Why Tata Motors Commercial Vehicles Jumped 55% After Demerger? Full Analysis | CA Rachana Ranade

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[00:00:30] Hey folks, CA Rachana Ranade here and I welcome you all to an all new video on a quick fundamental analysis of Tata Motors Commercial Vehicles or TMCV. In October 2025, Tata Motors demerged. After listing in November 2025, the new stock that is Tata Motors Commercial Vehicles or TMCV went up by almost 55% in just three months.

[00:00:54] Same trucks, same factories, same management team. Nothing about the actual business changed overnight. So why did investors suddenly value it so differently? Was this just a re-rating or did something real change underneath? In today's video, we'll cover five key points which will help you get answers to these questions. Number one, what TMCV actually does? Number two, why did the stock rally almost 55% post listing?

[00:01:21] Number three, how TMCV holds up against its peers? Number four, key risks to watch out for? And number five, where is the company headed in FY27? This is going to be a very interesting one so make sure that you're watching the video till the end. Let me ask you something. Imagine two companies are trading exactly at 200 rupees. Which one will you buy? If your answer is that the share price alone doesn't tell me anything, you are thinking in the right direction.

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[00:02:17] Now let's first start with what TMCV actually does. This is one of India's largest commercial vehicle manufacturers of trucks, buses, vans, pickups, and special purpose vehicles for logistics, infrastructure, mining, and public transport. It also operates across India and several international markets, serving both private fleets and government customers.

[00:02:42] Now let's understand the drivers of the business. Two main drivers, number one is trucks, where trucks are the core engine, light, intermediate, medium, and heavy trucks, plus mining and construction vehicles. This segment moves with the economy, which is cyclical, but high volume and central to everything. Now the second segment, which is buses and commercial vehicles.

[00:03:08] This one powers everyday mobility. City buses, schools buses, a growing electric bus lineup, and last mile workhorses like Tata Ace, Intra, and Yodha that keep India's MSME running. And then we have vehicles that run on alternate fuels, something like EVs, LNG, CNG, and hydrogen vehicles as well.

[00:03:31] The company is also focusing on defense supply, fleet management, and telematics, and exports across Africa, Middle East, and other emerging markets as well. Well, now that we have understood what the company actually does in the next section, we will try and understand the top four reasons why the stock rose almost 55% after the demerger. Well, there could be many reasons as to why the stock rallied so much, but according to me,

[00:03:59] the top four reasons could be something like these. Number one, a pure play story. Now before the Tata Motors demerger, buying Tata Motors meant buying three totally different businesses. You would buy a Jaguar Land Rover business, a passenger vehicle business, and also a commercial vehicle business. But now investors can buy one of India's largest commercial vehicles, which I mean,

[00:04:22] you can buy it directly with no exposure to JLR or to PV. Number two is the conglomerate discount that came off. Well, diversified companies often trade cheap because it's hard to value each piece separately. Post split, what happens is that Tata Motors has its own financials, its own capital allocation, its own dividend policy, and that clarity alone tends to unlock the value. Number three could be the

[00:04:50] numbers that backed it up. TMCV's first standalone results beat expectations. Revenue grew over 17% QoQ, EBITDA jumped nearly 22%, and margins expanded too. Now this wasn't just a re-rating on hope. The fundamentals actually showed up almost immediately. And the fourth reason is the IVCO acquisition.

[00:05:15] TMCV is in the process of acquiring IVCO Group, which is an Italian commercial vehicle and defense manufacturer with a strong footprint in Europe and Latin America. Now for TMCV, that instant access to global markets, new technology and a much bigger international base. And the market, so that is that is going to be a very important point for this company, right? And that access to all these markets

[00:05:43] is actually being priced in right now. So that were the four reasons, according to me, which because of which the stock rose almost 55% after the demerger. But in the next section, we'll try and understand how TMCV stacks up against its peers. Now let's analyze TMCV across its closest peers, which are

[00:06:04] Ashok Leyland and SML Mahindra. On scale, it's the clear leader with sales of 83,855 crores, well ahead of Ashok Leyland's 56,362 crores and SML Mahindra's 2,838 crores. Now on ROC, Tata Motors sits at 35.9%

[00:06:26] ahead of Ashok Leyland's 13.8% and just edging past SML Mahindra's 30.9%. Now if I'm talking about the balance sheet, that is also relatively stronger with the debt to equity ratio of 0.44 compared to Ashok Leyland and SML Mahindra's 4.49 and 0.56 respectively. But on operating profit margin, Tata Motors is

[00:06:49] actually the laggard here, 9.08% versus SML Mahindra's 9.81% and Ashok Leyland at 19.06%. On the valuation front, Tata Motors trades at a PE of 38.73, which is higher than Ashok Leyland's 24.65% and SML Mahindra's 35.24%, something that an investor can keep in mind. So the story here is a bit of both,

[00:07:16] clear strength in scale and capital efficiency with margins and valuations being the two threads worth watching from here. So now that we have understood the peer comparison as well, in the next section, we'll try and understand what are the key risks that could affect the company going forward. Well, no stock is risk free and TMCV has a few words flagging. Number one, it's a cyclical business tied to the economic growth and government infrastructure spending. One more point that we

[00:07:45] should note is that if input costs like steel, aluminium and rubber go up, then margins can take a hit if these costs are not passed on to the customers. Number two, it's competition that is heating up to which players, players like Ashok Leyland, VE commercial, it could be Mahindra, it could be Bharat Benz. And all these are shifting towards electric and alternate fuel vehicles as well. And

[00:08:13] this means that TMCV, if they were to keep their position as leaders, they have to keep investing heavily in R&D just to stay ahead, right? The number three point about risks is its growing exposure to exports, which brings in currency risk, geopolitical risk, and even trade policy risk. And the most important number four is the IVCO integration risk. Now this acquisition has real

[00:08:40] potential, but merging operations, technology and supply chains across two very different companies, it's genuinely hard. And execution here will make or break the thesis. So now that you have understood the risks in the next section, we'll understand about the outlook of TMCV for FY 2027. On June 23rd, 2026, TMCV held its investor day and gave its roadmap for FY 2027. Now management was guiding for high

[00:09:10] single digit industry volume growth in FY 2027, with a longer term goal of 40% domestic CV market share by 2028, which is up from around 36% today. On financial targets EBITDA margins in the teens during up cycles, disciplined capex of 2 to 4% of revenue. And for free cash flow, they have given a target of

[00:09:35] 7 to 9% of revenue. For ROC, they have given a 30 to 35% target. But once IVCO is folded in. Now, the two big catalysts to track are the IVCO deal, which is expected to close by Q2 of FY 27. And the second one is the EV inflection point, which is expected to kick in as cost parity improves and

[00:10:00] charging infrastructure scales up. In the near term, what investors should keep eye on is the elevated fuel prices and recent price hikes, which could curb demand a little bit in the short term, but structurally tailwinds like GDP growth, electrification and international recovery are look, I mean, they are set to outweigh the cyclical headwinds. To wrap up, let's quickly summarize the top three points

[00:10:28] worth focusing about TMCV. Number one, TMCV isn't just riding the hype. The 55% rally is backed by real numbers. Higher ROC and sales than its peers and relatively lower debt as well. But the strength comes with a trade-off of thinner margins and higher PE than the rest of the pack. Number two, the demerger worked exactly the way it was supposed to. It let the market finally see the

[00:10:55] business clearly on its own merit. And number three, the most important factor here is the IVCO acquisition. If that integration goes right, then TMCV has the potential to become a much bigger and a much more global company. But if it stumbles, then that's where the risk really sits. And now I want to hear from you. Is TMCV on your watch list or is it there in your portfolio? Comment

[00:11:22] below. And if you love today's video, please don't forget to smash the like button. Please don't forget to share this video with your friends. I'll see you in the next one. Till then, take care. Jai him and bye bye.