Some of the listed Tata Group entities will get re-rated with the RBI making it mandatory for Tata Sons to list on the stock exchanges.
Seven listed Tata Group companies cumulatively own 11.6 per cent stake worth ₹1.20 lakh crore in Tata Sons. Among them, Tata Motors Passenger Vehicle and Tata Steel own the highest equity stake of 3.06 per cent each while Tata Chemicals and Tata Power have 2.53 per cent and 1.65 per cent stake, respectively.
Similarly, Indian Hotel has 1.11 per cent stake while Tata Consumers and Tata Investment own 0.43 per cent and 0.25 per cent, respectively.
Who holds how much?
At the market estimated value of ₹10 lakh crore of Tata Sons, the stake of Tata Steel and Tata Motors PV in Tata Sons will be valued at ₹30,600 crore each while that of Tata Chemicals and Tata Power will be ₹25,300 crore and ₹16,500 crore, respectively. Indian Hotels’ stake will be valued at ₹11,100 crore.
The holding of Tata Consumers and Tata Investment will be valued at ₹4,300 crore and ₹2,500 crore, respectively.
The Tata Sons holding will be 13 per cent of Tata Steel’s current market capitalisation of ₹2.28 lakh crore while it will be more than 100 per cent of Tata Chemicals’ ₹15,603 crore market cap.
Similarly, Tata Sons holding of Tata Motors PV will be valued at 30 per cent of its market cap while for Tata Power and Indian Hotels it will be in the 10-14 per cent range. The impact on Tata Consumers and Tata Investments will be marginal given their low stake holding.
Though it is not clear whether the listed companies will dilute their stake in Tata Sons’ expected IPO, none of the shareholders, except the Shapoorji Pallonji Group, have shown an interest. The SP Group holds 18.37 per cent equity stake in Tata Sons.
Good for companies?
Tata Chemicals stands to gain the most, especially since its holding represents a significant value compared to its own market capitalisation, said Piyush Jhunjhunwala, CEO and founder, Stockify. Tata Investment Corporation and some other companies within the group could also see considerable value unlocking from Tata Sons listing.
The possible gains arise from the realisation of the actual value of the holdings as per market expectations instead of them being a mere entry in the companies’ books, he said, adding that the proposed listing could lead to value unlocking, albeit the actual benefit may be varied for different Tata companies.
Rajesh Singla, CEO and Fund Manager, Alpha AMC, said the final valuation figure of Tata Sons will depend on the holding-company discount the market applies to a diversified structure sitting on top of 26 listed and unlisted entities. “The proceeding of the September 17 board meeting needs to be watched closely, since succession and the listing roadmap are both likely to come up there.”