Tata Chemicals shares jump 20% on Tata Sons listing developments; Here's how others are faring

Shares of Tata Group stocks, Tata Chemicals Ltd., Tata Steel Ltd., Tata Motors Ltd., Tata Power Ltd., Indian Hotels Ltd., Tata Consumer Products Ltd., and Tata Investment Corporation gained up to 20% on Tuesday, September 15, after CNBC-TV18 reported exclusively about the recent listing developments with regards to Tata Sons.

Shares of Tata Chemicals are locked in a 20% upper circuit, while those of Tata Investment are trading with gains of over 13% on Tuesday. Both stocks are the top two gainers on the Nifty 500 index on Tuesday. Shares of Tata Motors Passenger Vehicles are also trading with gains of 4.5%, while those of Tata Steel are trading with modest gains.

Sources told CNBC-TV18 over the weekend that the Reserve Bank of India has rejected Tata Sons' application to de-register itself as an upper layer NBFC. The conglomerate had given an application for voluntary surrender of certificate of registration, which has now been rejected by the RBI, sources said.

As a result, Tata Sons will now have to comply with the upper layer NBFC regulations, meaning they will have to list soon.

Which Tata Group Stocks Will Be Impacted?

Among the listed Tata Group companies, Tata Steel and Tata Motors Passenger Vehicles have a 3.06% stake each in Tata Sons, while Tata Chemicals holds a 2.53% stake. Tata Power has a 1.65% stake, while Indian Hotels, Tata Consumer and Tata Investment own 1.11%, 0.4% and 0.25% respectively.

According to brokerages, at an estimated valuation of ₹10 lakh crore for Tata Sons, the value of a 3.06% stake held by both Tata Steel and Tata Motors Passenger Vehicles is around ₹30,600 crore.

At a 30% holding company discount, the holding of Tata Motors PV is estimated at ₹58 per share.

Brokerage firm HSBC wrote that in case Tata Sons does list, a scenario analysis suggests a value unlocking of anywhere between 13% to 210% for Tata Chemicals. It has a "hold" rating on the stock for now, with a price target of ₹720.

Why Is Tata Sons Important For Tata Steel?

According to calculations, Tata Steel has an overall market capitalization of ₹2.3 lakh crore, with a net debt of ₹84,173 crore. This takes Tata Steel's stake in Tata Sons to around 15% of its overall market capitalization.

Although Tata Steel will retain its stake instead of monetizing it, the RBI decision materially changes the narrative around it and therefore, it would move from an illiquid cross-holding to a potentially market-priced strategic asset.

(With Newsbreak by Shereen Bhan and inputs from Sudarshan Kumar and Nigel D'Souza)