Is Tata Sons looking to avoid IPO? Tata Chemicals, Rallis India slump

Tata Sons IPO, Tata Chemicals, Rallis India share price: Tata Chemicals, along with Rallis India, climbed sharply last week on reports that Tata Sons was planning to launch an initial public offering (IPO), which was the RBI-mandated rule for the holding company of Tata Group. It must be noted that Tata Chemicals holds a nearly 55 per cent stake in Rallis India.

However, in Monday's trade (March 11), the stocks saw selling pressure as news reports suggested that the entity is working on a debt restructuring programme to avoid the much-discussed IPO.

Reacting to the news, shares of Tata Chemicals and other group stocks, including the likes of Tata Power and Rallis India, slipped up to 10 per cent in the early trade.

Why did the RBI mandate the IPO?

Tata Sons has been registered as a core investment company (CIC) and was classified as an upper-layer NBFC in September 2022. Hence, to be registered as the CIC, the company needs to adhere to the following two guidelines stipulated by the RBI:

• The company’s asset base needs to be more than Rs 100 crore.

• Additionally, the company should list within three years of being classified as an upper-layer NBFC, i.e., until September 2025.

What report suggests Tata Sons is resorting to?

• Tata Sons, to avoid the mandated IPO, is looking at tweaking its balance sheet and working on debt restructuring. The company is aiming at transferring its debt to another entity or becoming debt-free. 
• The company’s total debt as of FY23 stood at Rs 20,000 crore.
• Tata Chemicals and Tata Motors hold 3 per cent each in Tata Sons, while other listed entities of the group, including Tata Power and Indian Hotels, hold 2 per cent and 1 per cent, respectively.

Why is Tata Sons’ IPO seen as beneficial for Tata Chemicals?

Experts believe that the IPO by the company may result in value unlocking, and as Tata Chemicals' stake in the firm is pegged at a substantial Rs 19,850 crore, the company is seen to benefit.