Tata Capital IPO Updates

Tata Capital to Raise Over $2 Billion through IPO in One of India’s Biggest Financial Sector Debuts

Tata Capital, the financial services arm of the Tata Group, is gearing up to raise over $2 billion (approximately Rs 17,000 crore) through an initial public offering (IPO). The company is poised to file its preliminary papers with the Securities and Exchange Board of India (SEBI) once it receives the final green light from the National Company Law Tribunal (NCLT) for its merger with Tata Motors Finance, as reported by PTI.

At this IPO size, Tata Capital is expected to be valued at around $11 billion. The NCLT’s final order on the merger is anticipated by the end of the current financial year (FY25), which will pave the way for the IPO filing.

Classified as an upper-layer non-banking financial company (NBFC) by the Reserve Bank of India (RBI), Tata Capital has already received board approval for the share sale. However, the company has yet to release an official statement regarding the draft filing for the IPO.

IPO Details and Strategic Move

The proposed IPO will involve the issuance of 2.3 crore equity shares, including both a fresh issue and an offer for sale (OFS) by existing shareholders, as disclosed in the company’s filings with the stock exchanges. Additionally, Tata Capital plans to raise further funds through a rights issue, aimed at strengthening its financial foundation ahead of the public listing.

If successful, this IPO will be one of the largest share sales in India’s financial sector and will mark the Tata Group’s second public market debut in recent years, following the listing of Tata Technologies in November 2023.

RBI Mandate for NBFCs and Industry Context

Under the RBI’s mandate, upper-layer NBFCs are required to list on the stock exchange within three years of being designated as such. Tata Capital was classified as an upper-layer NBFC in September 2022, and this IPO is in line with that regulatory requirement.

Alongside Tata Capital, HDB Financial Services (owned by HDFC Bank) is also preparing for an IPO, with a draft filing made in October to raise Rs 12,500 crore. This highlights the growing trend of large NBFCs entering the public markets.

Merger with Tata Motors Finance

Tata Capital’s IPO is contingent on the successful merger with Tata Motors Finance, with final orders from the NCLT expected by the end of FY25. The merger has already received approval from the Competition Commission of India (CCI), and in June 2024, the boards of Tata Capital, Tata Motors Finance, and Tata Motors approved the merger through an NCLT scheme of arrangement. Tata Sons holds a dominant 92.83% stake in Tata Capital.

Tata Capital has enlisted law firm Cyril Amarchand Mangaldas and investment bank Kotak Mahindra Capital to manage the IPO, with the filing of the draft red herring prospectus (DRHP) contingent on NCLT approval.

In a recent Q3 earnings call, Tata Motors Group CFO PB Balaji confirmed the completion of the creditors’ meeting for Tata Motors Finance, stating that the final orders from the NCLT are expected soon.

If successful, this IPO will be a landmark event in the Indian financial sector, positioning Tata Capital for significant growth in the public markets.