How Tata Capital Is Prepping For An IPO

After 22 years, India's biggest conglomerate will once again have a listed firm in the financial services industry

- T. Surendar

In the next six months, if everything goes to plan, the Mumbai-based $365 billion Tata group may well get its first publicly traded financial services company.

In a newspaper advertisement last Monday, Tata Capital said that it has filed its draft red herring prospectus with the Securities and Exchange Board of India (Sebi) to float its maiden public issue. The filing was made through the confidential route in which no details of the proposed issue are disclosed to the public.

Reports in newspapers suggested the public offer of shares could be worth ₹15,000-₹18,000 crore, making it one of the largest in the financial services industry and only the third IPO of any Tata company in the last 25 years. The two others are Tata Consultancy Services in 2003 and Tata Technologies in 2023.

Right away, the timing to list appears to be in response to a central bank stipulation in September 2022 that needed companies like Tata Capital to list on stock exchanges. Based on the scale of operations, the central bank had classified non-bank finance companies on different levels and made listing of the large and systemically important ones mandatory within three years or September 2025. Tata Capital was classified as an upper-layer finance company, requiring it to be listed within that time frame.

For equity investors and the stock market, the Tata move may appear to have come a little late in the day. Banking and financial services companies account for a fifth of Nifty 50 companies and 26% of its market capitalization. Seven out of the top 20 most valued companies in the Nifty are either banks or financial services companies. Tata contemporaries—other large business houses like the Aditya Birla group, Reliance, Mahindra's or the south-based Murugappa group—have all taken the lead and listed their finance companies and benefited from the valuation growth in the sector in recent years.