Tata Investment, Tata Chemicals, Tata Motors shares rise up to 12% on Tata Capital’s IPO anticipation

Shares of Tata Group companies such as Tata Investment, Tata Chemicals, Tata Motors rallied up to 12% in early trade on Tuesday amid report that Tata Capital, the flagship financial arm of the conglomerate, is gearing up to list its shares on domestic bourses. Tata Capital is a non-banking financial services (NBFC) company and a subsidiary of the group's holding company Tata Sons.

Cheering the news, shares of Tata Investment rallied as much as 11.8% to ₹7,305 in the first hour of trade so far. While shares of Tata Motors gained 1.5% to ₹733.80, Tata Chemicals stock price climbed 2.5% to ₹1,061 on the BSE. On the other hand, the equity benchmarks Sensex and Nifty were trading flat with marginal gains.

As per the shareholding pattern of Tata Capital, Tata Sons directly own 92.83% stake in the company and the remaining stake is owned by the other Tata group companies and trusts as on March 31, 2024. On the other hand, Tata Motors and Tata Chemicals own 3% each in Tata Sons, which is mostly owned by Dorabji Tata Trust (28%) and the Ratan Tata Trust (24%). Among others, Tata Power and Indian Hotels hold 2% and 1%, respectively, in the holding company, while Cyrus Mistry family-led Sterling Investment Corporation and Cyrus Investments own 9% each in Tata Sons. The listing of Tata Capital is likely to unlock value for shareholders.

Tata Capital taps IPO route to comply with RBI norms

Tata Capital’s IPO is being seen as a move to comply with Reserve Bank of India’s (RBI) norms for 'upper layer' NBFCs. Tata Capital was notified as an upper-layer NBFC in September 2022, which makes it mandatory to list itself on the exchanges within three years of notification. The deadline for the same is September 2025. 

Tata Capital is reportedly looking to raise around ₹15,000 crore via initial public offering (IPO) route and has hired law firm Cyril Amarchand Mangaldas and investment bank Kotak Mahindra Capital as advisors for the initial public offering (IPO). If this happens, this would be second public listing from the Tata Group after Tata Technologies, which debuted in December last year after a long gap of nearly two decades. Tata Consultancy Services (TCS) was the last IPO from the conglomerate in 2004.

In October this year, the central bank approved the merger of Tata Capital with Tata Motors Finance (TMFL), paving the way for the formation of India’s 12th largest NBFC. As of March 31, 2024, Tata Capital had sizeable AUM of ₹158,479 crore as compared to ₹119,950 crore as on March 31, 2023, and ₹94,349 crore as on March 31, 2022. 

Tata Sons, which is largest shareholder in Tata Captal, has infused capital of ₹6,097 crore in the NBFC in the last five fiscals, of which ₹2,500 crore was infused in fiscal 2019, ₹1,000 crore in fiscal 2020, ₹594 crore in fiscal 2023 and ₹2,003 crore during fiscal 2024, indicating the intent of the group to step up its focus on the lending business.

Tata Capital caters to the diverse needs of retail, housing, SME, and corporate customers with a pan-India network of 900+ branches. Its range of offerings include consumer finance, housing finance, commercial finance, cleantech finance, microfinance, debt syndication, private equity, and credit cards.

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