Tata Capital files for confidential IPO with Sebi, eyes ₹15,000 cr listing

Tata Group’s financial services arm, Tata Capital, has submitted a confidential pre-filing for its initial public offering (IPO) with the Securities and Exchange Board of India (Sebi). The move is part of the group's strategy to list its financial arm while safeguarding sensitive business information, Moneycontrol reported on Friday citing sources.

Details of Tata Capital IPO

Tata Capital, a non-banking financial services (NBFC) firm and a subsidiary of Tata Sons, has engaged 10 investment banks as advisors for the listing. The banks include Kotak Mahindra Capital, Citi, JP Morgan, Axis Capital, ICICI Securities, HSBC Securities, IIFL Capital, BNP Paribas, SBI Capital, and HDFC Bank.

The report indicates that the IPO will consist of a combination of primary and secondary share offerings, with Tata Sons and investor International Finance Corporation (IFC) planning to reduce their stakes. However, Tata Sons is expected to play a more significant role in the stake sale.

On February 25, Tata Capital’s board approved the IPO, comprising a fresh issue of up to 230 million shares along with an offer for sale by existing shareholders. The IPO is subject to market conditions and regulatory approvals.

Tata Sons’ holding and market standing

As of March 31, 2024, Tata Sons directly owned 92.83 per cent of Tata Capital, while the remaining shares were held by other Tata Group entities and IFC. The public listing is not expected to reduce Tata Sons' stake below 75 per cent in the near future, according to a recent Fitch Ratings report.

Ahead of the IPO, Tata Capital’s board also cleared a ₹1,504 crore rights issue in February. Tata Sons is expected to subscribe to the entire rights issue to support the company’s financial needs.

Growth and financial position

Tata Capital is a systemically important, non-deposit-taking, Core Investment Company registered with the Reserve Bank of India (RBI). It operates across both wholesale and retail finance segments, offering a wide range of financial products.

According to Crisil Ratings, Tata Capital had assets under management (AUM) of ₹158,479 crore as of March 31, 2024, compared to ₹119,950 crore in 2023 and ₹94,349 crore in 2022.

Tata Sons has also infused ₹6,097 crore into Tata Capital over the past five fiscal years, reinforcing its commitment to expanding its financial services business. This includes ₹2,500 crore in financial year 2018-19 (FY19), ₹1,000 crore in FY20, ₹594 crore in FY23, and ₹2,003 crore in FY24.

Tata Capital joins list of pre-filing companies

With this move, Tata Capital becomes the eighth major Indian company to opt for the confidential pre-filing route, following the footsteps of Tata Play, Oyo, Swiggy, Vishal Mega Mart, Credila Financial Services, Indira IVF, and PhysicsWallah.

The confidential pre-filing route, introduced by Sebi in November 2022, enables companies to submit their Draft Red Herring Prospectus (DRHP) without making crucial business details public. This method helps protect proprietary information from competitors and market speculation. Companies can decide whether to proceed with the IPO after receiving Sebi’s observations. If they choose not to proceed, they can withdraw without public scrutiny. If the company moves forward, the DRHP must be disclosed publicly at least 21 days before filing the Red Herring Prospectus (RHP).