Tata Group stocks Tata Investment, Tata Motors surge up to 12% amid Tata Capital IPO buzz

Several Tata Group stocks, including Tata Investment Corporation, Tata Technologies and Tata Motors witnessed significant gains in the morning trade on BSE on Tuesday, December 24, amid reports that the group is moving closer to launching the initial public offer (IPO) of its financial services arm Tata Capital.

Shares of Tata Investment Corporation surged as much as 12 per cent, while those of Tata Technologies rose 4 per cent. Shares of Tata Chemicals (up 3 per cent), Tata Motors (up 2 per cent) and TCS (up 1 per cent) also rose during the session.

According to a Moneycontrol report, Tata Group is in talks with advisors about launching the Tata Capital IPO next year.

"Work has begun on the proposed initial public offer. This is to comply with RBI's norms for 'upper layer' NBFCs. No final call has been taken on the quantum, but the deal is expected to be a big-bang one in excess of ₹15,000 crore," Moneycontrol quoted a source saying so.

Another source told Moneycontrol that the group has roped in law firm Cyril Amarchand Mangaldas and investment bank Kotak Mahindra Capital as advisors for the purpose.

Mint could not independently verify this news till this article was first published around 10:20 AM on December 24.

Move in line with the RBI mandate

The Tata Group is perhaps exploring options to launch the Tata Capital IPO to comply with the Reserve Bank of India's (RBI) mandate, which requires "upper-layer" NBFCs to list within three years of being notified.

In October 2021, the RBI introduced a revised scale-based regulatory framework for non-banking financial companies (NBFCs), which became effective on 1 October 2022.

According to the regulatory structure for NBFCs, there are four layers of NBFCs based on their size, activity, and perceived riskiness.

NBFCs in the lowest layer are known as NBFC—Base Layer (NBFC-BL), while those in the middle and upper layers are NBFC—Middle Layer (NBFC-ML) and NBFC—Upper Layer (NBFC-UL), respectively.

In September 2022, the RBI released a list of 16 upper-layer non-banking finance companies (NBFC-ULs): LIC Housing Finance, Bajaj Finance, Mahindra & Mahindra Financial Services, Shriram Transport, Tata Sons, L&T Finance, Indiabulls Housing Finance, Piramal Capital & Housing Finance, Cholamandalam Investment and Finance Co., Shanghvi Finance Pvt. Ltd, Muthoot Finance, PNB Housing Finance, Tata Capital Financial Services, Aditya Birla Finance, HDB Financial Services and Bajaj Housing Finance.

Tata Capital, a subsidiary of Tata Sons, must adhere to the RBI's directive of mandatory listing by September 2025.

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