After Tata Technologies, the Tata Group's first initial public offering (IPO) in over 19 years, made a blockbuster debut in November last year, the group is likely to consider the option of a mega initial public offering (IPO) before September 2025 in the wake the Reserve Bank's strict guidelines for non-banking financial companies.
According to a Kotak Securities report, Tata Sons – estimated to be worth Rs 11 lakh crore – may look to sell a five per cent stake in the IPO, worth around Rs 55,000 crore. The last time an IPO of this size came to market was LIC's which was worth Rs 21,000 crore.
“The non-banking financial company (NBFC) of the Tata group is classified as an 'upper tier' NBFC and for this reason, Tata Sons is required to list on the stock exchanges by September 2025,” the report said.
A spokesperson for Tata Sons did not respond to an email from The Indian Express seeking comment on the matter.
Tata Trusts headed by Ratan Tata holds 66 percent stake in Tata Sons. The Pallonji Mistry group holds an 18.4 percent stake in the company.
Tata Group has more than 100 operating companies across various industries. Tata Sons, the group's non-banking financial arm, supports and promotes all these companies. “The Central Bank of India has classified Tata Sons as an 'upper tier' NBFC in 2022 and suggests it must go public within three years. This could potentially be one of the largest IPOs… not just for the Tatas but in the history of the Indian stock market,” the Kotak report said.
The RBI released the list of 16 upper tier NBFCs on September 30, 2022. “This means Tata Sons will have to list its shares by September 30, 2025, unless the RBI extends the deadline or grants exemption,” a financial sector analyst said. And the central bank may not be in favor of easing the listing requirement for a company as others may seek the same.
The upper tier NBFCs include companies that have been specifically identified by the Reserve Bank as companies that warrant increased regulatory requirements based on a number of parameters and assessment methodologies. The ten eligible NBFCs in terms of asset size are always in the upper tier. Tata Sons, listed fourth, is the only core investment company in the list.
An RBI circular dated October 22, 2021 stipulated that an upper tier NBFC must be listed as such within three years of its identification. As per the policy approved by the NBFC board, disclosure requirements equivalent to those of a listed company should be put in place even before the actual listing, it said.
The NBFCs of the Birlas, Bajaj, Piramals and Mahindras are in the 'upper tier' list.
Tata Technologies returned around 140 percent in a single day and was trading at Rs 1,200 against the issue price of Rs 500. “Since then, those who missed this great opportunity have been waiting with bated breath for the Tata Group to launch another IPO from its portfolio of many unlisted companies,” the Kotak report said.
Total revenue of Tata Sons, the unlisted holding company of major Tata group companies, rose to ₹35,058 crore in FY2023 on a standalone basis compared to ₹24,132.97 crore in the previous year, a rise of 47 per cent. The company's annual profit also increased to Rs 22,132.38 crore from Rs 17,171.21 crore in the previous year, registering a growth of 28.89 per cent. Tata Sons' revenue comes mainly from tech giant TCS, which posted a profit of Rs 39,106 crore in FY2023
According to India Ratings, Tata Sons has significant financial flexibility due to the significant market value of its investments (Rs 11.2 Lakh Crore as of March 2023), which is 51 times its total borrowings (FY23: Rs 22,200 Crore) on its standalone balance sheet . Cash flows of investees, including TCS, in the form of dividends and share buybacks (from time to time) are largely sufficient for investments in group companies, it said.
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