Tata Capital Fundraise: Board to Discuss Rights Issue Ahead of IPO
The board of Tata Capital, a leading non-banking financial services company (NBFC) under Tata Group, is set to meet on Tuesday to discuss a potential fundraise via a rights issue. This move comes as Tata Capital prepares for its upcoming IPO, with the Reserve Bank of India (RBI) mandating a listing by September.
Key Highlights of the Tata Capital Fundraise:
✔ Rights issue under consideration to raise capital
✔ Tata Sons expected to participate to maintain its 93% stake
✔ Funds to support Tata Capital’s 20-25% annual growth rate
✔ Listing compliance as per RBI’s classification of Tata Capital as an upper-layer NBFC
The Tata Capital Fundraise is expected to strengthen its financial base, ensuring stability ahead of its IPO while keeping Tata Sons’ ownership levels intact.
Why is Tata Capital Raising Funds?
📌 IPO Listing Requirement: Tata Capital, classified as an upper-layer NBFC, must list its shares by September per RBI’s mandate.
📌 Sustaining Growth: The company requires a consistent capital infusion to sustain its 20-25% annual growth.
📌 Strengthening Capital Base: The rights issue will reduce leverage and improve debt-to-equity ratios ahead of its IPO.
📌 Tata Sons’ Stake Maintenance: The Tata Capital Fundraise ensures Tata Sons retains its controlling 93% ownership before public listing.
A rights issue offers an efficient way to raise funds without the complexities of fair value assessment, making it the preferred choice for unlisted companies like Tata Capital.
How Will Tata Capital’s Fundraise Through Rights Issue Work?
A rights issue allows existing shareholders to buy additional shares at a predetermined price.
Key Aspects of Tata Capital’s Rights Issue:
✔ Uniform Pricing: All shareholders will get the opportunity to purchase shares at the same rate.
✔ Restriction on Share Renunciation: Until Tata Capital lists publicly, shareholders cannot transfer their rights issue shares.
✔ Existing Shareholders’ Participation: Tata Sons and other shareholders, including IFC and Tata Group executives, will have the first right to subscribe.
Binoy Parikh, Executive Director, Katalyst Advisors:
“A rights issue is an ideal fundraising option for unlisted firms as it simplifies the process and maintains equity balance among existing shareholders.”
With 29,000 existing shareholders, the Tata Capital Fundraise ensures capital expansion without increasing shareholder dilution prematurely.
How Will Tata Capital’s IPO Impact Shareholding?
Current Ownership Structure:
✔ Tata Sons holds ~93%
✔ Remaining 7% held by Tata Group entities, key executives, and International Finance Corporation (IFC)
Post-IPO Ownership Expectations:
✔ Tata Sons’ stake may drop by ~5% due to public issuance
✔ IPO must ensure 25% public shareholding within 3 years
✔ Fitch Ratings predicts Tata Sons will retain at least 75%
With the Tata Capital Fundraise, the company is strategically preparing for its IPO, ensuring a stable financial position and minimal dilution for existing shareholders.
Tata Capital’s Financial Strength & Future Outlook
Tata Capital’s financial health has seen consistent improvement, with a focus on reducing leverage and increasing capital reserves.
Key Financial Indicators:
📉 Debt-to-Tangible Equity Ratio:
- FY22: 7.2x
- 1HFY25: 6.3x (improved due to capital strengthening efforts)
📈 Growth Potential:
- Annual expansion of 20-25%
- IPO expected to unlock further capital for growth
According to Fitch Ratings, Tata Capital’s public listing will further enhance its capital position, ensuring long-term stability as one of India’s largest NBFCs.
Tata Capital Fundraise & IPO Strategy
The Tata Capital Fundraise via a rights issue is a strategic move to strengthen its capital before its IPO. With Tata Sons maintaining control and a strong financial outlook, Tata Capital is well-positioned to comply with RBI’s listing mandate while continuing its aggressive growth trajectory.
🚀 Key Takeaways:
✔ Rights issue to support Tata Capital’s rapid growth & IPO listing
✔ Tata Sons expected to retain at least 75% post-IPO
✔ Funds raised will help reduce leverage & improve financial strength
✔ New listing rules require 25% public shareholding within 3 years
💬 What are your thoughts on the Tata Capital Fundraise and its IPO plans? Do you think Tata Capital will attract strong investor interest post-listing?
