Tata Sons could be valued at Rs 7-8 trn in IPO

Tata Sons, the investment-holding arm of Tata group companies, could fetch valuation of Rs 7-8 trillion in an initial public offering (IPO), based on the current market capitalisation of group firms, according to a report.

The market value of Tata Sons’ listed investments is estimated at Rs 16 trillion. The group could derive another Rs 1-1.5 trillion of value from unlisted investments and step-down subsidiaries such as Tata Technologies, Tata Metalliks and Rallis, according to a report by investment banking firm Spark PWM.

Investors are likely to give a holding company a 30-60% discount when calculating the equity value, and Tata Sons’ value would be Rs 7.8 trillion, factoring a 60% discount, it said.

Four group companies – Tata Motors, Tata Chemicals, Tata Power and Indian Hotels Company (IHCL) – hold ownership in Tata Sons. The only realistic way for potential value unlocking of Tata Sons stake is through Tata Chemicals wherein the ownership is about 80% of the company’s market capitalisation.

According to Reserve Bank of India regulations, it is mandatory for an upper-layer NBFC to list within three years of the notification. On September 14, 2023, the RBI had notified 15 companies, including Tata Sons, under this category. The holding company would now have to list on the bourses by September 2025.

“There are multiple levers of value available from unlisted investments as the group is entering into new-age segments such as semi-conductors (Tata Electronics),” it said. The IPO could likely lead to the simplification of the group holding structure.

“We believe that about 80% of Tata Sons’ holdings might not be monetisable, but the process of restructuring could trigger a re-rating,” it added.