Tata Capital targets $20 billion valuation in upcoming IPO

Tata Capital is now targeting a valuation between $18 and $20 billion for its upcoming initial public offering (IPO), a sharp increase from its earlier estimate of around $11 billion.Sources say the company is likely to file its updated Draft Red Herring Prospectus (DRHP) as early as tomorrow or by the end of this week. Tata Capital plans to raise around $2 billion through the IPO, which is expected to launch in the first half of September this year.

The IPO is being driven by a regulatory mandate. In September 2022, the Reserve Bank of India classified Tata Capital as an upper-layer systemically important NBFC, requiring it to go public within three years. That deadline expires this September.

If it hits this valuation, Tata Capital will become India’s fourth-largest non-bank lender, behind Bajaj Finance, Bajaj Finserv and Jio Financial Services. The revised valuation reflects upbeat investor sentiment, supported by Tata Capital’s recent rights issue and a strong run of IPOs in the financial services space.HDB Financial Services, for example, raised $1.5 billion and quickly reached a valuation of $7.7 billion after listing.

Tata Capital, a subsidiary of Tata Sons, operates as a diversified NBFC offering products such as commercial finance, consumer loans, wealth management, and Tata Cards. It currently serves over 5.2 million customers across 900 branches.

Tata Sons has provided consistent capital backing to Tata Capital, injecting ₹6,000 crore over the past six years, including ₹2,000 crore in FY24 and ₹500 crore in FY23.

The IPO is expected to consist of a fresh issue of 21 crore equity shares, along with an offer for sale of about 26.6 crore shares by existing shareholders. Tata Sons will offload around 23 crore shares, while International Finance Corporation is expected to sell 3.58 crore shares.