This week’s multi-billion-dollar rally in several Tata group stocks, sparked by a what-if bull case scenario, might fade away soon with India’s most valued conglomerate now trying to avoid Tata Sons IPO. The worst affected would, undoubtedly, be Tata Chemicals which had rallied 36% in 4 days as it was believed to be the biggest beneficiary of the mega listing.
To avoid getting listed under RBI rules, Tata Sons is now said to be exploring the option of restructuring its balance sheet. If it reorganises debt by repaying borrowing or transfers the holding in Tata Capital to another entity, Tata Sons may get deregistered as a core investment company (CIC) and upper-layer NBFC. By doing so, Tata Sons can avoid getting listed, ToI reported today.
The Tatas had also approached RBI seeking an exemption to the listing rule but the plea was rejected. Tata Sons has now been consulting legal and finance experts to find a solution, according to an ET report.
Also read | Tata Sons charting new path to sidestep Dalal Street
The RBI rule that Tata Sons, the holding company of the salt-to-software group, would have to get listed by September 2025 as it has been classified as an upper-layer NBFC, was known for a long time. But investors started buying Tata stocks, Tata Chemicals in particular, after investment banker Spark Capital released a report on Monday identifying Tata Chemicals as the only potential play in the IPO.
The report was just a what-if scenario because Tata Group has never officially said it is planning to get Tata Sons listed on the stock exchanges. Even if the IPO happened, the deadline is more than a year away.
Thanks to the retail investor’s bullishness on all things Tata, the report kicked off another round of rally this week. Tata Chemicals zoomed 36%, Tata Investment Corporation 28%, Rallis India 14%, and Tata Power 13% as the fundamental growth story of Tata Group turned into a momentum play. However, there were other factors as well which affected stock prices during the week beyond the IPO mania.
In the last four days, the combined market value of 24 Tata stocks rose by Rs 85,000 crore to Rs 31.6 lakh crore.
Tata Chemicals
Spark had identified Tata Chemicals as the only realistic way to get exposure to the potential value unlocking of Tata Sons stake. Tata Chemical’s 3% stake in Tata Sons was valued at about 80% of the company’s market capitalisation.
“Should the street assign a Rs 10-11 lakh crore valuation to Tata Sons, the intrinsic valuation of the listed Tata Chemicals business is 5-7x FY25 PE, which could potentially re-rate should the investment be liquidated at/or post IPO,” Spark’s Vidit Shah said.
Market experts, however, had suggested investors not buy the stock based on IPO rumours. Street veteran analyst Mahantesh Sabarad recalled how Tata stocks went up similarly in 2007-08 as well on Tata Sons IPO rumours.
“We have heard enough such stories and I would like to right now disbelieve it in the first instance unless I really see a proper document getting filed,” he said.
Also read | If Tata Sons brings out IPO, which listed Tata stock will gain the most?
(Data: Ritesh Presswala)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
