Tata Chemical shares jump 14% to hit record high; rally 44% in 6 sessions

Shares of Tata Chemical surged over 14% in intraday trade on Thursday amid strong volume trade, in an otherwise muted broader market. The stock has maintained an uptrend for the last six sessions and rose nearly 44% during the same period amid reports that Tata Sons, the parent company of the Tata Group, is looking for listing on domestic stock exchanges.

Continuing its gaining streak, Tata Chemical rose as much as 14.5% to hit a fresh all-time high of ₹1,349.70, while the market capitalisation rose to ₹34,136 crore. On the volume front, more than 28 lakh shares changed hands over the counter as compared to the two-week average volume of 2.99 lakh stocks.

Tata Chemical shares moved in a narrow range in the last one year, hitting a 52-week low of 922.20 on April 19, 2023. The stock, however, gained momentum this month on growing speculation over the possible listing of Tata Sons, in which the chemicals company has ownership. As per report, the parent company of Tata Group could list on the stock exchanges within the next 18 months.

Midas Equities and Research in a report says that RBI has classified Tata Sons as an upper layer NBFC last year, which makes it mandatory for the company to list itself on the exchanges by September 25, 2025. “We believe that this event could likely lead to the simplification of the complicated group holding structure of the Tata Group and enable some of the listed holding companies to liquidate its holding within the giant parent conglomerate,” the report highlights.

The report, citing news articles, says that Tata Sons could fetch a valuation of around ₹11 lakh crore and the IPO size will likely be around ₹55,000 Crore. “We believe that nearly 80% of Tata Sons’ holdings might not be monetisable but the process of restructuring could trigger a re-rating”, it says.

As per the shareholding pattern of Tata Sons, which is mostly owned by Dorabji Tata Trust (28%) and the Ratan Tata Trust (24%), Tata Motors and Tata Chemicals own 3% each in the holding company, while Tata Power and Indian Hotels hold 2% and 1%, respectively. Among others, Cyrus Mistry family-led Sterling Investment Corporation and Cyrus Investments own 9% each in the company. The listing of Tata Sons is likely to unlock value for shareholders.

According to Midas Equities, Tata Sons' ownership in Tata Chemicals amounts to nearly 80% of the company's overall market capitalisation, while for the other three companies - Tata Motors, Tata Power and Indian Hotels - that figure lies between 16% to 21%.

“We calculate the intrinsic valuation of Tata Chemicals to be 11x FY25 PE (calculated using Bloomberg earnings estimates). Given the commodity nature of the Soda Ash and the potential headwinds faced by the industry due to falling realisations, the valuations have been supressed. We also note that should the street assign a ₹10-11 lakh crore valuations to Tata Sons, the intrinsic valuation of the listed Tata Chemicals business is 5-7x FY25 PE, which could potentially re-rate should the investment be liquidated at/or post IPO,” the research firm says in the report.

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