An obscure equity market research firm has estimated the valuation of Tata Sons, the NBFC holding company of the Tata group, at Rs 7.8 lakh crore upon listing, based on the current market capitalization of the group's firms. As an upper-layer non-banking finance company, Tata Sons is mandated to go public within the next 18 months according to RBI regulations. The Reserve Bank's classification of Tata Sons as an upper-layer NBFC last year necessitates its listing by September 2025.
The impending listing is anticipated to simplify the convoluted group-holding structure. Recent reports have hinted at a potential valuation of Rs 11 lakh crore for the company, with the IPO size estimated at around Rs 55,000 crore. However, it's believed that around 80 per cent of Tata Sons' holdings may not be immediately monetizable, yet the restructuring process could trigger a re-evaluation.
The report highlights various potential sources of value, including unlisted investments and subsidiaries like Tata Technologies, Tata Metalliks, and Rallis, which could contribute an additional Rs 1-1.5 lakh crore. Summing up all investments across listed and unlisted entities, preference shares, and mutual funds, the report suggests a valuation of Rs 7-8 lakh crore for the holding company upon listing.
This valuation factors in a 60 per cent holding company discount, with an additional Rs 1 lakh crore attributed to optionalities. However, adjustments to the holding company discount could significantly impact the valuation, potentially reaching Rs 1.2/1.1 lakh crore if a 30/40 per cent discount is applied.
TCS stands out as the largest contributor to Tata Sons' value, with its stake valued at over Rs 10 lakh crore pre-holding company discount. Nevertheless, the conglomerate's significant stakes in various listed and unlisted companies contribute to an estimated market value of investments at Rs 16 lakh crore.
Ownership in Tata Sons is dispersed among several entities, with the Dorabji Tata Trust and the Ratan Tata Trust holding the majority shares. Tata Chemicals, with Tata Sons owning approximately 80 per cent of its market capitalization, is poised to have a significant influence. Other stakeholders include the Cyrus Mistry family-run Sterling Investment Corporation and Cyrus Investments, along with Tata Motors, Tata Chemicals, Tata Power, Indian Hotels, and others.
Overall, while the market is likely to apply a 30-60 per cent discount to Tata Sons' equity value, the estimated valuation post-listing stands at Rs 7.8 lakh crore, accounting for the holding company discount and valuing unlisted investments at Rs 1.6 lakh crore.
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