More than a year after the bumper listing of Tata Technologies, N Chandrasekaran-led diversified conglomerate Tata Group, has initiated work on the initial public offer (IPO) of the group's flagship financial services arm Tata Capital, three persons in the know told Moneycontrol.
Tata Capital is a non-banking financial services (NBFC) firm and a subsidiary of the business group's principal investment holding company Tata Sons.
"Work has begun on the proposed initial public offer. This is to comply with RBI's norms for 'upper layer' NBFCs. No final call has been taken on the quantum, but the deal is expected to be a big-bang one in excess of Rs 15,000 crore," said one of the persons above.
"Law firm Cyril Amarchand Mangaldas and investment bank Kotak Mahindra Capital have been roped in as advisors for now," a second person added.
According to a third person, "pitches to engage other investment banks will be conducted soon, and the deal is likely to be a combination of primary and secondary issue of shares."
All the three persons above spoke on the condition of anonymity.
Email queries to Tata Sons, Tata Capital, Cyril Amarchand Mangaldas and Kotak Mahindra Capital were left unanswered at the time of publishing this article.
This piece will be updated as soon as we hear from the parties.
The move by Tata Group is in line with RBI's mandatory requirement for "upper layer" NBFCs to list within three years of being notified, i.e September 2025.
Tata Capital Financial Services, which merged with Tata Capital later in January 2024, is on the regulator's list.
RBI requirement mandates Tata Capital listing
On September 30, 2022, the RBI announced the list of 16 NBFCs in the Upper Layer under Scale Based Regulation for NBFCs. The framework categorised NBFCs in Base Layer (NBFC-BL), Middle Layer (NBFC-ML), Upper Layer (NBFC-UL) and Top Layer (NBFC-TL).
It specified that Upper Layer shall comprise of those NBFCs which are specifically identified by the Reserve Bank based on a set of parameters and scoring methodology.
Additionally, in June, the Board of Directors of Tata Motors Limited (TML), Tata Capital Limited (TCL) and Tata Motors Finance Ltd (TMFL) approved a merger of TMFL with TCL through an NCLT scheme of arrangement.
As consideration for the merger, TCL will issue its equity shares to the shareholders of TMFL, resulting in TML effectively holding a 4.7 percent stake in the merged entity.
Bajaj Housing Finance, another firm in the RBI 'upper layer list', made a scintillating market debut on September 16, hitting the upper circuit, with a premium of 135 percent over the IPO issue price at the end of the trading session.
On March 28, Moneycontrol was the first to report that the Bajaj Finance subsidiary had begun work on the issue.
Latest IPO from the Tata Group
Tata Capital Limited is registered with the Reserve Bank of India as a systemically important, non-deposit-taking, Core Investment Company. It has a diversified product portfolio with a presence in both the wholesale and retail finance segments.
According to a September report by Crisil Ratings, the firm had an AUM of Rs 158,479 crore as on March 31, 2024 (Rs 119,950 crore as on March 31, 2023, Rs 94,349 crore as on March 31, 2022).
Tata Sons directly owned 92.83 percent of Tata Capital Limited's equity shares while most of the remaining stake was held by other Tata group companies and trusts as on March 31, 2024.
According to the Crisil Ratings report, "Tata Sons has infused capital of Rs 6,097 crore in Tata Capital Limited in the last five fiscals, of which Rs 2,500 crore was infused in fiscal 2019, Rs 1,000 crore in fiscal 2020, Rs 594 crore in fiscal 2023 and Rs 2003 crore during fiscal 2024, indicating the intent of the group to step up its focus on the lending business."
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