Tata Stocks Dip as Tata Sons IPO Plans Remain Uncertain
Shares in Tata Group companies experienced a notable drop following speculation about Tata Sons' potential public listing. Tata Chemicals Ltd. and Tata Investment Corporation shares fell sharply by up to 10% and 5%, respectively, amid concerns that Tata Sons may not proceed with an initial public offering (IPO). The Reserve Bank of India (RBI) has established norms that necessitate Tata Sons, categorized as an 'upper layer' Non-Banking Financial Company (NBFC), to list by September 2025. However, the conglomerate is reportedly exploring various options to comply with these norms without proceeding with a listing.
The downturn in stock prices comes after a significant rally last week when shares in Tata Chemicals surged by 36% on the buzz of a possible IPO. The decline reflects investor uncertainty as reports suggest that Tata Sons might restructure its debt or separate entities like Tata Capital to meet RBI's requirements. The broader impact was seen across the group, with Tata Consumer Products, Tata Motors, Tata Steel, and other group entities experiencing declines between 3% and 12%.
Kotak Securities maintained a "sell" rating on Tata Chemicals, forecasting a further 35% decline, citing industry challenges and increasing competition from China. The brokerage firm also reiterated its fair value estimate for Tata Chemicals at Rs 780, anticipating a significant decrease in earnings per share over the next two years due to margin pressures. Despite the tumult, Fitch Ratings affirmed Tata Chemicals' long-term foreign-currency Issuer Default Rating (IDR) at 'BB+' with a 'Stable' outlook, shifting from 'Positive'.
Tata Chemicals, holding a 3% stake in Tata Sons, saw its shares drop by approximately 9% in early trading. The market value of Tata Chemicals' stake in Tata Sons is estimated to represent a significant portion of the company's overall market value. Tata Sons' reluctance to go public, along with its search for alternatives to listing, has cast a shadow over the market, leading to the erosion of billions in market capitalization across the listed Tata Group companies.
