Alhamdulillah, in recent days, we have received several questions from different sources regarding the Tata Motors demerger and its Shariah status. The restructuring has created confusion among ethical and Shariah-compliant investors about which parts of the business raise concerns and how the new shares should be treated.
This blog explains the situation in simple terms, based on currently available information and the IslamicStock Shariah review process.
What Was the Tata Motors Demerger?
The recent split of Tata Motors into two separate listed companies has raised important questions, especially for ethical and Shariah-conscious investors.
Tata Motors divided its business as part of this corporate reorganisation so that each division could more effectively concentrate on its own operations and expansion.
The following two businesses were separated from the company:
Passenger Vehicle (PV) Company
This includes passenger cars, Electric Vehicles (EVs), and the premium brand Jaguar Land Rover (JLR).
It is also the entity under which defence-related activities have been placed, which is why this part of the business raises Shariah concerns.
Commercial Vehicle (CV) Company
This includes commercial vehicles such as trucks, buses, and pickups.
Its core business is transport and industrial, with no defence-related involvement identified to date.
Existing shareholders received shares in both new companies, in proportion to their original Tata Motors shareholding.
Why Is the Passenger Vehicle Company Shown as “Doubtful”?
Based on available disclosures and information, defence-related business activities have moved to the Passenger Vehicle company, now known as Tata Motors Passenger Vehicles Ltd. (TMPV).
Reports indicate involvement in armoured vehicles and related services, which places this company in a sensitive sector from a Shariah perspective.
Due to this connection with the defence sector, TMPV is currently shown in the “Doubtful” category in the IslamicStock Screener.
Shariah Guidance Issued by IslamicStock
The IslamicStock Shariah Team had already clarified its ruling on Tata Motors earlier, and the same ruling continues to apply to the company that now carries the defence-related business, i.e., TMPV.
According to this guidance:
- If an investor is in profit, the profit may be retained.
- If an investor is at a loss, the investment may be held until the loss is recovered. Note: The investment may be held only until the loss is recovered. Any profit earned thereafter must be donated
Shariah Status of the Commercial Vehicle Company (TMCV)
After the demerger, the second company formed is Tata Motors Commercial Vehicles Ltd. (TMCV). Its main business, such as the sale of trucks, buses, and other commercial vehicles, is permissible from a Shariah point of view.
Because of this:
- The TMCV shares received after the demerger may be sold, and
- The proceeds from selling these shares may be kept and used freely.
At present TMCV is not shown in the IslamicStock application. This is not due to any Shariah concern, but because its detailed annual report has not yet been released.
IslamicStock relies on detailed annual reports to carry out proper Shariah screening. Once the report becomes available, TMCV will be reviewed and displayed in the application with its Shariah status.
Why the Demerger Matters for Shariah Screening
After a demerger, each company becomes independent in its operations, revenues, and disclosures.
This means:
- Each company must be screened separately.
- Past rulings apply only to the relevant business.
- Investors should avoid assuming that both companies carry the same Shariah status.
This is why TMPV and TMCV are being treated differently after the demerger.
Conclusion
To summarise the Shariah status of the two new entities:
- Tata Motors Passenger Vehicles Ltd. (TMPV) is shown as doubtful due to defence-related activities. The earlier Shariah guidance regarding existing profit (may be kept) and loss (may be held until recovered) continues to apply.
- Tata Motors Commercial Vehicles Ltd. (TMCV) has a permissible core business. The shares received after the demerger may be sold, and the proceeds retained.
- TMCV Status in App: Its Shariah status is currently not fully visible in the app because the company’s detailed financial reports are not yet available. Once the company submits these reports, a full Shariah screening will be conducted, and the status will then be updated and displayed in the app.
- Investors are strongly advised to rely only on verified public disclosures and Shariah-reviewed analysis, rather than making assumptions or relying on incomplete information.
Allah knows best
Important Disclaimer: Read Before Investing
Please Note: The information provided here regarding the Shariah status of Tata Motors (TMPV and TMCV) is based on publicly available data and general Shariah screening guidelines (such as those used by IslamicStock Screener).
This content is for informational and educational purposes only. It provides a summary of the Shariah compliance view and is NOT financial or investment advice or a recommendation to buy, sell, or hold any security.
Before making any investment decisions, investors should always do their own research and speak with a qualified financial advisor and Shariah scholar