Big Things Ahead: Tata Capital’s IPO Plans Despite 8% Drop In Unlisted Shares

Tata Capital, the financial services arm of the Tata Group, is preparing to launch what could be one of the largest IPOs in India’s financial sector next month. The offer is planned ahead of the Reserve Bank of India’s September 30 deadline for upper-layer nonbanking financial companies (NBFCs) to get listed. However, investor enthusiasm appears somewhat tempered as unlisted shares have seen an 8% decline in value over the last month.

Key Highlights Of Tata Capital’s IPO Plans

Tata Capital plans to raise approximately $2 billion (over ₹17,000 crore) through the IPO.

The offering will include about 210 million fresh shares and 266 million shares from existing investors, including Tata Sons and the International Finance Corporation (IFC).

Tata Sons, the majority stakeholder with an 88.6% holding, intends to sell 230 million shares as part of the offer, while IFC will offload around 35.8 million shares.

The draft red herring prospectus filed recently outlines a fresh issue of 21 crore shares and offer for sale of 26.58 crore shares.

If successful, the listing will mark one of the biggest in India’s financial sector and a significant milestone for the Tata Group following Tata Technologies’ IPO in 2023.

Tata Capital reported strong financial performance for the June quarter, posting a net profit of over ₹1,040 crore — more than double compared to the previous year — and revenue of ₹7,691 crore.

The IPO proceeds aim to bolster capital for lending operations and facilitate future growth.

The company offers a wide suite of services including retail financing, SME loans, infrastructure finance, and wealth management.

Tata Capital is working with a large syndicate of lead investment banks, including Kotak Mahindra Capital, Axis Capital, BNP Paribas, HDFC Bank, and ICICI Securities among others.

Why The Unlisted Share Price Has Dropped

Over the last month, Tata Capital’s unlisted shares have dropped approximately 8%, trading near ₹795 compared to ₹865 a month ago.

This decline comes despite the company’s solid financial performance, reflecting some caution among investors ahead of the IPO pricing.

The unlisted shares are trading about 27% below their peak of ₹1,095 reached in October 2024.

Analysts note that the pricing of the upcoming IPO and broader market dynamics influence pre-IPO share valuations.

Tata Capital’s P/E ratio and price-to-book metrics are relatively high compared to peers, which might contribute to valuation concerns.

What Investors Should Know

Tata Capital’s IPO offers a chance to invest in one of India’s key financial service providers with an established brand and backing from Tata Sons.

The company’s diverse product range and strong growth provide a compelling long-term play in the expanding NBFC sector.

Potential investors should watch for the IPO price band and subscription details as they will guide the final valuation expectations.

Outlook And Next Steps

Tata Capital aims to complete its IPO listing before the RBI’s September 30 deadline for upper-layer NBFCs.

The success of the IPO will not only impact Tata Capital’s capital position but also signal investor appetite for large financial sector listings in India this year.

Given the scale and backing, the IPO is among the highlights in the current IPO calendar.

Conclusion

While the decline in unlisted share prices signals some investor caution ahead of the Tata Capital IPO, the company’s strong fundamentals and market position make it a significant upcoming offering in India’s financial space. The launch will be closely watched by market participants as a barometer of confidence in NBFCs and India’s capital markets.

Sources: Economic Times, Financial Express, Economic Times Markets, UnlistedZone