Tata Chemicals shares crash 10% after Tata Son
Tata Chemicals’ stock, which surged 36% in the past four trading sessions, faced a 10% decline, reaching Rs 1,183.45 on BSE on Monday. This drop is linked to the Tata Group’s efforts to avoid the Tata Sons IPO. The influence extended to Tata Investment Corporation shares, experiencing a 5% downturn after a 28% increase last week. Tata Chemicals, anticipated to benefit significantly from a potential Tata Sons listing, found itself in the F&O ban list today.
According to RBI rules, Tata Sons must go public by September 2025 as it falls under the category of an upper-layer NBFC. However, the massive Rs 31 lakh crore conglomerate is considering restructuring its balance sheet. If it repays debt or shifts its Tata Capital holding to another entity, Tata Sons might be deregistered as a core investment company (CIC) and upper-layer NBFC. This move could help Tata Sons steer clear of mandatory listing, as reported by ET. Despite the Tatas’ request, the RBI has already rejected an exemption from the listing rule
Boosted by enthusiastic individual investors, Tata Group stocks saw an increase of Rs 85,000 crore in market value last week. Much of this surge was driven by retail investors anticipating the Tata Sons IPO.
The upward trend started on Monday when investment banker Spark Capital’s report highlighted Tata Chemicals as a significant player in the IPO. Vidit Shah from Spark Capital mentioned, “If the market values Tata Sons at Rs 10-11 lakh crore, the intrinsic value of the publicly listed Tata Chemicals business, with a 5-7x FY25 PE, could potentially see a re-rating when the investment is liquidated during or after the IPO.
According to the brokerage’s analysis, Tata Chemicals’ 3% stake in Tata is estimated to be valued at approximately Rs 19,850 crore, making up 80% of the company’s market value.
The core business of Tata Chemicals is currently trading at around 11 times FY25 PE, equivalent to Rs 10,900 crore. The valuation is considered fair, considering the challenges the soda ash industry is presently encountering. However, there is potential for a re-rating of valuations with the announcement of growth plans or improvements in soda ash realizations, as stated by Shah.
Know more about TaTa Sons..
Tata Sons is the flagship company and the primary investment holding company of the Tata Group. Established by the Tata family in 1868, the Tata Group has grown to become one of India’s most prominent and diversified business conglomerates. Tata Sons is the principal vehicle through which the Tata family and trusts exercise control over various Tata companies.
Key points about Tata Sons:
Ownership and Control: The majority ownership of Tata Sons is held by various Tata Trusts, charitable entities that support philanthropic causes. These trusts were set up by members of the Tata family.
Investment Holding: Tata Sons serves as the main holding company for the Tata Group, holding significant equity stakes in major Tata companies across diverse sectors such as steel, automobiles, information technology, chemicals, hospitality, and more.
Leadership and Governance: The Chairman of Tata Sons plays a crucial role in overseeing the Tata Group’s strategic decisions and operations. The Tata family has historically been actively involved in the leadership of the company.
Philanthropy: Tata Sons and the Tata Trusts are known for their commitment to social causes and philanthropy. The trusts hold the majority of the share capital in Tata Sons, ensuring that a significant portion of the Group’s profits is channeled into charitable activities.
Corporate Structure: Tata Sons is structured as a private company, and its financial details are not publicly disclosed to the same extent as publicly traded companies.
The mention of “Tata Sons IPO” in recent news suggests the possibility of Tata Sons going public through an Initial Public Offering, a move that could bring additional transparency and liquidity to the company’s ownership structure. However, it seems the company is exploring options to restructure its balance sheet to avoid a mandatory listing, as per RBI rules.
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