More than a year after the successful listing of Tata Technologies, the Tata Group, led by N Chandrasekaran, has reportedly begun work on the initial public offering (IPO) of its flagship financial services arm, Tata Capital, according to Moneycontrol. The move comes as the company aims to comply with Reserve Bank of India (RBI) regulations for “upper layer” non-banking financial companies (NBFCs).
Key Highlights of the Proposed IPO
- Quantum of IPO: Expected to exceed Rs 15,000 crore.
- Purpose: To meet RBI’s requirement for listing “upper layer” NBFCs by September 2025.
- Advisors: Law firm Cyril Amarchand Mangaldas and investment bank Kotak Mahindra Capital have been engaged.
- IPO Structure: Likely to be a mix of primary and secondary share issues.
According to Moneycontrol, the Tata Group has already begun initial pitches to engage additional investment banks for the deal.
Tata Capital Financial Services, which merged with Tata Capital in January 2024, is among the entities identified by the RBI for listing under its Scale-Based Regulation for NBFCs. According to Moneycontrol, the RBI mandates that NBFCs in the “upper layer” category list within three years of being notified, i.e., by September 2025.
Tata Capital’s Financial Overview
Tata Capital, a non-deposit-taking, systemically important Core Investment Company, had an Assets Under Management (AUM) of Rs 158,479 crore as of March 31, 2024, according to a September 2024 report by Crisil Ratings. This marked a significant increase from Rs 119,950 crore in the previous year and Rs 94,349 crore as of March 31, 2022.
Tata Sons directly owns 92.83% of Tata Capital’s equity shares, with the remaining stake held by other Tata group companies and trusts. The parent company has infused Rs 6,097 crore into Tata Capital over the last five fiscals, including Rs 2,003 crore in FY2024, indicating its strategic focus on expanding the lending business, as per Moneycontrol.
Recent Developments in the Tata Group and NBFC Sector
The announcement follows the recent market success of another NBFC, Bajaj Housing Finance, which debuted with a 135% premium over its IPO price in September 2024. The move aligns with the Tata Group’s strategy to enhance its presence in the financial services sector, following the RBI’s strict regulatory framework for NBFCs.
Key Takeaways
- The IPO will support Tata Capital’s growth plans and align with regulatory requirements.
- It could become one of the largest IPOs from the Tata Group, underlining its commitment to the financial services sector.
- The deal is expected to draw significant market attention, similar to the successful listing of Tata Technologies.
This marks a significant step in the Tata Group’s efforts to meet regulatory requirements while enhancing its focus on the financial services business, according to Moneycontrol.
