Tata Chemicals Ltd. stock has surged 24% in two days after a Chennai-based advisor's report on the valuation of the Tata Sons Ltd. IPO sparked investor interest.
The Tata Group's holding company will be required to list on the exchanges by September 2025, as it was classified as an upper-layer non-bank financial company in October 2021.
The company could fetch a valuation of Rs 11 lakh crore, and the IPO size will likely be around Rs 55,000 crore, according to Spark Capital Advisors (India) Pvt.
As per the shareholding pattern of Tata Sons, Tata Motors Ltd. and Tata Chemicals own 3% each in the holding company, while Tata Power Co. and Indian Hotels Co. hold 2% and 1%, respectively.
According to Spark, Tata Chemicals' holding in the parent could be valued at Rs 20,000 crore, which represents nearly 60% of the salt-maker's current market capitalisation of Rs 34,000 crore.
The intrinsic valuation of the company is 11 times the FY25 PE, according to the note. The valuations have been suppressed, given the commodity nature of the soda ash and the potential headwinds faced by the industry, due to falling realisations.
The street should assign a Rs 10–11 lakh crore valuation to Tata Sons, the note said. Then the intrinsic valuation of the listed Tata Chemicals business would be 5–7 times its FY25 earnings, which could potentially re-rate, should the investment be liquidated at or post-IPO, the brokerage said.
Other Tata Group stocks also advanced in the last two days, including Tata Power (7.35% gain) and Tata Investment Ltd. (10.2%)
Shares of Tata Chemicals closed 11.6% higher on Thursday, compared to a 0.05% advance in the BSE Sensex.
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