Mumbai: A short-term pop could push up the stocks of seven Tata group companies, led by Tata Chemicals, which together hold 11.92% stake in Tata Sons, the holding company (holdco) of the salt-to-software conglomerate, after RBI rejected its submission to remain private.
Tata Chemicals is expected to be a standout performer when the markets reopen on Tuesday, as its approximately 2.5% stake in the holdco is valued at upwards of ₹17,407 crore after an estimated 40% holding company discount, were it to be listed. This is against its market capitalisation of ₹15,603 crore as of Friday.
To be sure, Tata Sons receives dividend income from Tata Group companies and proceeds from listed companies. Its standalone revenue totalled ₹42,366.5 crore and it reported ₹31,961 crore profit in FY26. However, these standalone numbers do not include the burgeoning losses from businesses incubated under the holding company. Tata Sons’s four privately held businesses include Air India, Tata Digital, Tata Electronics, and lithium-ion battery cell manufacturing for electric vehicles under Tata Agratas, which reported a combined loss of ₹29,924 crore.
When a similar listing prospect emerged in March 2024, group shares surged rapidly before gains fizzled when Tata Sons sought to surrender its registration as a core investment company. Tata Chemicals rallied 39% in less than a week during that wave, while entities like Tata Motors Ltd, Tata Power Co., and Tata Steel Ltd also posted steep short-term advances.
The continuation of the likely momentum if the listing takes place, will depend upon whether Tata Sons accedes to the regulatory directive or mounts a legal challenge.
Tata Sons submitted an application to surrender its registration as an upper-layer non-banking financial services (UL-NBFC) company in March 2024, which the central bank rejected on Friday. In September 2022, RBI had directed the stock market listing of core investment companies or upper-layer NBFCs with an asset size of ₹1 trillion within three years.
Trusts’ reaction could alter trajectory
“From a holding-company perspective, listed Tata companies that own stakes in Tata Sons could see greater price discovery for those investments following a listing, as an otherwise illiquid asset would have an observable market value,” said Devang Bhatt, director Research – private wealth management, Spark Capital.
“Tata Chemicals is one such company with an exposure to Tata Sons and could therefore see greater visibility around the value of this investment. However, the ultimate impact on individual listed companies would depend on the valuation at which Tata Sons lists and the materiality of their respective holdings,” Bhatt added.
Veteran investor Shankar Sharma added that there could be a ‘short-term uptick’ in the shares of companies holding stakes in Tata Sons.
“I say short term because we don’t know how the trusts having controlling stakes in Tata Sons would react post the RBI decision. If the regulatory diktat were to be legally challenged, that would change the picture,” Sharma added.
To a query about Tata Sons’ likely listing being a catalyst for a Tata group restructuring, Dhiraj Relli, managing director and chief executive officer of HDFC Securities, said, “The IPO (Initial Public Offering) will force the conglomerate to pre-emptively overhaul its complex web of cross-holdings, corporate governance, and asset allocations to protect the group from external vulnerability”.
Back in 2024, Tata Chemicals surged 39% from 1 March to ₹1,349 apiece on 7 March; Tata Investment Corp., which was in the trade-to-trade category and holds a 0.08% stake, surged 28% to ₹9,757 apiece over the same period and ahead of the 1:10 share split in October last year. Trade-to-trade category bars intraday selling, which means delivery is compulsory on the same day.
Tata Power Co., which holds 1.65%, jumped 15% to ₹433 over the comparative period, and the demerged Tata Motors Passenger Vehicles, which holds 3.06% in Tata Sons, jumped 9% from 1 March to ₹ 1,065.60 on 5 March. Other companies, including Tata Steel (3.06% in Tata Sons) and The Indian Hotels Co. (1.11% stake), rose 6% and 1.35% each in the first week of March 2024, while Tata Consumer Products Ltd (0.43%) rose 6% between 1 and 11 March.
