Decoding Tata Motors demerger: What investors need to know about cost of acquisition

Core Insights - Tata Motors has successfully listed its newly formed commercial vehicle arm, Tata Motors Commercial Vehicles Ltd (TMLCV), which opened at Rs 335 on the NSE, reflecting a 28.5% premium over its implied value of Rs 260.75, and reached Rs 345 during the day, indicating strong investor enthusiasm for the company [12]. Group 1: Corporate Restructuring - Tata Motors underwent a corporate restructuring, splitting its commercial and passenger vehicle businesses into two distinct entities: Tata Motors Commercial Vehicles Ltd (TMLCV) and Tata Motors Passenger Vehicles Ltd (TMLPV) [12]. - Shareholders of Tata Motors as of October 14, 2025, received 1 share of TMLCV for every share of Tata Motors held, without needing to take any further action [5][11]. Group 2: Cost of Acquisition - The cost of acquisition for shareholders is crucial for calculating capital gains when selling shares in the future, as the total cost of original Tata Motors shares must be split between TMLCV and TMLPV [6][10]. - For example, if an investor bought 1,000 shares of Tata Motors at Rs 400 each, the total investment of Rs 4,00,000 will be divided, with 31.15% attributed to TMLCV and 68.85% to TMLPV [10][11]. Group 3: Tax Implications - According to Indian tax rules, the share issuance through a demerger is not treated as a transfer, meaning no immediate capital gains tax is triggered [7][11]. - The date of acquisition for the new TMLCV shares will be the same as that of the original Tata Motors shares held by the investors [7].