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Tata Capital, the financial services arm of Tata Sons, is preparing for an initial public offering (IPO) later this year. The company has amended its Memorandum of Association (MoA) and adopted new Articles of Association (AoA) to comply with the Companies Act, 2013. This marks a crucial step towards becoming a publicly listed company, as required by the Reserve Bank of India (RBI).
Tata Capital is classified as an ‘upper-layer’ non-banking financial company (NBFC) by the RBI. It must go public by September 2025. The RBI’s push aims to improve transparency and governance in large financial institutions. While Tata Sons has sought an exemption from this mandate, Tata Capital is moving ahead with its IPO plans.
To align with these changes, Tata Capital has amended its AoA. A clause now prevents shareholders from renouncing rights in any rights issue until its shares are listed. This ensures compliance with Sections 25 and 42 of the Companies Act. The company clarified that the restriction doesn’t stop existing shareholders from applying for or subscribing to additional shares, as long as they follow applicable laws.
Tata Capital’s loan book and asset base are expanding. The company needs additional capital to maintain its capital adequacy ratios. The IPO will help boost its capital reserves, strengthening its lending portfolio.
In a postal ballot notice issued on January 30, Tata Capital reaffirmed its commitment to raising funds, including through rights issues. The company has approximately 29,000 shareholders. The governance measures aim to avoid regulatory non-compliance.
Tata Capital is also merging with Tata Motors Finance (TMFL), awaiting regulatory approvals. After the merger, TMF Holdings will acquire a 4.7% stake in the merged entity. This consolidation will enhance Tata Capital’s financial position, given TMFL’s strong presence in vehicle financing.
Tata Sons holds 92.83% of Tata Capital. Other shareholders include Tata Group companies (2.46%), the International Finance Corporation (1.91%), and the Employee Welfare Trust (1.16%). Various investors hold the remaining 1.64%.
After the merger, Tata Capital’s market position will strengthen, boosting its credibility ahead of the IPO.
Investment bankers from Kotak Mahindra Capital are advising on the IPO. Cyril Amarchand Mangaldas is providing legal expertise. Analysts believe the IPO could exceed ₹15,000 crore, making it one of the largest financial sector listings in recent years.
The listing will attract strong interest from institutional and retail investors, given Tata Capital’s financials and Tata Group backing. The company plans to file its draft red herring prospectus (DRHP) with SEBI soon.
With the IPO deadline approaching, Tata Capital is positioning itself for a smooth transition to the public markets. Investors and industry watchers are closely following developments, expecting a significant shift in India’s NBFC landscape.
