Winning Bizness Desk

Mumbai. Tata Motors, one of the original companies listed on the Sensex in 1986, is now close to losing its place in India’s oldest stock market index. After the company’s split into two independent entities, its combined market value has slipped below the minimum requirement needed to stay in the top-30 benchmark.

Market Cap Drop After Demerger Triggers Exit Risk

The company’s commercial vehicle and passenger vehicle divisions were demerged in October. This resulted in two separate market capitalisations: Tata Motors Passenger Vehicles at around Rs 1.37 lakh crore and Tata Motors Ltd (commercial vehicles) at around Rs 1.19 lakh crore. Their combined value is now below the nearly Rs 2 lakh crore minimum market cap needed to remain in the Sensex.

In contrast, Indigo’s parent InterGlobe Aviation has a market cap of more than Rs 2.27 lakh crore, making it a strong candidate to replace Tata Motors in the December reshuffle.

Key factors behind Tata Motors' possible exit include:

• Split market value after demerger
• Lower free-float-weighted ranking
• Strong contenders like Indigo ahead in eligibility
• Rebalancing scheduled for 19 December
• Similar exits earlier, including Nestle this June

Indigo And Grasim Emerge As Strong Contenders

The BSE will release the updated list of Sensex companies on 19 December, with the changes taking effect the same day. Indigo leads the race among non-members, while Grasim Industries also has a reasonable chance of entering the index.

Only four companies have remained in the Sensex continuously since inception: Tata Motors, Reliance Industries, HUL and ITC. Tata Motors now risks losing this long-standing status, marking a major shift in the index’s composition.

Impact On Investor Sentiment And Inflows

Analysts believe both negative and positive market flows may occur depending on which company exits and which one is added. A Smartkarma report by Brian Freitas estimates that removing Tata Motors could trigger forced selling.

The analyst has projected the following market movements:

• Selling pressure of about Rs 2,232 crore if Tata Motors exits
• Fresh inflows of nearly Rs 3,157 crore if Indigo enters
• Around Rs 2,526 crore inflows if Grasim joins the index

Internal Strains Reported Within Tata Trusts

Amid the index reshuffle developments, signs of fresh tension have emerged within Tata Trusts. Reports suggest differences between Tata Group chairman N Chandrasekaran and Tata Trusts chairman R Venkataramanan over the voting rights of Trust-nominated board members at Tata Sons.

There are also internal disagreements over the proposal to induct Neville, son of Noel Tata, into the Sir Ratan Tata Trust. Trustee Venu Srinivasan reportedly opposed the move in a meeting, delaying Neville’s entry.

Tata Motors Passenger Vehicles Share Slumps Sharply

Share performance has also added to the concern. Tata Motors Passenger Vehicles stock fell 4.74 percent on 17 November and slipped nearly 7 percent intraday to Rs 363. Over the last five days, the stock has dropped more than 8 percent, and over a year it has fallen nearly 20 percent.

In the last six months alone, the company’s shares are down 15 percent, and its present market cap stands at around Rs 1.44 lakh crore.

Recent quarterly results have also weighed on investor sentiment:

• Net loss of Rs 6,368 crore in July-September quarter
• JLR production hit due to a major cyberattack
• Delayed output affecting revenue projections
• Broader slowdown after restructuring phase

With rebalancing just weeks away, the coming update from BSE will confirm whether Tata Motors remains part of the index it has been associated with for nearly four decades or steps out to make way for new market leaders.