The Tata Sons IPO buzz led to a surge of up to 36 percent in several group stocks this week. Among the top performers in the BSE500 pack were four companies affiliated with the conglomerate, spanning from salt to software.
However, recent reports suggest that the conglomerate’s planned listing may not materialize in the near future due to challenges in adhering to the Reserve Bank of India’s (RBI) regulations. Tata Sons, the parent company of various Tata group firms, is currently registered as a Core Investment Company (CIC) with the RBI and falls under the category of an ‘upper layer’ NBFC. This classification entails strict regulatory requirements, including mandatory listing on the public market within three years of notification.
The RBI issued a notification to Tata Sons in September 2023, requiring it to list on exchanges by September 2025. Despite this, sources indicate that the conglomerate’s listing is increasingly unlikely. Tata Sons is exploring various options, including the potential separation of Tata Capital, to ensure regulatory compliance.
According to RBI rules, a CIC with assets less than Rs 100 crore and no public fundraising can avoid being classified as a Credit Information Company (CIC) or an ‘upper layer’ NBFC, thereby bypassing the listing requirement. Additionally, efforts to reduce group debt are under consideration as part of the compliance strategy.
If the Tata Sons IPO does not materialize, Tata Chemicals stands to lose potential value unlocking opportunities, as it is expected to benefit the most from the IPO. According to a recent note by Spark Capital, four Tata Group companies – Tata Motors, Tata Chemicals, Tata Power, and Indian Hotels – hold ownership stakes in Tata Sons.
Tata Chemicals holds a 3 percent equity stake in Tata Sons, making it the primary vehicle for investors seeking exposure to potential value unlocking. Spark Capital estimates Tata Sons’ market capitalization at around Rs 8 lakh crore, excluding discounts and optionalities, potentially valuing Tata Chemicals’ equity stake at Rs 19,850 crore.
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