Tata Capital Board Approves IPO Plan, Announces ₹1,504 Crore Rights Issue
Tata Capital, the financial services arm of the Tata Group, has taken a significant step toward going public. On February 25, the company announced that its board has approved an initial public offering (IPO) plan, marking a new chapter in its growth journey. The IPO will consist of a fresh issue of 23 crore equity shares and an offer-for-sale (OFS) by existing shareholders, though further details regarding pricing and timing remain undisclosed.
This highly anticipated IPO will be the first by a Tata Group entity since Tata Technologies’ blockbuster listing in 2023. The move aligns with the Reserve Bank of India’s (RBI) directive that mandates ‘upper layer’ non-banking financial companies (NBFCs) to list within three years of notification, setting a deadline of September 2025.
₹1,504 Crore Rights Issue to Strengthen Capital Base
Alongside the IPO decision, Tata Capital has also approved a rights issue worth ₹1,504 crore. This means that existing shareholders will get an opportunity to buy additional shares before the company goes public. The capital infusion aims to strengthen Tata Capital’s financial position and fuel its expansion plans in India’s booming financial services sector.
Tata Capital has been witnessing steady growth, with a focus on offering diverse financial products, including home loans, personal loans, business loans, and vehicle financing. The additional funding from the rights issue and IPO is expected to enhance the company’s lending capabilities and strengthen its market presence.
Tata Capital’s Growth and Market Position
Founded in 2007, Tata Capital has grown into a leading NBFC, catering to a wide customer base with various financial solutions. The company has seen substantial financial backing from its parent entity, Tata Sons, which holds a 92.83% stake in the firm, while the remaining stake is owned by Tata Group companies and trusts.
According to a Crisil Ratings report, Tata Capital had an Assets Under Management (AUM) of ₹1,58,479 crore as of March 31, 2024. Over the past five fiscal years, Tata Sons has injected ₹6,097 crore into Tata Capital, reaffirming its commitment to the company’s growth.
The capital infusions over the years include:
- ₹2,500 crore in FY19
- ₹1,000 crore in FY20
- ₹594 crore in FY23
- ₹2,003 crore in FY24
These investments indicate Tata Group’s long-term focus on expanding its lending business, strengthening Tata Capital’s position in the Indian NBFC space.
IPO to Meet Regulatory Compliance
The decision to go public is not just a strategic expansion move but also a regulatory necessity. The RBI’s upper-layer NBFC framework, introduced in September 2022, requires identified NBFCs to list within three years. Tata Capital Financial Services, which merged with Tata Capital in January 2024, was classified under this category, making an IPO a mandatory step.
This regulatory push has already driven companies like Bajaj Housing Finance to list, which saw a 135% surge on its debut trading session on September 16, 2024. Tata Capital’s IPO could witness a similar level of investor enthusiasm, given the strong brand reputation of the Tata Group.
Market Reaction to the Announcement
Following the IPO announcement, Tata Investment Corporation’s stock surged by 8%, trading at ₹6,218 per share. This reflects investor optimism about Tata Capital’s potential public offering and the strong backing from the Tata Group.
Tata Capital’s Financial Performance and Key Ratios
To help investors gauge Tata Capital’s financial strength, here are some key financial ratios:
| Metric | Value |
|---|---|
| Assets Under Management (AUM) | ₹1,58,479 crore |
| Net Profit Margin | ~15% (estimated) |
| Return on Assets (ROA) | ~2.5% |
| Return on Equity (ROE) | ~14-16% |
| Capital Adequacy Ratio | >18% |
| Debt-to-Equity Ratio | ~4.5 |
These numbers indicate strong profitability, efficient capital management, and a solid risk profile, making Tata Capital’s IPO an attractive proposition for potential investors.
What’s Next for Tata Capital?
While the IPO timeline and pricing details are yet to be finalized, the company has already taken crucial steps by appointing advisors such as Cyril Amarchand Mangaldas and Kotak Mahindra Capital. The IPO is expected to raise over ₹15,000 crore, making it one of the largest financial sector IPOs in recent years.
With India’s NBFC sector witnessing robust growth, Tata Capital’s entry into the stock market could attract strong investor demand, particularly given the legacy, trust, and stability of the Tata Group.
Conclusion
Tata Capital’s IPO marks a significant milestone for the Tata Group and the Indian financial services industry. With strong financial backing, regulatory compliance, and a growing loan portfolio, the company is well-positioned to capitalize on market opportunities.
As the IPO process unfolds, investors will closely watch for further details on pricing, subscription timelines, and potential listing gains. Given the past success of Tata Group IPOs, Tata Capital’s public listing could be another game-changer in the Indian stock market.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.