Tata Sons’ possible IPO could unlock massive value for Tata Group firms.
Seven listed Tata companies together hold 12.1% stake in Tata Sons.
Valuation surge likely as long-held investments get proper market recognition.
Power tussle between Tata Trusts and SP Group clouds IPO prospects.
If Tata Sons go for an initial public offering (IPO), then there would be major gains for the Tata Group’s seven big listed companies.
According to a Business Standard report, the walk towards an IPO will unlock the value of their investment in Tata Sons, which was done years ago at much low valuations as compared to current valuation of Tata Sons.
As of now, the seven listed group companies together hold around 12.1 per cent in Tata Sons. The listed companies’ stake in Tata Sons is their large unrealised gains, which will get a ‘proper’ market valuation if Tata Sons lists.
Tata Motors, Tata Steel, Tata Chemicals and Tata Power are the listed group companies and are among the third-largest block of shareholders in Tata Sons. These companies come after Tata Trusts and the Shapoorji Pallonji group.
Additionally, Trent owns cumulative redeemable preference shares with a par value of ₹1,000 each — with their worth being ₹15 crore — in Tata Sons at the end of March this FY.
Classified together as promoters, seven Tata Trusts hold 65.3 per cent in Tata Sons. The two biggest shareholders in Tata Sons are Sir Dorabji Tata Trust and Sir Ratan Tata Trust, who hold 27.98 per cent and 23.56 per cent shares, respectively.
On the other hand, the Shapoorji Pallonji group 18.4 per cent through its two investment firms — Sterling Investment Corporation Pvt Ltd and Cyrus Investments Pvt Ltd, with each owning 9.2 per cent.
In addition to that, other shareholders, including individuals, together own 4.2 per cent stake in Tata Sons.
However, there is a power tussle going in Tata Sons and Tata Trusts with a section of the shareholders led by the Shapoorji Pallonji family pushing for the listing of Tata Sons.
Interestingly, Tata Sons is one of the few large holding companies not listed on the bourses.
The holding companies in other large business groups — such as Bajaj Holdings, Pilani Investments, JSW Holdings, TVS Holdings, Kalyani Investments, Tube Investments, and Bengal & Assam Company — are listed.
The individual companies Tata Steel and Tata Motors are the two biggest shareholders with 3.06 per cent each. Following that is Tata Chemicals (2.53 per cent), Tata Power (1.65 per cent), Indian Hotels (1.11 per cent), Tata Consumer (0.43 per cent), and Tata Investment Corporation (0.25 per cent).Every ordinary share of Tata Sons’ with a face value of ₹1,000 now, has a book value of around ₹6.28 million on a consolidated basis. This basically refers to a book value of around ₹2.54 trillion at the end of March this year on a consolidated basis.
Thereby, the combined stake of the Tata group’s listed companies in Tata Sons had a combined book value of ₹30,705 crore at the end of March this year. According to BS report, the market value is likely to be even higher as large holding companies trade at multiples of their book value.
The largest holding company in the country after Tata Sons in terms of assets, Bajaj Holdings is trading at 2.1 times its latest book value. The company is also a major shareholder in most of the Rahul Bajaj group companies, including Bajaj Auto and Bajaj Finserv.
In comparison, the investment cost of these companies’ stake in Tata Sons is only ₹449.13 crore, their annual reports stated. However, it is a question if these listed group companies will sell or book profits on their investment in Tata Sons.
