is hovering around the crucial ₹659 level, a strong support zone on the weekly chart. The recent selling pressure has weakened, with diminishing volumes indicating exhaustion.

On the outlook of Tata Motors stock, Jain further added, “A breakout above ₹695 could trigger fresh bullish momentum, potentially pushing the stock towards ₹750. Traders should watch for volume confirmation and broader market sentiment before taking positions. If Tata Motors sustains above this resistance, it could signal a trend reversal, offering an attractive opportunity for investors eyeing a recovery rally.”

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts, consider individual risk tolerance, and conduct thorough research before making investment decisions, as market conditions can change rapidly, and individual circumstances may vary.