Shares of Tata group companies rose on Tuesday after reports suggested that the salt-to-software conglomerate has begun the groundwork to list its financial services arm, Tata Capital, through an initial public offering (IPO) of $2 billion or around Rs 17,000 crore.
The IPO is expected to happen before September 2025 ― the deadline for meeting the upper-layer NBFC guidelines of the Reserve Bank of India (RBI).
The rally in some of these stocks took place on hopes of value unlocking in their shares. Tata Investment Corp shares rose 4.2% to close at Rs 6,799, off the day’s high of Rs 7,411. Tata Motors scrip gained 1.9% to Rs 736 while shares of Tata Chemicals added 3.2% to close at Rs 1,068. All these companies hold stake in Tata Capital.
This would mark Tata Group’s second listing in two decades, after Tata Technology’s IPO in November 2023.
According to the people directly aware of the development, the Tata Group has authorised Kotak Investment Banking to initiate the process. The company will appoint more bankers by January.
In September 2022, the RBI classified Tata Capital Financial Services as an upper-layer systemically important NBFC. This classification mandates the adoption of enhanced regulatory frameworks and listing within three years.
Tata Capital is the holding company for the group’s three lending businesses―Tata Capital Financial Services, Tata Capital Housing Finance and Tata Cleantech Capital ― and three investment and advisory businesses: Tata Securities, Tata Capital Singapore and private equity.
Tata Capital’s unlisted shares, which surged from Rs 450 in December last year to Rs 1,100 in April, are currently trading at around Rs 900 in the unlisted market. At this price, the unlisted market is valuing the company at Rs 3.5 lakh crore, based on the outstanding number of shares of 3.74 billion by the end of FY24.
Tata Sons, the holding company of group, holds 92.93% in Tata Capital. Tata Chemicals is expected to gain the most from this IPO, as it holds approximately 3% stake in Tata Sons while Tata Investment Corporation holds around 2.2% in Tata Capital.
Tata Capital had assets under management of Rs 158,479 crore as of March 2024, up significantly from Rs 119,950 crore a year earlier.
For the year ended March 31, 2024, Tata Capital reported revenue of Rs 18,178 crore, a 34% jump over FY23. The company posted a net profit of Rs 3,315 crore, a 12% year-on-year increase. The NBFC had net worth of Rs 23,417 crore as on March 31, 2024.