Tata Group shares halt rally; drop up to 10% as Tata Sons looks to avoid IPO

Shares of Tata Group companies fell up to 10% on Monday as investors resorted to profit booking after a strong rally last week amid reports that Tata Sons is looking to avoid going public next year. Last week, shares of several Tata group firms such as Tata Chemicals, Tata Motors, Tata Power, Tata Investment Corp, Tata Elxsi, Rallis India, Indian Hotels Company, Tata Teleservices, and others rallied up to 40% amid hopes that listing of the parent company, Tata Sons, will unlock value for its shareholders.

As per multiple reports, Tata Sons is looking to restructure its balance sheet to get an exemption from the Reserve Bank of India (RBI) to list its shares on stock exchanges. Last year, the RBI classified Tata Sons as an upper-layer NBFC, which makes it mandatory for the company to list itself on the exchanges within three years of notification. The deadline for the same is September 2025. 

Reacting to the news, shares of Tata Chemicals declined as much as 10.3%, snapping six sessions gaining streak. In the past six trading days, the chemical arm of Tata Group rose nearly 40% and touched a 52-week high of ₹1,349.70 on March 7, 2024.

In a similar trend, Tata Motors shares fell 1.5% in intraday trade, while Tata Power tumbled 4.6%, retreating from its 52-week high of ₹433.20 touched in the previous session on last Thursday. Indian Hotels Company shares were down 3% during the trade so far.

Among others, Tata Investment Corporation hit its 5% lower circuit limit, whereas Rallis India and Tata Teleservices declined in the range of 4-5%.

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.

Midas Equities and Research in a report last week said that it is mandatory for Tata Sons to list itself on the exchanges by September 25, 2025.  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.

The report highlighted that 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 report noted.

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