Shares of several Tata group firms experienced a decline of up to 10 percent on March 11, following reports suggesting that Tata Sons might not pursue an initial public offering (IPO) in the near future. In the previous week, these stocks had surged by as much as 36 percent due to the buzz surrounding the potential IPO.
While Tata Sons was initially speculated to be considering an “imminent” listing, the narrative shifted to an “improbable” listing, prompting investors to take profits in several Tata stocks.
Tata Sons, registered as a Core Investment Company (CIC) with the Reserve Bank of India, is categorized as an “upper layer” Non-Banking Financial Company (NBFC), mandating its listing on exchanges within three years of notification. The RBI issued a notification to this effect for Tata Sons in September 2023, setting a deadline for the company to list by September 2025.
Following reports indicating that Tata Sons may not proceed with an initial public offering (IPO) to comply with Reserve Bank of India (RBI) norms, the parent company of several Tata group firms is reportedly exploring alternative options.
Last week, Spark Capital identified Tata Chemicals as a potential beneficiary of the IPO speculation, leading to a surge of 36 percent in its stock price. However, Tata Chemicals witnessed a sharp decline of over 10 percent in early trading as reports suggested an IPO was unlikely.
The impact of this uncertainty was felt across other Tata group firms, with Tata Investment Corp’s stock plummeting to a 5 percent lower circuit. Tata Technologies and Tata Consumer Products stocks also fell around 3 percent each. Additionally, Tata Teleservices, Tata Steel, and Tata Power Company stocks experienced declines of over 1 percent. The stock of Indian Hotels Company fell nearly 1 percent, while Tata Motors shares were down half a percent.
Tata Sons’ potential IPO was anticipated to be record-breaking, potentially exceeding the Rs 21,000 crore offering by Life Insurance Corporation of India. According to Spark’s analysis, the IPO could have valued Tata Sons at Rs 7-8 lakh crore, leveraging the current market capitalization of its group companies.
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