Tata Capital Awaits NCLT Final Nod to Proceed with Mega IPO
Financial services giant Tata Capital is planning to file draft papers with market regulator Securities and Exchange Board of India (SEBI) to raise around USD 2 billion (approximately ₹17,000 crore) through an initial public offering (IPO). However, the IPO process hinges on securing final approval from the National Company Law Tribunal (NCLT) for the merger of Tata Motors Finance into Tata Capital, according to industry sources.If the IPO goes ahead at this scale, Tata Capital's market valuation is anticipated to touch around USD 11 billion, sources familiar with the developments indicated.
NCLT Approval Expected by March-End FY25
Sources have revealed that Tata Capital is expecting the NCLT’s final order by the close of the current financial year (FY25). The company had previously received board approval for the IPO, but the filing of the Draft Red Herring Prospectus (DRHP) with SEBI will occur only after NCLT’s merger clearance.An email sent to Tata Capital seeking comments on the timing and specifics of the IPO filing remained unanswered.
IPO Structure: Fresh Issue and Offer for Sale (OFS)
The IPO is structured to include a fresh issue of 2.3 crore equity shares alongside an offer for sale (OFS) by certain existing shareholders, as detailed in disclosures submitted to stock exchanges.In addition to the IPO, Tata Capital intends to bolster its financial strength ahead of the public listing by raising additional funds through a rights issue.
Strategic Move to Comply with RBI Listing Mandate
This IPO initiative aligns with Reserve Bank of India’s (RBI) regulations, which mandate that all upper-layer Non-Banking Financial Companies (NBFCs) must list on stock exchanges within three years of their categorization. Tata Capital was designated as an upper-layer NBFC in September 2022, thereby triggering this compliance requirement.The Tata Capital IPO, upon successful listing, would rank among India's largest financial-sector share sales, marking another significant public-market milestone for the Tata Group, following the successful IPO of Tata Technologies in November 2023.
Tata Motors to Hold 4.7% Stake Post-Merger
In June 2024, the boards of Tata Capital, Tata Motors Finance, and Tata Motors had unanimously approved the merger through an NCLT-backed scheme. Post-merger, Tata Capital will issue new equity shares to shareholders of Tata Motors Finance, resulting in Tata Motors owning an effective stake of 4.7% in the merged entity. Tata Sons, the holding company of Tata Capital, will continue holding a majority stake of 92.83%.The proposed merger also received clearance from the Competition Commission of India (CCI) in September 2024.
In Tata Motors’ recent Q3 earnings call, the Group CFO, PB Balaji, mentioned, "Final orders (are) awaited from the NCLT, and we do expect closure for this by the end of this financial year." He further noted that Tata Motors Finance had completed its creditor meeting.
Market Advisors Appointed for IPO Management
Tata Capital has appointed prominent advisors—law firm Cyril Amarchand Mangaldas and investment bank Kotak Mahindra Capital—to guide the IPO process.Meanwhile, another significant player, HDB Financial Services, an upper-layer NBFC owned by HDFC Bank, is also gearing up for its own IPO, aiming to raise ₹12,500 crore. It filed its draft IPO papers with SEBI in October.
With key regulatory and corporate approvals anticipated soon, Tata Capital's impending IPO is expected to be one of the landmark public issues in India's evolving financial services landscape.
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