Tata Capital set for IPO—after merger with Tata Motors Finance
What's the story
Tata Capital, a financial services firm, is preparing to file preliminary papers for a $2 billion initial public offering (IPO). The move will occur after receiving final approval from the National Company Law Tribunal (NCLT) for the merger with Tata Motors Finance, according to PTI. At this size, Tata Capital is expected to be valued at around $11 billion.
Approval awaited
NCLT approval and IPO structure
The final order from the NCLT on the merger is awaited, with the report indicating it will be finalized by the end of this financial year (FY25). The Reserve Bank of India (RBI) has identified Tata Capital as an upper-layer non-banking finance company (NBFC), and its board has already approved plans for an initial share sale.
Share sale plan
IPO structure and shareholder participation
The proposed IPO will comprise 2.3 crore equity stocks via a fresh issue, as well as an offer for sale (OFS) by certain existing shareholders, as per a disclosure made to stock exchanges. Apart from the IPO, the company also plans to raise money through a rights issue, hoping to bolster its financial position ahead of the public listing.
Regulatory adherence
Tata Capital's compliance with RBI listing requirements
Notably, the IPO marks Tata Group's second public market debut in recent years, following Tata Technologies's debut in November 2023. This is part of the company's efforts to comply with RBI's listing requirements for upper-layer NBFCs. As per the RBI mandate, these companies are required to list on stock exchanges within three years of being designated as an upper-layer NBFC.
Merger outcome
Merger details and shareholder implications
The merger of Tata Capital and Tata Motors Finance was approved by the Competition Commission of India (CCI) in September. In June 2024, the boards of Tata Capital, Tata Motors Finance, and Tata Motors approved the merger under an NCLT scheme of arrangement. As consideration for the merger, Tata Capital will issue its equity stocks to the shareholders of Tata Motors Finance, resulting in Tata Motors holding a 4.7% stake in the merged entity.