Tata Capital to File Draft IPO Papers Post NCLT Nod on Tata Motors Finance Merger

 Tata Capital to File Draft IPO Papers Post NCLT Nod on Tata Motors Finance Merger

Tata Capital is set to take a significant step in the financial sector by launching one of India's largest initial public offerings (IPO), with plans to raise over $2 billion (approximately Rs 17,000 crore). However, the company will proceed with filing preliminary IPO papers with the Securities and Exchange Board of India (SEBI) only after receiving the final approval from the National Company Law Tribunal (NCLT) for its merger with Tata Motors Finance, according to sources.

At the projected IPO size, Tata Capital’s valuation is estimated to be around $11 billion. The final NCLT order is expected by the end of the financial year (FY25), paving the way for the much-anticipated public listing.

Compliance with RBI Mandates

Tata Capital, an upper-layer non-banking finance company (NBFC) as designated by the Reserve Bank of India (RBI), has already secured board approval for its IPO. The public listing will comprise a fresh issue of 2.3 crore equity shares along with an offer for sale (OFS) by existing shareholders. This move aligns with the RBI’s requirement for upper-layer NBFCs to be listed within three years of their classification. Tata Capital received this designation in September 2022, making the IPO a crucial step toward compliance.

In addition to the IPO, Tata Capital has announced a rights issue to strengthen its financial standing before entering the public markets. If successful, this IPO would mark Tata Group’s second major listing in recent years, following the debut of Tata Technologies in November 2023.

The Road Ahead for Tata Capital

Apart from Tata Capital, another upper-layer NBFC, HDB Financial Services—owned by HDFC Bank—is also preparing for its IPO, aiming to raise Rs 12,500 crore. As competition in the NBFC sector intensifies, Tata Capital's public listing is expected to enhance its market presence and financial growth.

Legal advisory for Tata Capital’s IPO has been entrusted to Cyril Amarchand Mangaldas, while investment banking services are being managed by Kotak Mahindra Capital. However, the company will submit its draft red herring prospectus (DRHP) to SEBI only after securing NCLT’s approval for the merger.

Key Developments in the Merger Process

In Tata Motors’ Q3 earnings call, Group CFO PB Balaji confirmed that the creditors' meeting for Tata Motors Finance had been completed, with final orders from NCLT awaited. The Competition Commission of India (CCI) had already given its clearance for the merger in September 2023.

In June 2024, the boards of Tata Capital, Tata Motors Finance, and Tata Motors approved the merger scheme under NCLT's framework. As part of the deal, Tata Capital will issue its equity shares to Tata Motors Finance shareholders, resulting in Tata Motors securing a 4.7% stake in the newly merged entity. Tata Sons, the holding company of Tata Capital, remains the dominant shareholder with a 92.83% stake.

A Landmark IPO in the Making

With the merger nearing completion and the IPO preparations underway, Tata Capital is poised to make a landmark entry into the stock market. The listing is expected to strengthen its financial capabilities, expand its operational reach, and enhance shareholder value. As regulatory approvals progress, the market eagerly awaits the debut of one of the largest IPOs in India's financial sector.

Stay tuned for further updates as Tata Capital moves closer to its much-anticipated public offering.