Another major and much expected evolution has taken shape today in the Indian financial horizon. A top quality non-bank financial enterprise of the Tata Group, Tata Capital Limited is soon to launch an initial public offering (IPO). The listing will not affect the five-year strategic plan of the Tata Group in any way since it is viewed as a part and parcel of it; furthermore, it has both direct and purely monetary consequences.
Totally 44 crore shares will be available in the market in respect of the IPO. Another twenty-one crore shares will be offered as new equity; twenty-three crore of the shares will come out of the current holdings of Tata Sons which is the major promoter. Such an arrangement will lead to a large amount of proceeds being placed in the companys treasury and these funds are expected to be used in the future needs of the company and in its expansion plans.
Tata sons are not the only shareholders of the transaction. Engaged as well is the International Finance Corporation (IFC). The markets are offering about 3.58 crore shares with 7.16 crore as the total share being held by IFC now. Tata Sons currently owns 88.6 per cent of Tata Capital with other Tata Group companies owning an approximate 7 per cent. In this context therefore, this IPO is not regarded just as a way of raising capital but a critical milestone in the general orientation of the Tata enterprise.
It should be mentioned that the IPO was recently approved by the regulators (Securities and Exchange Board of India (SEBI) several weeks ago and currently, the company is at its finishing stage of setting down its papers (draft red herring prospectus). The proceeds of this activity is not restricted to cover the cost of IPOs, but instead the funds will be used to strengthen the Tier-1 capital ratio of Tata capital, and hence improving the financial strength of the firm.
Big names are behind this IPO. Kotak Mahindra Capital, Axis Capital, BNP Paribas, Citigroup Global Markets and HDFC Bank will be the main book running lead managers for this issue. Notably, the company has not planned any pre-placement plan before the IPO, meaning everything will be raised directly through the public issue.
Of course, if we talk about numbers, then the market is talking about the IPO being around ₹17,200 crore. However, if the company keeps the price of ₹281 per share like the previous rights issue, then this IPO will be around ₹13,371 crore.
Overall, Tata Capital’s entry into the stock market is a step towards a new journey for a large and trusted NBFC company. This step is also important for the market and can open up a new option for investors.
