Tata Chemicals stock jumps 12% today, up 40% in 6 days, as Tata Sons listing seen unlocking value

Tata Chemicals stock zoomed 12 percent with strong trading volumes on March 7.

Tata Chemicals shares zoomed around 14 percent on March 7 to hit a 52-week high of Rs 1,349 on NSE, amid the speculation of parent Tata Sons listing getting closer, potentially resulting in a huge value unlocking for the firm.

Tata Chemicals stock closed at Rs 1,315, up 12%, extending gains to sixth straight session. The stock has rallied 40 percent since March 1, and is up about 30 percent in the last one year.

Tata Chemicals has a 3 percent equity stake in Tata Sons -- which is the holding company of several group firms. A Reserve Bank of India classification requires that Tata Sons be listed as an upper-layer NBFC by 2025.

Research firm Spark Capital said in a report this week that Tata Sons' market capitalisation could be at around Rs 8 lakh crore, excluding holdco discounts.

By that calculation, Tata Chemicals' equity stake in Tata Sons could be worth as much as Rs 19,850 crore, it added. Tata Chemicals total market capitalisation was Rs 33,500 crore at close on March 7.

Spark Capital said that the only realistic way to get exposure to the potential value unlocking of Tata Sons stake is through Tata Chemicals where the ownership of Tata Sons potentially amounts to 80 percent of the chemicals firm's valuation.

Earlier, last week, Tata Chemicals said that Fitch Ratings affirmed its Long Term Foreign Currency Issuer Default Rating (IDR) at BB+. The ratings agency has also revised the outlook to “stable” from “positive”.

In the last one year , Tata Chemicals share has gained 25 percent, in line with the gains in the benchmark Nifty.

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The rapid gains in the stock price has enhanced the appeal of the stock, drawing attention from investors, analysts said.

It is imperative to exercise caution due to the significant resistance looming around Rs 1,200-1,205, primarily identified through the presence of a previous historical high depicted in the chart analysis, said Jigar S Patel of Anand Rathi Shares & Stock Brokers.

"Therefore, initiating fresh long positions at this juncture is not advisable. For individuals who have already entered the market, it is prudent to consider booking profits and adopting a wait-and-see approach, anticipating a meaningful correction in the stock's price before contemplating further investment actions," Patel said.

For the quarter ended December 2023, Tata Chemicals reported a 60 percent on-year drop in net profit at Rs 158 crore amid tepid demand across key regions and segments. The Tata Group chemical firm's revenue fell more than 10 percent to Rs 3,730 crore.

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Tata Chemicals is the world's third-largest soda ash producer. Fitch Ratings expect the company's Ebitda (earnings before interest, taxes, depreciation, and amortisation) net leverage to average 2.2x over FY25-FY27 and be commensurate for its rating, driving the “stable” outlook despite the near-term industry pressures.

The margins will improve to 17 percent from FY26, supported by a gradual demand recovery, supply tightening, and lower energy cost. However, a prolonged period of unfavourable economic conditions and supply glut in the industry could limit margin improvement, Fitch Ratings said.

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