Classified as an upper-layer NBFC last year by RBI Tata Sons must list itself on stock exchanges by September 2025. It was last year reported that Tata Sons could be worth Rs 11 lakh crore and a 5% stake sale would lead to an IPO size of about Rs 55,000 crore.
Tata Sons is majorly owned by Dorabji Tata Trust (28%) and Ratan Tata Trust (24%). Both Tata Motors and Tata Chemicals own about 3% stake in the holding company, while Tata Power owns 2% and Indian Hotels 1%.
“However, the only realistic way to get exposure to the potential value unlocking (of Tata Sons stake) is via Tata Chemicals wherein the ownership of Tata Sons potentially amounts to 80% of the company’s market capitalisation. The stake is worth 16-21% of the market capitalisation for the other three companies,” said Vidit Shah of Spark Capital.
Calculations done by the brokerage show that the value of Tata Chemicals’ 3% stake in Tata Sons is worth around Rs 19,850 crore or 80% of the market value of the company.
“The intrinsic business of Tata Chemicals is trading at ~11x FY25 PE (worth Rs 10,900 crore), which we believe to be fair given the headwinds that the soda ash industry is currently facing. However, valuations could potentially re-rate on announcements of growth plans/ improvement in soda ash realisations,” Shah said.Also read: Tata Motors shares rally 8% to fresh high on value discovery hopes after demerger
Tata Sons IPO valuation
Intrinsic valuation calculations can however change depending on how much holding company discount one is willing to give.
“While investors are likely to give a holding company discount of 30-60%, while calculating the equity value, we value Tata Sons at Rs 7.8 lakh crore post factoring for a 60% holding company discount of its listed investments and valuing the unlisted investments at ~Rs1.6 lac crore. We note that the holding company discount given by the street to Godrej Industries and Bajaj Holdings is in a similar range. A change in the discount assumption of 10% could lead to a Rs 1.5-1.6 lakh crore change in the equity value of Tata Sons,” the analyst said.
The market value of Tata Sons’ listed investments is estimated at Rs 16 lakh crore and the market value of unlisted investments could be worth around Rs 1-2 lakh crore given the group’s foray into semiconductors and EV batteries.
RBI rules mandate not only the listing of Tata Sons but also that of Tata Capital Financial Services by September 2025.
Tata stocks are investor favourite
Shares of another Tata Group holding company Tata Investment Corporation, in the meantime, have been rallying non-stop to double in the first two months of 2024 and are up 335% in the last year. Several other Tata stocks like Trent and Tata Motors have more than doubled wealth in the last year.
The combined market capitalisation of all listed Tata stocks recently crossed the Rs 30 lakh crore mark, making the salt-to-software conglomerate’s value bigger than the entire economy of Pakistan.
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times)
