Spark Capital said that Tata Sons Ltd. could potentially be valued at as high as Rs 11 lakh crore in an initial public offering (IPO) expected to take place within a year and a half.
Tata Son’s May Be Valued At Rs 11 lakh Crore In IPO
Here Spark Capital is a venture capital firm in the United States, responsible for early-stage funding startups of consumer, commerce, FinTech, software, frontier, and media sectors.
The venture capital firm cited a regulation of the Reserve Bank of India that requires NBFC-Upper Layer to mandatorily be listed within three years of getting that tag.
As per this development, the Tata Group’s holding company will have to list on the exchanges by September 2025 as it has already been classified as an upper-layer non-bank financial company during October 2021.
According to Spark Capital, Tata Sons Ltd. is expected to fetch a valuation of Rs 11 lakh crore and its IPO size will likely be around Rs 55,000 crore.
It’s noted that 80% of Tata Sons’ holdings may not be monetizable, but the process of restructuring could potentially lead to a re-rating of the company’s value, said Spark Capital.
Adding that 80% of Tata Sons’ holdings may not be monetizable, but the process of restructuring could potentially lead to a re-rating of the company’s value.
“We believe that Tata Sons could potentially fetch a value of Rs 7–8 lakh crore at current market capitalisations of Tata Group companies,” Spark Capital said.
What About Market Value?
Notably, the market value of Tata Sons’ listed investments is estimated to be around Rs 16 lakh crore, while the book value of its unlisted investments is approximately Rs 60,000 crore.
It is noteworthy here that the market value of the unlisted investments could be much higher as the firm’s foray into semiconductors and EV batteries.
Besides this, Investors are expected to apply a holding company discount of 30–60% to Tata Sons’ valuation, as indicated by the range observed for companies like Godrej Industries and Bajaj Holdings.
It appears that the venture capital firm values Tata Sons at Rs 7.8 lakh crore factoring in a 60% discount of its listed investments.
This way, it is valuing the unlisted investments at Rs 1.6 lakh crore.
Saying, “ A change in the holding company discount assumption of 10% could lead to a Rs 1.5–1.6-lakh lakh crore change in the equity value of Tata Sons.”
Further, the note suggests that the intrinsic valuation of Tata Chemicals is 11 times the FY25 PE.
One can observe that the valuations have been suppressed.
It is given to the fact that the commodity nature of the soda ash and the potential headwinds faced by the industry due to falling realizations.
According to the note, the street should assign a Rs 10–11-lakh crore valuation to Tata Sons.
This could also affect the intrinsic valuation of the listed Tata Chemicals business, which is 5–7 times its FY25 earnings.
This valuation could potentially increase (re-rate) if the investment is liquidated either at or post-IPO.
