Tata Capital’s IPO Launches Tomorrow: Key Details and Insights

The highly anticipated initial public offering (IPO) of Tata Capital Ltd is set to open for public subscription on October 6, 2023. This IPO, valued at approximately Rs 15,512 crore, will close on October 8. With a price band of Rs 310-326 per share, the offering is notably lower than the company’s current unlisted market price of Rs 735, positioning it as the largest IPO of the year.

Key Dates and Lot Size Details

The subscription period for the Tata Capital IPO begins tomorrow and will conclude on October 8. The anchor book bidding commenced on October 3, with share allotment scheduled for October 9. Investors can expect the company’s shares to be listed on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) on October 13.

The minimum investment for retail investors is pegged at Rs 14,996 for a lot size of 46 shares, based on the upper price of the IPO. For small non-institutional investors (NIIs), the lot size is 14 lots, amounting to Rs 2,09,944, while larger NIIs can apply for 67 lots at a total investment of Rs 10,04,732.

Market Valuation and Growth Potential

The IPO price band represents a significant discount, about 55% lower than the unlisted market price. Consequently, investors who previously acquired shares may face substantial losses. In the grey market, shares are currently trading at Rs 334.5, indicating a potential gain of around 2.61% for those receiving shares in the IPO allotment.

Brokerages are generally optimistic about the IPO, with many recommending a long-term subscription. Notably, SBI Securities attributes the company’s recent dip in return ratios to temporary post-merger losses from Tata Motors Finance Ltd (TMFL). Analysts suggest that TMFL is expected to return to profitability, enhancing Tata Capital’s vehicle financing portfolio and overall business scale.

Deven Choksey’s IPO note values the offering at 4.1 times trailing price-to-book (P/B) ratio, slightly above the peer average of 3.7 times. Despite a return on assets (ROA) of approximately 1.9%, which lags behind the peer average of 3%, analysts maintain it appears fairly valued given its growth outlook.

Other brokerages, including BP Wealth and Mehta Securities, echo similar sentiments, citing the IPO as a reasonable investment opportunity with potential for healthy listing gains. They highlight that Tata Capital’s asking valuation is lower than peers, positioning it attractively amid India’s growing non-banking financial company (NBFC) sector.

Proceeds from the IPO will bolster Tata Capital’s Tier-1 capital base, supporting future lending requirements. The issue consists of a total of 47.58 crore shares, including a fresh issue of 21 crore shares and an offer for sale (OFS) of 26.58 crore shares, with Tata Sons offloading 23 crore shares and the International Finance Corporation divesting 3.58 crore shares.

Tata Capital, part of the prestigious Tata Group, has served over 7 million customers since its inception in 2007. The company’s diverse lending portfolio includes retail, small and medium enterprises (SMEs), corporate, and green finance segments, alongside offering wealth management services.

As the IPO approaches, industry observers expect it will not only be the largest public issue in India’s financial sector but also mark a significant moment for the Tata Group, following the Tata Technologies listing in November 2023. The IPO aligns with the Reserve Bank of India’s mandate for upper-layer NBFCs to go public within three years of classification, a designation Tata Capital received in September 2022.

With strong fundamentals and backing from a reputable parent, Tata Capital’s IPO is attracting attention from various segments of the investment community, setting the stage for a pivotal moment in India’s evolving financial landscape.