Tata group shares rally on prospects of Tata Sons’ IPO value unlocking

Shares of Tata group companies surged today closing 1-13 per cent higher, with many of them hitting 52-week highs in intra-day trades, after a couple of brokers put out reports of holding company Tata Sons’ initial public offering next year fetching it a valuation of around ₹8 trillion.

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The biggest gainers were Tata Chemicals that ended 11.3 per cent higher, Rallis India ( up 12.8 per cent), Tata Power (up 8.5 per cent), Tata Investment Corp (up 5 per cent) and newly-listed Tata Technologies that ended 5.7 per cent higher.

Tata Motors, Tata Steel, Tata Consumer Products, Indian Hotels and Trent also closed 2-3.7 per cent higher at the day’s close.

Tata Consumer, Tata Communications, Tata Chemicals, Tata Steel, Tata Power, Rallis, and Tata Investment hit 52-week highs in intra-day trades.

Tata Sons IPO buzz

“Tata group stock fundamental long-term stories are intact, and they have outperformed in recent times,” said Prashanth Tapse, Senior VP, Research Analyst at Mehta Equities. But the buzz created around the Tata Sons IPO next year, “has fuelled fresh fire in the group stocks due to cross holding structures,” he added.

According to information on Tata Sons’ website, Tata Motors held 3.06 per cent stake in Tata Sons as on March 31, 2023, Tata Power held 1.65 per cent, Indian Hotels held 1.11 per cent, Tata Chemicals held 2.5 per cent and Tata Steel held 3.06 per cent.

The value unlocking that is expected consequent to a listing by Tata Sons has fuelled the rally in many of the stocks. Tapse pointed out, as an example, that Tata Chemicals’ holding in Tata Sons would be worth close to its own market capitalisation of ₹33,414 crore. Tata Sons has been classified as an upper layer NBFC and under Reserve Bank of India regulations would likely have to list next year.

“Market sentiments see it as a great opportunity with high potential and limited downside if the Tata Sons listing proceeds would be as per market reports..,” Tapse added.

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He said that the recent demerger announcement in Tata Motors would also likely encourage a lot of corporate actions in group companies to unlock shareholders value.

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