Tata group shares jump up to 13% today as Tata Capital begins work on mega IPO, fuels hope of value unlocking

Tata Capital IPO is expected to raise over Rs 15,000 crore and will include a mix of primary and secondary share sales.

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Tata group company shares rose as much as 13 percent in intraday trading on Tuesday after the conglomerate began work on a mega Rs 15,000-crore IPO of its financial services arm Tata Capital. The public issue plan fuelled hopes of value unlocking for various group companies that own equity stakes in Tata Sons or Tata Capital.

Tata Investment Corp stock rose 4.2 percent to close at Rs 6,799, off the day’s high of Rs 7,411. Tata Motors shares gained 1.9 percent to Rs 736 at the end of the day, while Tata Chemicals added 3.2 percent to end at Rs 1,068.

Tata Capital’s IPO preparation comes as the systemically important non-banking financial company (NBFC) complies with the Reserve Bank of India’s (RBI) directive for ‘upper-layer’ NBFCs to list by September 2025. The public issue is expected to raise over Rs 15,000 crore and will include a mix of primary and secondary share sales, Moneycontrol reported. Cyril Amarchand Mangaldas and Kotak Mahindra Capital have been appointed as advisors, with further investment bank engagements anticipated.

Tata group companies’ equity stake holdings in Tata Sons, Tata Capital

Tata Chemicals holds approximately 3 percent stake in Tata Sons, the principal holding company of the Tata Group and the largest shareholder in Tata Capital. Tata Sons holds a commanding 92.83 percent stake in Tata Capital, with most of the remaining shares owned by other Tata Group companies and trusts.

Analysts have previously identified Tata Chemicals as a potential beneficiary of value creation if Tata Sons or its subsidiaries list, given the significant contribution of its holdings to its overall market value.

Also read | Tata Group ropes in advisors for Rs 15,000-crore IPO of Tata Capital

Tata Motors stock could potentially benefit from its direct exposure to Tata Capital through its 4.7 percent stake. This stake was acquired following the merger of Tata Motors Finance Ltd (TMFL) into Tata Capital earlier this year, a move aimed at consolidating the group’s financial services operations under one umbrella.

Tata Motors also holds about 3 percent equity stake in Tata Sons, which positions the company to benefit from any value-unlocking at the holding company level.

Tata Investment Corporation was the biggest gainer today, owing to its direct 2.15 percent stake holding in Tata Capital. Tata Investment also holds stakes across various Tata Group entities, and has historically been sensitive to announcements regarding group-level financial developments. Investors expect the ripple effect of Tata Capital’s listing on the valuations of Tata Sons and its associated companies.

RBI mandate for listing Tata Capital may unlock value for group firms

The Tata Group’s moves align with RBI’s guidelines for upper-layer NBFCs, which require listing within three years of their classification. Tata Capital was notified as an upper-layer NBFC in September 2022. Tata Capital had assets under management (AUM) of Rs 158,479 crore as of March 2024, up significantly from Rs 119,950 crore a year earlier.

Today’s rally follows previous stock movements in Tata Chemicals and Tata Investment Corporation earlier this year, when reports of Tata Sons’ potential listing emerged. Tata Sons, valued at over Rs 11 lakh crore, has a unique ownership structure, with Tata Trusts holding 65.9 percent, Shapoorji Pallonji Group 18.4 percent, Tata Group companies 12.8 percent, and the Tata Family 2.8 percent.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.