This is March 2024, and everyone’s buzzing about the Tata Sons IPO. Why? Well, Tata Sons is like the headmaster of Indian conglomerates, super old and super respected. Now, get this- some investment folks like Spark (an investment advisory firm) are speculating that Tata Sons IPO could be worth a mind-blowing $96 billion!
But here’s the twist – it’s all just speculation, nothing official yet.
Then, on March 11th, rumors started flying that maybe Tata Sons wouldn’t even go public. And guess what?
Chaos occurred among the stocks of Tata Group!
Tata Chemicals took a nosedive, down by a whopping 10%. And it’s not just the only one – other Tata group stocks like Tata Investment Corporation, Tata Consumer Products, Tata Power, Indian Hotels, and Tata Motors also dropped from 1% to 5%. Crazy, right?
Now, the question is Will Tata Sons IPO occur? If yes, then when and what are the plans of Tata Sons after the IPO… Well, to understand that you need to know what Tata Sons do and then we will thoroughly explain its plan with IPO.
Stay tuned!
(A) What does Tata Sons do?
You can think of Tata Sons as the backbone of the Tata group, holding significant shares in various Tata companies. Did you know that a whopping 66% of Tata Sons’ shares are managed by philanthropic trusts? These trusts do amazing work, supporting causes like education, healthcare, and culture.
Tata Sons is a privately owned conglomerate that owns the bulk shares of over 100 companies in the segment of chemicals, consumer products, energy, engineering, information systems, materials, and services.
Tata Sons makes money by receiving dividends from its companies and fees for using the Tata brand.
Let’s look at the profile of Tata Sons-
| Name of the Entity | Tata Sons |
| Type of Company | Privately Owned Conglomerate |
| Founded | 1917 |
| Headquarters | Bombay House, Mumbai (Maharashtra, India) |
| Founder | Jamshetji Tata |
| Key People | Tata Family,Natarajan Chandrsekaran(Chairperson and MD) |
| Area Served | Worldwide |
| Revenue (FY23) | Rs.35,058 crore (US $4.4 billion) |
| Owner | Tata Trusts (100%) |
| Subsidiaries | Tata Group |
Let’s quickly peep into the history of Tata Sons!
Tata Sons traces its roots back to 1917 when it began as a trading enterprise, focusing on the opium and tea trade with Mongolia and China. Over time, it transitioned from direct business operations to becoming the primary holding company of the Tata Group.
Notably, around 66% of Tata Sons’ equity capital is held by philanthropic trusts established by members of the Tata family, including prominent trusts like the Sir Dorabji Tata Trust and Sir Ratan Tata Trust.
As the custodian of the Tata name and trademarks, Tata Sons holds significant influence and recognition, not only in India but also in several other countries. Renowned as one of the largest conglomerates in the Indian subcontinent, Tata Sons continues to play a pivotal role in the economic landscape with its diverse portfolio of businesses and investments.
And speaking of success, Tata companies collectively pulled in a staggering $106 billion in revenue in the fiscal year 2019-20—that’s no small feat!
(B) Why was Tata Sons converted into a private limited company?
In 2017, Natarajan Chandrasekaran stepped in as Chairman of Tata Sons, while the company made a significant shift from being a public limited company to a private limited one. These changes stirred up a storm, especially with former executive chairman Cyrus Mistry challenging them in court.
Before moving further, let’s briefly look into the key reasons why Tata Sons converted into a private company-
| Reasons | Explanation |
| Transfer Restrictions and Shareholder Control | By becoming private, Tata Sons could set strict rules on who could buy and sell shares, making sure control stayed within the group and avoiding any unwanted takeovers. |
| Flexibility and Decision-Making | As a private company, Tata Sons could make decisions faster without having to get approval from a bunch of shareholders. This streamlined their processes, especially for everyday decisions. |
| Transparency Requirements | Public companies have to share a lot of information publicly, which can be a hassle. Going private meant Tata Sons could keep things more private and avoid all that scrutiny. |
| Corporate Governance and Mistry Group | During Cyrus Mistry’s time, there were some issues with how things were run, and his family had a big stake in Tata Sons. Switching to a private limited minimized their influence since they couldn’t veto the change with their 18% shares. |
| Legal Approval and NCLT Jurisdiction | To make the switch, Tata Sons needed most of their shareholders to agree (75% majority) and approval from the National Company Law Tribunal (NCLT), as required by the Companies Act, 2013. This was crucial to making the conversion official. |
Fast forward to December 2019, and the National Company Law Appellate Tribunal (NCLAT) ruled that the conversion, along with Chandrasekaran’s chairmanship, was illegal, reinstating Mistry.
However, the plot thickened in January 2020 when the Supreme Court intervened, putting a hold on NCLAT’s decision. Mistry wasn’t done yet though, he fired back with a cross-appeal, questioning the inconsistencies in NCLAT’s ruling. Finally, in March 2021, the Supreme Court of India upheld Tata Sons’ call to remove Cyrus Mistry from his position.
In a nutshell, Tata Sons’ move to a private limited company aimed to keep control tight, make decisions quicker, and ease up on transparency rules. But getting the thumbs up from the NCLT was essential to make it all legit.
(C) The Necessity for Tata Sons to List on Stock Markets
So, according to some rules set by the Reserve Bank of India (RBI), Tata Sons was classified as this upper-level non-banking financing company thing called a core investment company. Now, in a circular from October 22, 2021, the RBI said that companies like Tata Sons, which fall into this upper layer category, gotta list their shares on the stock market within three years of getting that fancy title.
Basically, they gotta go public and let people buy and sell their shares. Oh, and even before they officially hit the stock market, they gotta start sharing a bunch of info just like companies that are already listed. So, Tata Sons got put in this upper layer category in September 2022, which means they have to go public by September 2025 to follow RBI’s rules.
But still, rumors are floating around that Tata Sons might have some other ideas up their sleeve.
(D) Tata Sons’ plans with IPO: Why Tata Wants to go Public?
So, why exactly does Tata want to leap into the world of public markets? Well, going public, or having an IPO (Initial Public Offering), can bring in a whole bunch of benefits.
Firstly, it’s all about the money. By going public, Tata Sons can raise a ton of capital, which they can then use to fuel their growth and expansion plans.
But that’s not all!
Going public could also make Tata Sons look more valuable to investors, boosting its market value and attracting even more folks who want to invest in the Tata Group’s success story.
Let’s look at the plans of Tata Sons IPO one by one in the following table-
| Reasons for Tata Sons IPO (Plans) | Explanation |
| Raising Capital for Growth | One big reason is money. By going public, Tata Sons can sell shares to the public and raise a lot of capital, which they can then use to fund their expansion plans, invest in new projects, or pay off debts. This extra cash injection can help Tata Sons grow faster and take advantage of new opportunities. |
| Enhancing Valuation and Attracting Investors | Going public can also make Tata Sons look more valuable to investors. When a company is publicly traded, its value is determined by the stock market, and if investors believe in the Tata Group’s potential for growth and success, they’ll be more willing to buy shares. This increased demand can drive up Tata Sons’ valuation and attract more investors who want to be part of the Tata story. |
| Unlocking Value and Building Confidence | Another benefit of going public is that it can shine a spotlight on Tata Sons’ diverse portfolio of assets. By listing on the stock market, Tata Sons can showcase the value of its various businesses and assets, potentially increasing returns for shareholders and boosting investor confidence in the Tata Group’s long-term prospects. |
| Strategic Timing and Market Conditions | The timing of Tata Sons’ IPO is crucial. They need to consider factors like market conditions, investor sentiment, and regulatory approvals. Waiting for the right moment can maximize the success of the IPO and ensure that Tata Sons achieves the best possible valuation. |
| Meeting Regulatory Requirements | Additionally, there are regulatory requirements to consider. For example, the Reserve Bank of India (RBI) may mandate that certain companies, like Tata Sons, list on the stock market within a certain timeframe. By going public, Tata Sons can comply with these regulations and maintain a positive relationship with regulators. |
| Providing Liquidity for Existing Shareholders | Going public can also provide liquidity for existing shareholders, including employees and early investors, who may want to sell their shares and realize their investments. This liquidity can incentivize employees with stock options and reward early investors for their support, while also diversifying their investment portfolios. |
| Enhancing Brand Visibility and Reputation | Listing on the stock market can significantly enhance Tata Sons’ brand visibility and reputation. Being a publicly traded company can increase awareness among customers, suppliers, and the general public, lending credibility and prestige to the Tata brand. This enhanced visibility can also attract top talent and business partners, further fueling Tata Sons’ growth and success. |
| Facilitating Acquisitions and Strategic Partnerships | As a publicly traded company with access to capital markets, Tata Sons can more easily pursue acquisitions and strategic partnerships to expand its business portfolio and enter new markets. The ability to use its shares as currency for acquisitions can provide Tata Sons with valuable leverage in negotiations and enable it to pursue growth opportunities that may not have been feasible as a private company. |
| Improving Corporate Governance and Transparency | Going public often requires companies to adhere to stricter corporate governance standards and transparency requirements. By becoming a publicly traded company, Tata Sons may enhance its corporate governance practices, strengthen its internal controls, and improve transparency in its operations. This can build trust among investors, reduce the risk of fraud or misconduct, and ultimately enhance shareholder value over the long term. |
| Access to Prestigious Stock Exchanges and Index Inclusion | Listing on prestigious stock exchanges, such as the Bombay Stock Exchange (BSE) or the National Stock Exchange (NSE), can provide Tata Sons with increased credibility and visibility in the financial markets. Moreover, inclusion in stock market indices, such as the Nifty 50 or the Sensex, can further elevate Tata Sons’ profile and attract institutional investors, index funds, and exchange-traded funds (ETFs) seeking exposure to leading companies. |
So, what’s next for Tata? Well, there’s a lot of excitement brewing around their potential IPO. Whether it’s about raising funds, unlocking value, or just getting their name out there, Tata’s IPO could be a game-changer, marking the start of an exciting new chapter for the Tata Group filled with growth, innovation, and prosperity. Keep an eye out for updates, because things are about to get interesting!
(E) Flip Side: Is Tata Sons looking to avoid IPO?
Now, let’s look at the flip side of Tata Sons IPO. Do you know the company seems to be thinking over a plan to shake up its balance sheet to dodge the whole listing requirement?
According to a Times of India report, if a Core Investment Company (CIC) doesn’t have assets exceeding Rs 100 crore and doesn’t mess around with public funds or shuffle them off to another entity, it might just slip through the Reserve Bank of India’s (RBI) radar and skip the whole listing thing on the stock exchanges.
Now, here’s where it gets interesting.
Word on the street is that the company is thinking about spinning off Tata Capital or tweaking its debt situation to aim for that net debt-free status.
As of the end of FY23, their debt tally was a hefty Rs.20,000 crore. A lawyer mentioned in the TOI report hinted that if the company manages to clear its debt or shifts it to another entity, it could potentially avoid being tagged as a CIC, thus dodging the listing requirement altogether.
Now, hold onto your hats because things are heating up on Dalal Street! Investors and market watchers are keeping a close eye on Tata stocks, with everyone buzzing about the possibility of an IPO.
And can you blame them?
The last time a Tata Group company, Tata Technologies, went public, investors were amused with a whopping 168% gain.
So, yeah, there’s definitely some excitement in the air!
(F) Financial Snapshop of Tata Sons Pvt. Ltd
In the fiscal year ending March 2023, Tata Sons saw a notable uptick in its revenue, marking a substantial 33.53% increase from the previous fiscal year’s revenue of 30,34,578 to 40,39,796.
However, according to Tata Sons’ report, there was a significant decline in profit, dropping by 44.56% from FY 2022 to FY 2023. Below is a table illustrating the company’s performance over the past five years.
Let’s look at the financials of Tata Sons-
| Rs. (Consolidated) | FY19 | FY20 | FY21 | FY22 | FY23 |
| Net Sales | 21,73,134 | 23,01,666 | 23,75,707 | 30,24,578 | 40,39,796 |
| Growth (%) | 19% | 6% | 3% | 27% | 34% |
| Operating Profit | 5,46,402 | 5,38,926 | 6,40,778 | 7,19,146 | 8,14,647 |
| OPM (%) | 25% | 23% | 27% | 24% | 20% |
| Net Profit | 2,03,572 | 68,770 | 1,26,846 | 3,03,903 | 1,68,478 |
| Net Margin (%) | 9% | 3% | 5% | 10% | 4% |
| ROE (%) | 28.5 | 8.3 | 15.5 | 26.3 | 15.9 |
| ROCE (%) | 21.6 | 12.5 | 16.8 | 21.3 | 18.2 |
| Dividend (Rs.) | 10000 | 10000 | 10000 | 10000 | 17500 |
| Debt to Equity (x) | 1.1 | 1.1 | 1.2 | 1.2 | 1.3 |
The dividend payout has increased over the years!
(G) Which Tata Stocks could benefit from Tata Sons IPO?
As we have read till now, Tata Sons, the big boss of the Tata Group, is gearing up for its IPO, which means it’s going to sell its shares to the public for the first time. Now, when a company like Tata Sons goes public, it’s a big deal because it can have a ripple effect on other companies within the Tata Group.
Let’s see which Tata Stocks could benefit from Tata Sons IPO-
(G.1) Tata Chemicals
One of the companies that could benefit directly from Tata Sons’ IPO is Tata Chemicals. Why? Because Tata Chemicals owns a 3% stake in Tata Sons. Now, when Tata Sons goes public and its shares become available for trading on the stock market, the value of Tata Sons’ shares will be determined by investors’ demand and the overall market conditions.
Since Tata Chemicals owns a chunk of Tata Sons, if the value of Tata Sons’ shares goes up after the IPO, it means Tata Chemicals’ investment in Tata Sons becomes more valuable too. This increase in the value of Tata Chemicals’ stake in Tata Sons could potentially boost Tata Chemicals’ stock price as well.
So, investors are keeping a close eye on Tata Chemicals, expecting it to benefit from Tata Sons’ IPO.
(G.2) Tata Motors
Tata Motors holds a 3% stake in Tata Sons. As Tata Sons’ value increases post-IPO, Tata Motors’ investment in Tata Sons could become more valuable, potentially boosting Tata Motors’ stock price.
(G.3) Tata Power
Similarly, Tata Power holds a 2% stake in Tata Sons. A rise in Tata Sons’ value post-IPO could have a positive impact on Tata Power’s stock price, reflecting the increased value of its investment in Tata Sons.
(G.4) Indian Hotels
Indian Hotels Company Limited, which operates the Taj Group of Hotels, holds a 1% stake in Tata Sons. Like other Tata Group companies, Indian Hotels could also see its stock price benefit from the increase in Tata Sons’ value following its IPO.
(G.5) Tata Steel
While specific data on Tata Steel’s stake in Tata Sons is not provided, it is a significant Tata Group company with potential investments in Tata Sons. Depending on its stake, Tata Steel could also potentially benefit from Tata Sons’ IPO.
These are just a few examples of Tata Group companies that could potentially benefit from Tata Sons’ IPO due to their stakes in Tata Sons. As Tata Sons’ value increases, the value of their investments in Tata Sons could rise, potentially leading to positive effects on their respective stock prices.
(H) Final Words on Tata Sons IPO
In a nutshell, Tata Sons is the force behind the Tata Group’s success, influencing its subsidiary companies and their stocks. As Tata Sons gears up for a possible IPO, investors are eagerly awaiting its impact on the market.
With its strategic decisions and complex ownership structure, Tata Sons holds the key to unlocking new opportunities and growth for the Tata Group. The IPO could mark a major turning point in the Tata Group’s journey, paving the way for exciting developments and potential gains for investors.
So, keep an eye out for Tata Sons’ IPO, as it could shape the future of the Tata Group and its stakeholders!
