Tata Capital's $2 Billion IPO Plans Await NCLT Approval on Tata Motors Finance Merger
Tata Capital Limited is preparing to enter the public market with what could become one of India's largest financial sector listings, but investors will have to wait until a crucial regulatory hurdle is cleared. The financial services giant plans to file preliminary papers with the Securities and Exchange Board of India (SEBI) for its much-anticipated initial public offering (IPO) only after receiving final approval from the National Company Law Tribunal (NCLT) regarding its merger with Tata Motors Finance.
A Major Financial Services IPO in the Making
According to market sources, Tata Capital aims to raise approximately $2 billion (over Rs 17,000 crore) through the public offering. At this size, the company is expected to be valued at around $11 billion, positioning it as a significant player in India's financial services landscape.
The proposed IPO structure would comprise 2.3 crore equity shares through a combination of fresh issue and an offer-for-sale by certain existing shareholders. The company has already secured board approval for the initial share sale, indicating strong internal commitment to the listing plan.
NCLT Approval: The Critical Final Step
The NCLT's final order on the merger between Tata Motors Finance and Tata Capital represents the last major regulatory milestone before the IPO process can formally begin. Sources close to the matter indicate that this approval is expected to be received by the end of the current financial year.
The merger plan, approved by the boards of all three involved companies — Tata Capital, Tata Motors Finance Ltd., and Tata Motors Ltd. — in June 2024, has already cleared another significant regulatory hurdle when it received approval from the Competition Commission of India (CCI) in September.
Strategic Restructuring Before Public Listing
As part of the merger arrangement, Tata Capital will issue its equity shares to the shareholders of Tata Motors Finance. This transaction will result in Tata Motors effectively holding a 4.7% stake in the merged entity, creating a more consolidated financial services operation under the Tata umbrella.
During Tata Motors' Q3 earnings call, Group CFO PB Balaji confirmed that the Tata Motors Finance creditors meeting has been completed, with final NCLT orders pending. "We do expect closure for this by the end of this financial year," he stated, providing a timeframe for potential investors.
Regulatory Compliance and Capital Raising Strategy
The IPO move is partially driven by regulatory requirements. As an upper-layer non-banking finance company (NBFC) designated by the Reserve Bank of India (RBI) in September 2022, Tata Capital must list on a stock exchange within three years of receiving this classification.
Beyond regulatory compliance, the company is also implementing a comprehensive capital raising strategy. In addition to the planned IPO, Tata Capital has announced its intention to conduct a rights issue to further strengthen its financial position before the public listing.
Professional Advisory Team in Place
To manage the complex IPO process, Tata Capital has assembled a team of experienced advisors. Law firm Cyril Amarchand Mangaldas and investment bank Kotak Mahindra Capital have been engaged to guide the company through the regulatory and market aspects of the public offering.
However, sources confirm that the draft red herring prospectus (DRHP) will only be filed with SEBI after receiving the crucial NCLT approval on the proposed merger, highlighting the sequential nature of the company's listing strategy.
Tata Group's Growing Public Market Presence
When completed, this offering will represent the Tata Group's second major public market debut in recent years, following the successful listing of Tata Technologies in November 2023. The IPO reflects the continued evolution of the Tata conglomerate's business structure and its strategic approach to capital markets.
Tata Sons, the principal holding company of the Tata Group, maintains a dominant 92.83% ownership stake in Tata Capital, underscoring the strategic importance of this business unit within the wider conglomerate.
Broader NBFC Listing Trend
Tata Capital is not alone in its journey toward public listing. Another upper-layer NBFC, HDB Financial Services (owned by HDFC Bank), is also preparing for an IPO. HDB Financial Services filed its draft papers with SEBI in October, seeking to raise Rs 12,500 crore through its initial share sale.
This parallel movement suggests a broader trend of large financial services companies accessing public markets, potentially driven by both regulatory requirements and strategic capital-raising objectives in a competitive financial landscape.
For retail and institutional investors interested in the financial services sector, these developments signal significant new investment opportunities on the horizon as major players in India's NBFC space prepare to welcome public shareholders.
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