Tata stocks plunge on reports that Tata Sons may avoid an IPO

Shares of various Tata Group companies plunged on Monday's trading session, March 11, 2024. The dip in stock prices came amid reports suggesting that Tata Sons, the holding company of the Tata Group, is reconsidering plans for its initial public offering

Why did Tata stocks crash?

The uncertainty surrounding the IPO plans has impacted various Tata group stocks. Last week, there was a buzz in the market regarding a possible initial public offering by Tata Sons, which led to a surge in the stock prices of various Tata Group firms, with some experiencing gains of up to 36%. However, these gains were reversed today due to speculations that Tata Sons might avoid going public. Tata Chemicals, for instance, saw a sharp decline, hitting its lower circuit of 10%, while Tata Investment Corporate was also locked in a 5% lower circuit.

RBI rules mandate Tata Sons IPO

The Reserve Bank of India's decision in 2022 categorised Tata Sons as an upper layer non-banking finance company, necessitating its listing by September 2025.

Despite seeking exemption from this listing rule, Tata Sons' plea was rejected, prompting the exploration of legal avenues for a solution.

Tata Sons is registered as a CIC with the Reserve Bank of India and has been classified as an "upper layer" NBFC, which requires the company to list on exchanges within three years of being notified.

The hype around Tata Sons' IPO

Last week, Spark Capital identified Tata Chemicals as the key potential play in the IPO and the stock had surged 36%. The stock, however, plunged over 10% today after reports said an IPO was unlikely.

If launched, Tata Sons' IPO was estimated to be the biggest ever, even surpassing Life Insurance Corporation of India’s ₹21,000 crore offer. Spark’s report said Tata Sons could be valued at ₹7-8 lakh crore through the IPO, based on the current market capitalisation of group companies.

Investors started buying Tata stocks, particularly Tata Chemicals, after the report, despite Tata Group never officially announcing plans for an IPO.

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