IPO Plans Take Shape

Tata Capital has taken a significant step toward going public by approving an initial public offering (IPO) that will consist of both a fresh issue of 23 crore equity shares and an offer-for-sale by existing stakeholders. This announcement was made on February 25, marking a crucial milestone for the financial services arm of the Tata Group. Additionally, the board has sanctioned a rights issue worth up to Rs 1,504 crore, allowing existing shareholders to increase their stakes. This upcoming IPO will be the first from a Tata Group company since the highly successful listing of Tata Technologies in 2023.

The company had already initiated work on this massive IPO in December, with early reports suggesting the total issue size could exceed Rs 15,000 crore. Advisors, including Cyril Amarchand Mangaldas and Kotak Mahindra Capital, were brought on board to guide the process. The IPO is expected to enhance Tata Capital’s financial standing and expand its reach in India’s non-banking financial sector.

Regulatory Push and Industry Trends

The decision to go public aligns with regulatory mandates set by the Reserve Bank of India (RBI). Under RBI’s guidelines, non-banking financial companies (NBFCs) classified in the ‘upper layer’ category must list themselves on the within three years of notification. Tata Capital Financial Services, which merged with Tata Capital in January 2024, falls under this category and must meet the listing deadline by September 2025.

This move follows a trend among top financial institutions, as seen in the remarkable debut of Bajaj Housing Finance on September 16. The company’s shares soared, hitting the upper circuit and closing with a premium of 135 percent over the issue price. Tata Capital aims for similar success, leveraging its strong market position and financial backing.

Financial Strength and Growth Trajectory

Tata Capital, a subsidiary of Tata Sons, plays a crucial role in the group’s financial services segment. As of March 31, 2024, the firm reported assets under management (AUM) of Rs 158,479 crore, according to a report by Crisil Ratings. Tata Sons remains the primary stakeholder, directly holding 92.83 percent of Tata Capital’s equity, while other Tata group entities and trusts own the remaining shares.

Over the past five fiscal years, Tata Sons has injected Rs 6,097 crore into Tata Capital, underlining its commitment to strengthening the firm’s lending business. This capital infusion included Rs 2,500 crore in FY19, Rs 1,000 crore in FY20, Rs 594 crore in FY23, and Rs 2,003 crore in FY24. These investments highlight Tata Group’s strategic intent to bolster its presence in India’s financial sector and ensure the company’s sustained growth.

With a strong financial foundation, regulatory compliance, and promising market conditions, Tata Capital’s IPO is poised to be a significant event in the Indian financial landscape. Investors and market analysts will be closely watching as the company moves forward with its listing plans.