Tata Sons's potential IPO valuation estimated at $96 billion

By Pratyaksh Srivastava

Mar 05, 2024

07:15 pm

What's the story

Tata Sons Limited could be valued at a whopping $96 billion in an initial public offering (IPO), as per Mumbai-based investment banking firm Spark PWM Pvt. The salt-to-software conglomerate, with stakes in Tata Consultancy Services and Tata Motors, is expected to be listed within next 18 months. This comes after the Reserve Bank of India (RBI) classified Tata Sons as an "upper-layer" non-banking financial company (NBFC) in September 2022, requiring a public listing within three years.

Contributing factors

Factors contributing to Tata Sons's valuation

According to Spark analyst Vidit Shah, Tata's entry into new age sectors like semiconductors and EV batteries offers "multiple levers of value" from its unlisted investments. The market value of Tata Sons's listed investments is estimated at Rs. 16 trillion while its privately-held stake could be worth around Rs. 1-2 trillion. Investors might get a 30%-60% discount for the holding company, the analyst added.

Larger impact

Impact on India's IPO market and Tata's structure

A Tata Sons IPO would energize India's bustling IPO market, which has seen a spike in companies seeking to sell shares amid soaring valuations. Since the beginning of 2024, listings in India have more than doubled to 56 compared to the same period last year. Shah believes that an IPO could also "lead to the simplification of the complicated group holding structure of the Tata Group." It could also prompt some listed firms to liquidate their holdings within the conglomerate.

Re-rating

Restructuring and re-rating possibilities

Spark estimates that about 80% of Tata Sons's holdings may not be monetizable, but a restructuring process could result in re-rating. As an upper-layer non-bank financial company, Tata Sons must list on exchanges by September 2025. RBI has four layers for NBFCs: base layer, middle layer, upper layer and top layer. The upper layer includes NBFCs identified by the central bank as guaranteeing enhanced regulatory requirements based on a set of parameters and scoring methodology used by RBI.