The board of Tata Capital, Tata Group’s financial services arm, on Tuesday approved raising funds via initial public offering (IPO) and rights issue, according to an exchange filing. The non-banking finance company (NBFC) will raise up to ₹1,504 crore via rights issue; and issue up to 23 crore new shares for the IPO. An offer for sale can be conducted, subject to market conditions and regulatory approvals.
The Reserve Bank of India’s (RBI) guidelines mandate upper layer NBFCs including Tata Capital to get listed by September this year. Tata Capital’s parent company Tata Sons, meanwhile, has filed an application with the RBI to de-register itself as a NBFC-core investment company. The RBI had last month included Tata Sons in the upper-layer list, but said their application to de-register is under consideration.
Tata Capital’s loan book stood at₹1.76 lakh crore as on September 2024, up 33 per cent year-on-year (y-o-y), and net interest margin plus fees stood at 6.4 per cent. Credit cost more than doubled to ₹581 crore in H1FY25, while net profit for H1FY25 was at ₹1,825 crore, up 21 per cent on-year. Retail loans form 64 per cent of the overall advances, with home loans and loan against property dominating the retail loan mix.
Last month, the NBFC has raised $400 million through its maiden international bond carrying an interest rate of 5.38 per cent. The tenor of the senior unsecured bond is 3.5 years, and proceeds will be deployed in business operations, including lending.
According to traders, shares of Tata Capital in the unlisted markets have jumped to ₹1,000-1,050 range, from ₹800-825 a week ago. Shares of Tata Investment, which holds about 2 per cent stake in Tata Capital, ended trading 7 per cent higher at ₹6,169.20 apiece on the BSE on Tuesday
Focus on premium
Analysts, however, say that the final listing price of the NBFC’s shares will be lower than the current price in grey market as the price discovery mechanism in the grey market is not dynamic and remains slow, and peer NBFCs like Bajaj Finance, Cholamandalam Investment and Finance, and Aditya Birla Capital have lower price to book value and price-earning ratios.
Kranthi Bathini, director-equity strategy, WealthMills securities, says investors cannot consider unlisted market data critically as the free float is also lower. “Tata Capital, coming from the house of Tata, will definitely have high investors interest. However, we must also not forget the subdued performance of Tata Tech stock’s post listing. Given the current market scenario, focus would be on valuation and premium,” Bathini said.
“In the previous bull run, there was not much focus on valuations but over the last few days period investors have become cautious about valuation. Shares of the companies which conducted IPO in last one year are trading slightly above the listing price or below it,” he added.
Another analyst at a brokerage firm said Tata Capital’s shares may list around ₹500-Rs 700 level, and the total total IPO size is estimated at around ₹15,000 crore.