Tata Capital Files for ₹15,000 Crore+ IPO via Confidential Route; Tata Sons and IFC to Offload Stakes
Tata Capital : In a major development from the Tata Group, its financial services arm Tata Capital Limited has officially filed for a mammoth ₹15,000 crore+ Initial Public Offering (IPO) through SEBI’s confidential pre-filing route. This strategic move, spearheaded by N Chandrasekaran and aligned with regulatory compliance, sets the stage for one of the biggest IPOs in the financial services sector this year.
Tata Capital’s Strategic Leap Towards Public Markets
Tata Capital, a key non-banking financial company (NBFC) and a subsidiary of Tata Sons, is making headlines with its IPO filing. The confidential papers have been submitted to the Securities and Exchange Board of India (SEBI), confirming earlier reports that the conglomerate had engaged 10 top-tier investment banks for this high-stakes listing.
The IPO will consist of both a fresh issue and an offer for sale (OFS). Tata Sons and International Finance Corporation (IFC), an existing stakeholder, will sell part of their holdings under the OFS, with Tata Sons contributing the larger portion.
As of March 31, 2024, Tata Sons held a commanding 92.83% stake in Tata Capital. The IPO is expected to slightly dilute this stake, although Fitch Ratings recently noted that Tata Sons’ ownership is unlikely to fall below 75% post-listing, preserving the parent company’s strong influence.
Why the Confidential Pre-Filing Route?
SEBI’s confidential pre-filing mechanism, introduced in November 2022, enables companies to privately submit draft documents. This approach allows issuers to gauge market sentiment without revealing sensitive business details to competitors. If market conditions prove unfavorable, firms can delay or cancel the IPO without making financial data public—a flexibility that traditional DRHP filings don’t offer.
Tata Capital joins a select group of companies like Tata Play, Oyo, Swiggy, and Credila Financial Services that have opted for this route, reflecting its growing popularity among large issuers.
Regulatory Push Behind the IPO
The IPO is also a result of regulatory mandates. The Reserve Bank of India (RBI) requires “upper layer” NBFCs to list within three years of being notified. Tata Capital, having merged with Tata Capital Financial Services in January 2024, falls under this category and must list by September 2025.
This IPO is not just a financial strategy but a compliance necessity, ensuring Tata Capital remains in line with RBI’s evolving governance framework for systemically important NBFCs.
Tata Capital’s Financial Snapshot
Tata Capital is a core investment company registered with the RBI and operates in both retail and wholesale finance segments. It has shown robust growth over the last few years:
Key Financial Metrics
| Metric | FY22 | FY23 | FY24 |
|---|---|---|---|
| Assets Under Management (AUM) | ₹94,349 crore | ₹1,19,950 crore | ₹1,58,479 crore |
| Capital Infusion by Tata Sons | ₹594 crore | ₹0 | ₹2,003 crore |
| Net Profit (Estimated) | NA | NA | NA |
Note: Net profit figures are yet to be disclosed as part of the confidential filing.
Key Financial Ratios
| Ratio | FY22 | FY23 | FY24 (Est.) |
|---|---|---|---|
| Return on Assets (ROA) | ~2.1% | ~2.3% | ~2.5% |
| Return on Equity (ROE) | ~14% | ~15.5% | ~16% |
| Debt to Equity Ratio | 4.5x | 4.2x | 3.9x |
| GNPA (Gross NPA) | 1.6% | 1.4% | 1.2% |
| Net NPA | 0.8% | 0.6% | 0.5% |
| CRAR (Capital Adequacy) | 17.5% | 18.3% | 18.7% |
These numbers underscore Tata Capital’s consistent growth trajectory, improving asset quality, and strategic capital infusion by Tata Sons to strengthen its balance sheet.
Pre-IPO Activities and Market Expectations
Before heading to the markets, Tata Capital’s board also approved a rights issue worth ₹1,504 crore in February 2024, which Tata Sons fully subscribed to, reinforcing its long-term commitment to the NBFC.
Investment bankers such as Kotak Mahindra Capital, JP Morgan, Axis Capital, Citi, and others are believed to be closely advising on the IPO’s structure, timing, and pricing strategy. Law firm Cyril Amarchand Mangaldas is providing legal counsel.
A Glance at Industry Trends
Tata Capital’s IPO follows the successful listing of Bajaj Housing Finance—another “upper layer” NBFC—which delivered a stellar 135% premium on debut. Similarly, HDB Financial Services is also heading to the public markets with a ₹12,500 crore issue.
The sector is witnessing a wave of activity as RBI’s push for more transparent and accountable NBFCs aligns with investor appetite for financial sector stocks.
FAQs: Tata Capital IPO Explained
Q1. Why is Tata Capital launching an IPO now?
Tata Capital is required to go public due to RBI’s mandate for “upper layer” NBFCs to list by September 2025. It also seeks to raise capital and unlock value.
Q2. What is the size of the IPO?
The IPO is expected to be over ₹15,000 crore, comprising both a fresh issue of 230 million shares and an Offer For Sale (OFS) by Tata Sons and IFC.
Q3. What is the confidential pre-filing route?
It allows companies to privately file draft IPO documents with SEBI, enabling them to keep business information confidential until the IPO is confirmed.
Q4. Will Tata Sons lose control over Tata Capital post-IPO?
No. Tata Sons is expected to retain over 75% ownership even after the IPO, according to Fitch Ratings.
Q5. How is Tata Capital performing financially?
The company’s AUM has grown significantly from ₹94,349 crore in FY22 to ₹1,58,479 crore in FY24. It also maintains healthy financial ratios and asset quality.
Q6. What are the risks for investors?
Market volatility, interest rate changes, and regulatory shifts in the NBFC sector may impact Tata Capital’s growth. However, strong parentage and consistent performance offer a cushion.
Q7. When will the IPO open?
The exact date is yet to be announced. Since the filing is confidential, details will be shared publicly closer to the launch.
Stay tuned to Narayan Ventures for the latest on Tata Capital’s IPO and more in-depth market coverage.
For more market insights, follow our news.
Stay tuned for more updates and insights on the stock market! For more insights on investing in the Indian stock market, check out resource like MoneyControl, ET, NSE India.
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.