Tata Capital, a prominent financial services provider, is preparing to approach the Securities and Exchange Board of India (Sebi) with preliminary documentation for an ambitious $2 billion IPO (approximately ₹17,000 crore). This strategic move is contingent upon obtaining the final green light from the National Company Law Tribunal (NCLT) regarding the merger with Tata Motors Finance.
Anticipated Valuation and Timeline
Industry insiders project that upon completion of the IPO, Tata Capital could be valued at about $11 billion. The NCLT’s final ruling is anticipated by the end of the financial year FY25, as confirmed by sources close to the matter.
- Final order expected: By FY25
- Projected valuation: $11 billion post-IPO
Despite attempts to contact Tata Capital for clarification regarding their IPO filing, there has been no response.
IPO Details and Future Plans
The board of Tata Capital has already sanctioned the initial share sale, which will involve 23 million equity shares. This offering will consist of new shares as well as an offer for sale (OFS) from existing shareholders, as disclosed in filings to stock exchanges.
In addition to the IPO, Tata Capital is also planning a rights issue to strengthen its financial framework ahead of the public offering. If successful, this IPO could be one of the largest in the Indian financial sector in recent times, marking the Tata Group’s second foray into public markets following the Tata Technologies listing in November 2023.
Compliance with Regulatory Requirements
This IPO initiative is part of Tata Capital’s compliance strategy with the Reserve Bank of India (RBI) regulations. Upper-layer non-banking financial companies (NBFCs) are mandated to list on the stock exchange within three years of their classification. Tata Capital received this designation in September 2022.
In a similar vein, HDB Financial Services, a subsidiary of HDFC Bank, is also gearing up for an IPO, having filed its draft documents in October to raise ₹12,500 crore.
Expert Guidance and NCLT Approval
To navigate the complexities of the IPO process, Tata Capital has engaged the services of Cyril Amarchand Mangaldas and Kotak Mahindra Capital as legal and financial advisors. The submission of the draft red herring prospectus (DRHP) to Sebi will proceed only after the NCLT grants approval for the merger.
During a recent earnings call, PB Balaji, Group CFO of Tata Motors, confirmed that the creditors’ meeting regarding Tata Motors Finance has been successfully concluded. He mentioned, “We are awaiting final orders from the NCLT, and we expect the closure by the end of this financial year.” The merger received the nod from the Competition Commission of India (CCI) in September.
Merger Dynamics
In June 2024, the boards of Tata Capital, Tata Motors Finance, and Tata Motors unanimously approved the merger under an NCLT scheme. As part of this arrangement, Tata Capital will distribute its shares to the shareholders of Tata Motors Finance, resulting in Tata Motors holding a 4.7% stake in the combined entity.
With Tata Sons holding a commanding 92.83% stake in Tata Capital, the upcoming IPO and merger are pivotal moves for the company’s growth trajectory as it seeks to solidify its position in the financial services arena.
For further insights, explore more about the latest IPOs and investment opportunities in the Indian financial sector.
