During the opening trading session on Thursday, March 11, 2024, the shares of several companies affiliated with the Tata Group witnessed a significant decline in their stock prices.
This downturn in stock prices coincided with emerging reports indicating that Tata Sons, the holding conglomerate of the Tata Group, is revisiting its plans for an initial public offering (IPO).
Tata Sons, with an estimated valuation of $150 billion, is purportedly exploring alternative strategies to circumvent an IPO following a directive issued by the Reserve Bank of India (RBI) in 2022.
The RBI's directive categorized Tata Sons as an upper-layer non-banking financial entity, mandating its listing by September 2025.
Despite seeking an exemption from this listing mandate, Tata Sons' request was declined, prompting a quest for legal recourse to resolve the issue.
The ambiguity surrounding the IPO deliberations has reverberated across various Tata Group equities.
Notably, there was a surge in market activity last week fueled by speculation surrounding a potential IPO by Tata Sons, leading to an uptick in the stock prices of several Tata Group entities, with some registering gains of up to 36 percent. However, today's developments have reversed these gains amid speculation that Tata Sons may forego its plans for a public offering.
Tata Chemicals, for instance, experienced a sharp downturn, triggering its lower circuit limit of 10 percent, while Tata Investment Corporate was similarly constrained by a 5 percent lower circuit.
Additionally, Tata Power Co recorded a decline of over 4.7 percent, with other prominent Tata Group stocks also witnessing negative movements in the early trading hours.
Kotak Institutional Equities cautioned that recent reports suggesting Tata Sons' reconsideration of an IPO should moderate expectations regarding potential value-unlocking opportunities, particularly for Tata Chemicals.
"Recent reports indicating that Tata Sons is evaluating strategies to avoid an IPO should temper expectations surrounding value-unlocking prospects at Tata Chemicals. Our fair value estimate remains at Rs 780, and we anticipate a decline in earnings per share by approximately two-thirds over FY2023-25E, driven by diminishing margins in the soda ash segment. The recent speculative activity in the stock should be viewed as an exit opportunity," Kotak Institution Equities conveyed to Business Today.
Overall, the prevailing uncertainty surrounding Tata Sons' IPO deliberations continues to dampen investor sentiment, resulting in downturns across various Tata Group equities.
