By Bl Mumbai Bureau

Copyright thehindubusinessline

Tata Sons stands to make up to ₹7,498 crore in the initial public offer (IPO) of its subsidiary Tata Capital, in the offer for sale portion where the holding company of the Tata group is selling up to 23 crore shares.

For Tata Sons, this is much-needed cash boost, as in FY25 it saw dividend income from its most reliable subsidiary, Tata Consultancy Services, shrink by over ₹1,300 crore from a year ago. With the IT sector seeing challenges in its largest market, the US, future quantum of dividend flows from TCS remain uncertain.

The price band of the IPO is set at ₹310-326 – substantially lower than what was anticipated and offered during its investor roadshows, with sources pegging the IPO size at $2 billion. The current IPO size is $1.75 billion at the upper end of the price band.

The IPO, comprising a total of 47.58 crore shares, includes a fresh issue of 21 crore equity shares and an Offer For Sale of 26.58 crore shares.

Tata Capital’s ₹15,512-crore IPO, which will be biggest in the NBFC space so far, will open for subscription on October 6 and close on October 8.

Lower price

Investment bankers explained that till late last week, it had been decided to price the issue higher. However, over the weekend, the management and Tata Sons decided that the pricing should leave something on the table for investors, while a lower price would also allow more investors to participate.

A senior official said, “Keeping in mind the (Tata) ethos of really getting some value on the table…for retail investors, I think made this (pricing) very, very attractive. There have been generations of investors who have benefitted from investing in the Tata Group over decades. And that is something that the Group really values.”

The fresh issue portion in which Tata Capital will be raising up to ₹6,946 crore will boost its capital base. The aforementioned numbers are premised on TCL’s shares being sold at the upper end of the price band.

The capital mop-up will support its growth needs for the next 2.5-3 years, according to Rajiv Sabharwal, MD & CEO.

As per the draft red herring prospectus (DRHP) of India’s third-largest diversified NBFC, the proceeds from the fresh issue of shares will augment its tier-1 capital base to meet its future capital requirements including onward lending.

Sabharwal said “Money is the raw material for our business. And we need the necessary amount of capital, which we can leverage and make the lending pool larger….The capital which we are raising will help us sustain our growth for the next about two and a half to three years.”

Debt-to-equity ratio

Rakesh J Bhatia, CFO, said the company’s debt-to-equity ratio, which is at 6.5 times, will come down below 5 times, post-IPO.

Tata Sons holds 88.6 per cent stake in the NBFC, with the balance being held by TMF Holdings, Tata Investment Corporation, Tata Motors, Tata Chemicals, Tata Power Company and International Finance Corporation, among others.

Post-IPO, the parent company’s stake is likely to come down to 78 per cent, said officials. Its capital-to-risk weighted assets ratio may go up to 22 per cent from 16.9 per cent as at March-end 2025.

Under RBI’s scale-based regulation, which came into effect from October 1, 2022, NBFCs classified as Upper Layer (UL) have to be mandatorily listed within 3 years of identification as NBFC-UL. Tata Capital is going in for an IPO to comply with this regulation.

The NBFC’s business comprises retail finance, SME finance and corporate finance. As at March-end 2025, the company had a pan-India network of 1,496 branches and total gross loans of ₹2,26,553 crore. Net profit stood at ₹3,665 crore for FY25 against ₹3,150 crore for FY24.

Published on September 29, 2025