Tata Capital IPO: Tata Capital, the highly anticipated Tata Group company set to hit the primary market on October 6, has announced its IPO price band at ₹310-326 per share. However, the announcement has dampened investor sentiment — particularly among those who bought shares in the unlisted market.
Tata Capital IPO price band has not only eroded hopes of strong listing gains, but has also left many investors questioning whether they will even recover their original investment.
The concern stems from the fact that Tata Capital’s unlisted stock had peaked at around ₹1125, significantly higher than the upper end of the IPO price band. Any investor who bought Tata Capital unlisted shares then, in hopes of making returns on IPO, is now starting at a staggering 71% loss. Meanwhile, as of yesterday’s close to the Tata Capital IPO price is at a 56% discount.
As a result, early investors now face the possibility of booking losses.
“Tata Capital’s valuation reset reflects the market’s broader shift toward more conservative pricing in financial services IPOs. The company remains fundamentally strong, with a diversified lending book and strong parentage backing its growth,” said Raj Gaikar, Research Analyst, SAMCO Securities.
HDB Fin, NSDL and now Tata Capital: Unlisted shareholders face rude shock
However, this is not a standalone incident. Earlier big-shot IPOs whose shares enjoyed good traction in the unlisted market also disappointed investors due to discounted IPO pricing — serving as cautionary tales.
National Securities Depository Limited (NSDL) has set the price band for its upcoming IPO at ₹760–800 per share — a steep 22% discount to its valuation in the unlisted market.
A similar pattern played out with HDB Financial Services. The ₹12,500-crore IPO was priced at ₹700–740 per share, far below the ₹1,225 level seen in the unlisted market as recently as June 18.
Explaining the reason behind this difference, Gaikar said that in the unlisted space, scarcity and limited liquidity often push valuations much higher than its actual fundamentals. Once these companies enter the public market, regulatory oversight, peer benchmarking, and investor scrutiny push valuations toward realistic levels, he said, adding that investment banks also prefer to leave some upside for public investors to ensure smooth listings.
Can Tata Capital’s unlisted shareholders recover losses?
While NSDL has managed to peak above the unlisted price, HDB Financial shares have cracked below the issue price.
In the case of the Tata Capital IPO, Gaikar expects that unlisted investors will have to wait for a medium-to long-term to break even on their investment.
“In the near term, recovering these losses fully may be difficult for those investors who have listed in unlisted shares, as listed valuations tend to align more with sector averages than grey market multiples,” he opined.
In the medium to long run, patient investors can recover their losses if the company delivers strong growth, maintains solid credit quality, and continues to improve its financial performance in the future, the SAMCO Securities analyst added.
While these incidents may make investors steer clear of unlisted shares, Gaikar said that unlisted stocks can still create wealth if chosen carefully, but investors need to keep their expectations in check.
“For long-term investors, buying quality companies with strong fundamentals and fair valuations with a high margin of safety can still work out well,” he opined.
However, Nithin Kamath, Founder and CEO, Zeordha, had cautioned retail investors against investing in the unlisted market, suggesting that mutual funds are a better bet.
“Most investors think they can make easy money by picking these pre-IPO companies, waiting for the IPO, and making big listing gains. But it’s not as easy as it sounds, and there are all sorts of risks,” the entrepreneur said in a social media post on X back in June.
Low liquidity, delayed IPOs and lack of regulations are some of the key risks that investors face when they dabble in the world of unlisted shares, Kamath had warned.
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
