Tata stocks fall 10% as Tata Sons's IPO remains uncertain
Today morning, stocks of Tata Group fell up to 10% as reports suggested that Tata Sons might not go for an initial public offering (IPO) anytime soon. Earlier, the IPO's buzz had driven several group stocks up by as much as 36%. Registered as a Core Investment Company (CIC) with the Reserve Bank of India (RBI), Tata Sons is notified as an "upper layer" non-banking financial company (NBFC). It must get listed within three years of being notified.
RBI notification and Tata Sons's options
The RBI sent a notification to Tata Sons in September 2023, setting a deadline of September 2025 for its market debut. However, the parent company of numerous Tata group firms is reportedly exploring different ways to comply with RBI regulations. Last week, Spark Capital singled out Tata Chemicals as the only likely IPO candidate to unlock value in Tata Sons, causing its stock to soar by 36%. However, the stock has plummeted over 10% as Tata Sons's IPO looks unlikely.
Impact on Tata Group stocks and potential valuation
Today, Tata Investment Corp stock dropped 5%, while Tata Technologies and Tata Consumer Products stocks each fell around 3%. Tata Teleservices dipped 2%, and Tata Steel and Tata Power stocks declined over 2.4%. Tata Motors shares also decreased by nearly 1%. If it had gone ahead, Tata Sons's IPO was projected to be the largest ever in India with a potential valuation of Rs. 7-8 lakh crore.
Tata mulling over debt restructuring to avoid IPO
To avoid RBI-mandated IPO, Tata Sons is trying to restructure its balance sheet. It seeks to transfer its debt to a separate company in a bid to remove itself from the 'upper layer' list. The RBI mandates apply if company has asset size of more than Rs. 100 crore and has raised public funds. If either condition is not met, it is not required to be registered as CIC and hence IPO is not mandatory.
