Today, the shares of Tata Chemicals nosedived over 10 percent following the media reports where Tata Sons IPO, which was earlier being seen as a value booster for the firm appeared increasingly improbable in the foreseeable future.
How Did This Happen?
During this time, Tata Chemicals shares rallied 36 percent and the reports of the IPO of several Tata group firms’ parent companies gained traction.
The conglomerate appears to be considering various avenues to adhere to the Reserve Bank of India’s (RBI) norms, the reports noted.
The movement was seen at 9.26 am on March 11, when Tata Chemicals shares were trading at Rs 1,207.45 on the National Stock Exchange.
It was trading 8 percent down from its previous close.
Prior to this, the stock has witnessed 27 percent in just one month.
Not only that it has outperformed benchmark Nifty 50 which has gained 4 percent during this period.
It appears that the Tata Sons is registered as a “core investment company (CIC)” with the RBI.
So far, it has been classified as an “upper layer” NBFC, which requires the company to follow a strict regulatory structure.
Under this category, it has to list on the public market within three years of being notified.
Pertaining that the RBI issued a notification to this effect for Tata Sons in September 2023.
Considering Options To Avoid IPO
This simply means that Tata Sons has to list on exchanges by September 2025.
But, sources are pointing towards a totally different story saying the conglomerate’s much-awaited listing is unlikely.
In the meantime, Tata Sons is considering various options they have.
They are also considering the potential separation of Tata Capital, to ensure compliance.
According to the RBI’s rules, 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.
The company is also evaluating the efforts to reduce group debt as part of the compliance strategy.
It is noteworthy here that in case the Tata Sons IPO does not materialize then Tata Chemicals will lose on the potential value unlocking.
And why not, as it is said to be the biggest beneficiary of the much anticipated public issue.
So far, four Tata Group companies including Tata Motors, Tata Chemicals, Tata Power and Indian Hotels have ownership in Tata Sons, as per the Spark Capital note.
This appears to be the only realistic way to get exposure to this potential value —unlocking opportunity via Tata Chemicals as it has a 3 percent equity stake in Tata Sons.
Spark Capital has estimated Tata Sons’ market capitalisation around Rs 8 lakh crore by, excluding holding company discounts and optionalities.
Tata Chemicals’ equity stake in Tata Sons could be worth as much as Rs 19,850 crore, as per the Spark Capital calculations.
