Tata Chemicals stock plunges 10% as Tata Sons seeks options to avoid IPO

Tata Chemicals has jumped 27 percent in just the past one month.

Shares of Tata Chemicals nosedived over 10 percent on March 11 following reports that Tata Sons IPO, which was being seen as a value booster for  the firm, appeared increasingly improbable in the foreseeable future.

Tata Chemicals stock rallied 36 percent in the week gone by as reports of IPO of several Tata group firms' parent company gained traction. Reports now suggest that the conglomerate is considering various avenues to adhere to the Reserve Bank of India's (RBI) norms.

At 9.26 am, Tata Chemicals was trading at Rs 1,207.45 on the National Stock Exchage, down 8 percent from the previous close. The stock has jumped 27 percent in just one month, outperforming benchmark Nifty 50 which has gained 4 percent during this period.

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Tata Sons is registered as a "core investment company (CIC)" with the RBI and has been classified as an "upper layer" NBFC, which requires the company to follow a strict regulatory structure and list on the public market within three years of being notified.

The RBI issued a notification to this effect for Tata Sons in September 2023, which means that Tata Sons has to list on exchanges by September 2025.

Sources, however, told CNBC TV-18 that the conglomerate's much-awaited listing is unlikely. Tata Sons is considering various options, including the potential separation of Tata Capital, to ensure compliance.

RBI rules say that if a "core investment company" has assets worth less than Rs 100 crore and does not raise public funds, it can avoid being classified as a Credit Information Company or an "upper layer" NBFC and is not required to go for a public listing.

Efforts to reduce group debt are also being evaluated as part of the compliance strategy. If the Tata Sons IPO does not materialise, Tata Chemicals will lose on the potential value unlocking as it is expected to be the biggest beneficiary of the much anticipated public issue.

As per the Spark Capital note released last week, four Tata Group companies - Tata Motors, Tata Chemicals, Tata Power and Indian Hotels have ownership in Tata Sons.

However, the only realistic way to get exposure to this potential value —unlocking opportunity is via Tata Chemicals as it has a 3 percent equity stake in Tata Sons.

Also Read | Tata Sons' IPO unlikely soon, company seeking options to comply with RBI norms

Tata Sons' market capitalisation was estimated to be around Rs 8 lakh crore by Spark, excluding holdco discounts and optionalities. By that calculation, Tata Chemicals' equity stake in Tata Sons could be worth as much as Rs 19,850 crore, it added.

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