How are Tata Group companies linked? Why Tata Capital’s IPO could unlock value across conglomerate

The rally also lifted other Tata Group stocks. Tata Motors rose over 2% during the day before settling at Rs 735.10. Tata Technologies, trading nearly 25% below its all-time high of Rs 1242.20, gained nearly 3% to close at Rs 908.55.

But what ties all these companies together? Let’s break it down.

At the heart of the Tata Group is Tata Sons, the holding company that owns stakes in most Tata entities. Tata Sons holds a whopping 92.83% stake in Tata Capital, the financial services arm that’s planning to go public.

"Investors expect the ripple effect of Tata Capital’s listing on the valuations of Tata Sons and its associated companies," a Moneycontrol report said.

Tata Chemicals and Tata Motors, both part of the conglomerate, also own stakes in Tata Sons. This means any value created at Tata Sons—say, from a big IPO like Tata Capital’s—can directly benefit these companies. So, if Tata Sons benefit from Tata Capital’s IPO, Tata Chemicals and Tata Motors get a slice of the pie too.

Tata Motors holds a 4.7% stake in Tata Capital, which it picked up earlier this year when Tata Motors Finance Ltd (TMFL) merged with Tata Capital. This merger was part of a group-wide effort to bring all financial services under one roof. Tata Motors’ 3% stake in Tata Sons gives it another reason to celebrate any value created at the holding company level.

Tata Investment Corporation (TICL) was Tuesday’s star performer, with its shares soaring 12%. TICL is like the group’s investment arm, holding stakes across multiple Tata companies. Any big news at the group level, like Tata Capital’s IPO, tends to lift TICL’s prospects because it benefits indirectly from the rising valuations of its portfolio companies.

The Reserve Bank of India has a mandate for “upper-layer” NBFCs like Tata Capital to list within three years of being classified. Tata Capital was notified as an "upper-layer" NBFC in September 2022. With Tata Capital’s assets under management (AUM) growing to ₹158,479 crore as of March 2024 and the RBI deadline ending in September 2025, it’s the perfect time for the group to unlock value.