Winning Bizness Desk

Mumbai. Tata Capital, the financial services arm of the Tata Group, is gearing up to enter the capital markets with an Initial Public Offering (IPO). The company has submitted its draft red herring prospectus (DRHP) to the Securities and Exchange Board of India (SEBI), marking a significant step toward its market debut.

As per media reports, Tata Capital has opted for SEBI’s confidential pre-filing route for the IPO. Introduced in November 2022, this mechanism allows companies to file draft IPO papers without publicly disclosing sensitive business details during the early stages of the regulatory process.

Target to Raise ₹15,000 Crore Through IPO

Through this IPO, Tata Capital aims to raise around ₹15,000 crore. The issue will include a fresh issuance of 2.3 crore equity shares along with an offer for sale (OFS) by existing shareholders. This dual route of fundraising is designed to meet both capital infusion needs and provide an exit window for select investors.

Tata Sons Holds Majority Stake

Tata Sons, the holding entity of the Tata Group, owns a dominant 92.83 percent stake in Tata Capital. The remaining stake is held by various other Tata Group companies and associated trusts. The company is classified as an “Upper Layer” Non-Banking Financial Company (NBFC) under the Reserve Bank of India (RBI) guidelines.

Ten Investment Banks Appointed for Listing

To oversee the IPO and related listing process, Tata Capital has onboarded ten investment banks as advisors. These include Kotak Mahindra Capital, Citi, JP Morgan, Axis Capital, ICICI Securities, HSBC Securities, IIFL Capital, BNP Paribas, SBI Capital, and HDFC Bank. The IPO will feature a mix of primary and secondary share offerings.

Stake Dilution Likely by Tata Sons and IFC

As part of the share sale, both Tata Sons and International Finance Corporation (IFC) are expected to reduce their stakes. Tata Sons is likely to play a more prominent role in the divestment process, although specific details on the quantum of stake sale are yet to be made public.

RBI Mandate Makes Listing Compulsory

Tata Capital was designated an Upper Layer NBFC by the RBI in September 2022. Under RBI’s mandate, such entities are required to get listed within three years of the classification. This means Tata Capital has until September 2025 to complete its market listing. The IPO filing comes well in advance of that deadline.

Board Approval Received, Rights Issue Already Done

The company secured board approval for the IPO just last month. Prior to this, the board had also cleared a ₹1,504 crore rights issue in February 2024 to strengthen its capital base. If successful, this would be the first IPO from a Tata Group company since Tata Technologies listed in 2023.

Strong Business Footprint and Loan Portfolio

As of March 31, 2024, Tata Capital had assets under management (AUM) of ₹1.58 lakh crore. The company operates across various loan segments, including personal loans, home loans, vehicle financing, commercial vehicle loans, and business loans. It also offers credit cards and digital lending products, expanding its presence in retail financial services.