Tata Cap IPO pops unlisted mkt bubble

Unlisted investors confront lower than expected prices and waning pre-listing gains

- KHUSHBOO TIWARI & SAMIE MODAK

Tata Capital’s initial public offering (IPO) price band has jolted the unlisted share market, where investors had paid as much as &1,125 apiece for the non-banking arm ofthe Tata group.

On Monday, the company fixed its price band at 310-326 a share, pegging its valuation at nearly 1.4 trillion.

Backin April 2024, Tata Capital’s unlisted stock had surged past 71,000 amid a frenzy in the IPO market. Investors often rush to pick up marquee names in the grey market ahead of listings, hoping for hefty gains.

According to the company’s red herring prospectus, there were around 37,000 public shareholders, accounting for nearly a 3.7 per cent stake in the company.

“Transactions that happen in the unlisted markets are often without any interaction with the company. So, often, there is no correlation between the unlisted price and the actual price,” said V Jayasankar, managing director at Kotak Investment Banking, during the Tata Capital IPO conference. While the strategy of buying in the unlisted market works in buoyant markets, it has misfired in several high-profile cases. Shares of Tata Technologies, HDB Financial Services, and Nazara Technologies were priced at less than half their peak unlisted prices. National Securities Depository stock also ended up over 37 per cent below its grey market peak. However, in some cases, the losses for unlisted investors were mitigated thanks to strong after-listing performance.